Federal Register Vol. 81, No.242,

Federal Register Volume 81, Issue 242 (December 16, 2016)

Page Range90949-91642
FR Document

81_FR_242
Current View
Page and SubjectPDF
81 FR 91207 - Sunshine Act Meeting NoticePDF
81 FR 91137 - Notice of Approval for the He`eia National Estuarine Research Reserve Management PlanPDF
81 FR 90997 - Modernizing HUD's Consolidated Planning Process To Narrow the Digital Divide and Increase Resilience to Natural HazardsPDF
81 FR 91185 - Silvio O. Conte National Fish and Wildlife Refuge; Final Comprehensive Conservation Plan and Environmental Impact StatementPDF
81 FR 91183 - Extension of Effective Date of NIH Policy on the Use of a Single Institutional Review Board for Multi-Site ResearchPDF
81 FR 91197 - Atlantic Wind Lease Sale 6 for Commercial Leasing for Wind Power on the Outer Continental Shelf Offshore New York-Final Sale Notice; CorrectionPDF
81 FR 91169 - Environmental Impact Statements; Notice of AvailabilityPDF
81 FR 91177 - Agency Information Collection Activities: Submission for OMB Review; Comment RequestPDF
81 FR 91141 - Procurement List; Addition and DeletionsPDF
81 FR 91140 - Procurement List; Proposed Additions And DeletionsPDF
81 FR 91187 - Notice of Availability of the Record of Decision for the Energy Gateway South Transmission Project and Approved Land Use Plan Amendments in Colorado, Utah, and WyomingPDF
81 FR 91189 - Notice of Availability of the Record of Decision for the TransWest Express Transmission Project in Wyoming, Colorado, Utah and NevadaPDF
81 FR 91206 - Program-Specific Guidance About Possession Licenses for Production of Radioactive Material Using an AcceleratorPDF
81 FR 91086 - Drawbridge Operation Regulation; Detroit River (Trenton Channel), Grosse Ile, MIPDF
81 FR 91115 - Foreign-Trade Zone (FTZ) 21-Dorchester County, South Carolina, Notification of Proposed Production Activity, AGRU America Charleston, LLC (Industrial Pipes), North Charleston, South CarolinaPDF
81 FR 91175 - Agency Information Collection Activities: Proposed Collection; Comment RequestPDF
81 FR 91195 - Notice of Inventory Completion: Office of the State Archaeologist, University of Iowa, Iowa City, IAPDF
81 FR 91191 - Notice of Intent to Repatriate Cultural Items: Allen County-Fort Wayne Historical Society, Fort Wayne, INPDF
81 FR 91196 - Notice of Inventory Completion: Thomas Burke Memorial Washington State Museum, University of Washington, Seattle, WA; CorrectionPDF
81 FR 91192 - Notice of Inventory Completion: St. Joseph Museums, Inc., St. Joseph, MOPDF
81 FR 91193 - Notice of Inventory Completion: Seminole Tribe of Florida, Clewiston, FLPDF
81 FR 91249 - Health Services Research and Development Service, Scientific Merit Review Board; Notice of MeetingsPDF
81 FR 91169 - Proposed Consent Decree, Clean Air Act Citizen SuitPDF
81 FR 91156 - National Assessment Governing Board MeetingPDF
81 FR 91168 - Pesticide Experimental Use Permit; Receipt of Application; Comment RequestPDF
81 FR 91162 - Certain New Chemicals; Receipt and Status Information for November 2016PDF
81 FR 91120 - Certain Pasta From Italy: Final Results of Antidumping Duty Administrative Review; 2014-2015PDF
81 FR 91118 - Stainless Steel Bar From India: Initiation of Antidumping Duty Changed Circumstances ReviewPDF
81 FR 91157 - Agency Information Collection Activities; Comment Request; Measuring Educational Gain in the National Reporting System for Adult EducationPDF
81 FR 91155 - Agency Information Collection Activities; Comment Request; Rehabilitation Services Administration Grant Re-Allotment FormPDF
81 FR 91206 - Notice of Information CollectionPDF
81 FR 91188 - Notice of Application for Extension of Public Land Order No. 1144, as Modified by PLO 7325, and Opportunity for Public Meeting; Miller Lake Recreational Area, OregonPDF
81 FR 91208 - OMB No. 3206-0144, More Information Needed for the Person Named Below, OPM Form RI 38-45PDF
81 FR 91180 - Gifts to the Food and Drug Administration: Evaluation and Acceptance; Guidance for the Public and Food and Drug Administration; AvailabilityPDF
81 FR 91136 - Certain Biaxial Integral Geogrid Products From the People's Republic of China: Extension of Final Determination of Antidumping Duty InvestigationPDF
81 FR 91122 - Initiation of Antidumping and Countervailing Duty Administrative ReviewsPDF
81 FR 91179 - International Cooperation on Harmonisation of Technical Requirements for Registration of Veterinary Medicinal Products; Bioequivalence: Blood Level Bioequivalence Study; Guidance for Industry; AvailabilityPDF
81 FR 91115 - Lightweight Thermal Paper From the People's Republic of China: Final Results of Antidumping Duty Administrative Review; 2014-2015PDF
81 FR 91116 - Diffusion-Annealed, Nickel-Plated Flat-Rolled Steel Products From Japan: Final Results of Antidumping Duty Administrative Review; 2013-2015PDF
81 FR 91125 - Certain Hardwood Plywood Products From the People's Republic of China: Initiation of Less-Than-Fair-Value InvestigationPDF
81 FR 91131 - Certain Hardwood Plywood Products From the People's Republic of China: Initiation of Countervailing Duty InvestigationPDF
81 FR 91173 - Formations of, Acquisitions by, and Mergers of Bank Holding CompaniesPDF
81 FR 91049 - Energy Efficiency Program for Commercial and Industrial Equipment: Availability of Provisional Analysis Tools and Notice of Data AvailabilityPDF
81 FR 91197 - Certain Automated Teller Machines, ATM Products, Components Thereof, and Products Containing the Same; Notice of Request for Statements on the Public InterestPDF
81 FR 91184 - Accreditation and Approval of Intertek USA, Inc., as a Commercial Gauger and LaboratoryPDF
81 FR 91154 - Notice of Availability-Final Environmental Impact Statement for the Update of the Water Control Manuals and Water Supply Storage Assessment for the Apalachicola-Chattahoochee-Flint River BasinPDF
81 FR 91151 - Notice of Availability of the Draft Missouri River Recovery Management Plan and Environmental Impact StatementPDF
81 FR 91178 - Submission for OMB Review; Comment RequestPDF
81 FR 91158 - Ad Hoc Renewable Energy Financing Group; Notice of Petition for Declaratory OrderPDF
81 FR 91201 - Bay Area Compliance Laboratories Corp.: Application for RecognitionPDF
81 FR 91204 - Intertek Testing Services NA, Inc.: Grant of Expansion of Recognition and Modification to the NRTL Program's List of Appropriate Test StandardsPDF
81 FR 91239 - Qualification of Drivers; Exemption Applications; VisionPDF
81 FR 91238 - Qualification of Drivers; Exemption Applications; Implantable Cardioverter DefibrillatorsPDF
81 FR 91242 - Qualification of Drivers; Exemption Applications; DiabetesPDF
81 FR 91237 - CSX Transportation, Inc.-Discontinuance of Service Exemption-in Perry County, Ky.PDF
81 FR 91147 - Department of Defense Military Family Readiness Council (MFRC); Notice of Federal Advisory Committee MeetingPDF
81 FR 91143 - Proposed Collection; Comment RequestPDF
81 FR 91174 - Medicare Program; Start-Up Funding in Support of the Vermont All-Payer Accountable Care Organization (ACO) Model-Cooperative AgreementPDF
81 FR 91248 - Submission for OMB Review; Comment RequestPDF
81 FR 91216 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Chapter XV, Section 2PDF
81 FR 91227 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Interpretive Material to Rule 7150 (Price Improvement Period “PIP”) and Interpretive Material to Rule 7245 (Complex Order Price Improvement Period “COPIP”) To Make Permanent the Pilot Programs That Permit the Exchange To Have No Minimum Size Requirement for Orders Entered Into the PIP (“PIP Pilot Program”) and COPIP (“COPIP Pilot Program”)PDF
81 FR 91221 - Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change To Amend ISE Rule 723 and To Make Pilot Program PermanentPDF
81 FR 91232 - Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Notice of Filing of Amendments No. 1 and Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments No. 1, Relating to Clearing Agency Investment PolicyPDF
81 FR 91211 - Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Require Listed Companies To Publicly Disclose Compensation or Other Payments by Third Parties to Any Nominee for Director or Sitting Director in Connection With Their Candidacy for or Service on the Companies' Board of DirectorsPDF
81 FR 91235 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 21.5 of Bats EDGX Exchange, Inc. To Extend Through June 30, 2017, the Penny Pilot Program in Options Classes in Certain IssuesPDF
81 FR 91230 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Commentary .02 to Rule 960NY in Order To Extend the Penny Pilot in Options Classes in Certain IssuesPDF
81 FR 91220 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Commentary .02 to Rule 6.72PDF
81 FR 91215 - Alpha Architect ETF Trust, et al.; Notice of ApplicationPDF
81 FR 91199 - Circular Welded Carbon-Quality Steel Pipe From Oman, Pakistan, the United Arab Emirates, and Vietnam; DeterminationsPDF
81 FR 91237 - Revisions to Arbitration ProceduresPDF
81 FR 91196 - Notice of Extension of Concession ContractsPDF
81 FR 91192 - Notice of Availability of the Draft Environmental Impact Statement To Address the Presence of Wolves at Isle Royale National Park, MichiganPDF
81 FR 91198 - Certain Iron Mechanical Transfer Drive Components From Canada and China; DeterminationsPDF
81 FR 91181 - Agency Information Collection Activities; Proposed Collection; Comment Request; Medical Devices; Pediatric Uses of Devices; Requirement for Submission of Information on Pediatric Subpopulations That Suffer From a Disease or Condition That a Device Is Intended To Treat, Diagnose, or CurePDF
81 FR 91150 - Implementation of Executive Orders on Floodplain Management and Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder InputPDF
81 FR 91208 - New Postal ProductsPDF
81 FR 91211 - Product Change-First-Class Package Service Negotiated Service AgreementPDF
81 FR 91210 - Product Change-Priority Mail Negotiated Service AgreementPDF
81 FR 91211 - Product Change-Priority Mail Negotiated Service AgreementPDF
81 FR 91211 - Product Change-Priority Mail and First-Class Package Service Negotiated Service AgreementPDF
81 FR 91210 - Product Change-Priority Mail and First-Class Package Service Negotiated Service AgreementPDF
81 FR 91171 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated AuthorityPDF
81 FR 91148 - 36(b)(1) Arms Sales NotificationPDF
81 FR 91209 - Product Change-Priority Mail Express and Priority Mail Negotiated Service AgreementPDF
81 FR 91210 - Product Change-First-Class Package Service Negotiated Service AgreementPDF
81 FR 91199 - Carbon and Alloy Seamless Standard, Line, and Pressure Pipe From Japan and Romania Institution of Five-Year Reviews; Notice of Commission Determination To Conduct Full Five-Year ReviewsPDF
81 FR 91144 - 36(b)(1) Arms Sales NotificationPDF
81 FR 91097 - Sea Turtle Conservation; Shrimp Trawling RequirementsPDF
81 FR 91104 - Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; Snapper-Grouper Fishery of the South Atlantic Region; Amendment 37PDF
81 FR 91184 - National Institute on Drug Abuse; Notice of Closed MeetingPDF
81 FR 91184 - National Institute on Alcohol Abuse and Alcoholism; Amended Notice of MeetingPDF
81 FR 91183 - National Institute on Alcohol Abuse and Alcoholism; Notice of MeetingPDF
81 FR 91140 - Submission for OMB Review; Comment RequestPDF
81 FR 91137 - Proposed Information Collection; Comment Request; Atlantic Highly Migratory Species Release ReportsPDF
81 FR 91136 - Submission for OMB Review; Comment RequestPDF
81 FR 91142 - Submission for OMB Review; Comment RequestPDF
81 FR 90979 - Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers; Related Aircraft AmendmentPDF
81 FR 91238 - Notice of Release From Quitclaim Deed and Grant Assurance Obligations at Reno Stead Airport, Reno, Washoe County, NevadaPDF
81 FR 91160 - Commission Information Collection Activities (FERC-549D and FERC-733); Consolidated Comment Request; ExtensionPDF
81 FR 91159 - Northern Natural Gas Company; Notice of Availability of the Environmental Assessment for the Proposed Cedar Station Upgrade ProjectPDF
81 FR 91159 - Columbia Gas Transmission, LLC; Notice of Schedule For Environmental Review of the WB XPress ProjectPDF
81 FR 91200 - Notice of a Virtual Public Meeting of the Advisory Committee on Apprenticeship (ACA)PDF
81 FR 91200 - Agency Information Collection Activities; Comment Request; Joint Quarterly Narrative Progress Report TemplatePDF
81 FR 91157 - Appalachian Power Company; Notice of Application Accepted for Filing And Soliciting Comments, Motions To Intervene, and ProtestsPDF
81 FR 91162 - Hawks Nest Hydro, LLC; Notice of Availability of Draft Environmental AssessmentPDF
81 FR 91247 - Agency Requests for Renewal of a Previously Approved Information Collection(s): Requirements for Establishing U.S. CitizenshipPDF
81 FR 91245 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel OUTRIDER; Invitation for Public CommentsPDF
81 FR 91247 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel TIGRESS; Invitation for Public CommentsPDF
81 FR 91246 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel FOUR CAPTAINS; Invitation for Public CommentsPDF
81 FR 91088 - Determinations of Attainment by the Attainment Date, Determinations of Failure To Attain by the Attainment Date and Reclassification for Certain Nonattainment Areas for the 2006 24-Hour Fine Particulate Matter National Ambient Air Quality StandardsPDF
81 FR 91045 - NASA Federal Acquisition Regulation Supplement: Contractor Financial Reporting of Property (2016-N024)PDF
81 FR 91083 - Manufactured Housing Program: Minimum Payments to the StatesPDF
81 FR 91037 - Procedures for Disclosure of Information Under the Freedom of Information ActPDF
81 FR 91245 - Notice of Application for Approval of Discontinuance or Modification of a Railroad Signal SystemPDF
81 FR 90949 - Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign BanksPDF
81 FR 91071 - List of Bulk Drug Substances That Can Be Used To Compound Drug Products in Accordance With Section 503A of the Federal Food, Drug, and Cosmetic ActPDF
81 FR 91049 - Small Business Investment Companies-Administrative FeesPDF
81 FR 90987 - Ensuring Program Uniformity at the Hearing and Appeals Council Levels of the Administrative Review ProcessPDF
81 FR 90983 - Implementation of the February 2016 Australia Group (AG) Intersessional Decisions and the June 2016 AG Plenary UnderstandingsPDF
81 FR 91032 - Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Paying BenefitsPDF
81 FR 91641 - Federal Acquisition Regulation; Federal Acquisition Circular 2005-93; Small Entity Compliance GuidePDF
81 FR 91636 - Federal Acquisition Regulation; Fair Pay and Safe Workplaces; InjunctionPDF
81 FR 91627 - Federal Acquisition Regulation; Paid Sick Leave for Federal ContractorsPDF
81 FR 91626 - Federal Acquisition Regulation; Federal Acquisition Circular 2005-93; IntroductionPDF
81 FR 90974 - Airworthiness Directives; Rolls-Royce plc Turbofan EnginesPDF
81 FR 90969 - Airworthiness Directives; International Aero Engines AG Turbofan EnginesPDF
81 FR 91592 - Trichloroethylene; Regulation of Certain Uses Under TSCA § 6(a)PDF
81 FR 91033 - Air Plan Approval; TN; Revisions to the Knox County Portion of the TN SIPPDF
81 FR 91035 - Air Plan Approval; Ohio; Redesignation of the Ohio Portion of the Cincinnati, Ohio-Kentucky-Indiana Area to Attainment of the 2008 Ozone StandardPDF
81 FR 90958 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 90971 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 91556 - Use of U.S. Army Corps of Engineers Reservoir Projects for Domestic, Municipal & Industrial Water SupplyPDF
81 FR 91171 - Banking Organization Systemic Risk Report (FR Y-15)PDF
81 FR 90952 - Regulatory Capital Rules: Implementation of Capital Requirements for Global Systemically Important Bank Holding CompaniesPDF
81 FR 91138 - Notice of Availability of an Alabama Trustee Implementation Group (Alabama TIG) Draft Recreational Use Restoration Plan I and Draft Environmental Impact Statement: Provide and Enhance Recreational Opportunities (RP/EIS)PDF
81 FR 91494 - Eagle Permits; Revisions to Regulations for Eagle Incidental Take and Take of Eagle NestsPDF
81 FR 91185 - Federal Property Suitable as Facilities To Assist the HomelessPDF
81 FR 90961 - Airworthiness Directives; Bombardier, Inc. AirplanesPDF
81 FR 91012 - Treatment of Certain Transfers of Property to Foreign CorporationsPDF
81 FR 91060 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 91058 - Airworthiness Directives; Bombardier, Inc. AirplanesPDF
81 FR 91066 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 90976 - Amendment of Class D Airspace for St. Petersburg, FLPDF
81 FR 91454 - Aggregation of PositionsPDF
81 FR 90978 - IFR Altitudes; Miscellaneous AmendmentsPDF
81 FR 91252 - Capital Requirements of Swap Dealers and Major Swap ParticipantsPDF
81 FR 90955 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 90964 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 91418 - Energy Conservation Program: Test Procedures for Cooking ProductsPDF
81 FR 91062 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 91068 - Airworthiness Directives; Fokker Services B.V. AirplanesPDF
81 FR 91401 - Surface Transportation Vulnerability Assessments and Security Plans (VASP)PDF
81 FR 91336 - Security Training for Surface Transportation EmployeesPDF

Issue

81 242 Friday, December 16, 2016 Contents Army Army Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91142-91143 2016-30214 Centers Medicare Centers for Medicare & Medicaid Services NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91175-91178 2016-30340 2016-30349 Medicare Program: Start-up Funding in Support of the Vermont All-Payer Accountable Care Organization Model—Cooperative Agreement, 91174-91175 2016-30269 Children Children and Families Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Tribal Child Support Enforcement Program Annual Data Report, 91178 2016-30291 Coast Guard Coast Guard PROPOSED RULES Drawbridge Operations: Detroit River (Trenton Channel), Grosse Ile, MI, 91086-91088 2016-30342 Commerce Commerce Department See

Foreign-Trade Zones Board

See

Industry and Security Bureau

See

International Trade Administration

See

National Oceanic and Atmospheric Administration

Committee for Purchase Committee for Purchase From People Who Are Blind or Severely Disabled NOTICES Procurement List; Additions and Deletions, 91140-91142 2016-30347 2016-30348 Commodity Futures Commodity Futures Trading Commission RULES Aggregation of Positions, 91454-91492 2016-29582 PROPOSED RULES Capital Requirements of Swap Dealers and Major Swap Participants, 91252-91334 2016-29368 Comptroller Comptroller of the Currency RULES Expanded Examination Cycle for Certain Small Insured Depository Institutions and United States Branches and Agencies of Foreign Banks, 90949-90952 2016-30133 Defense Department Defense Department See

Army Department

See

Engineers Corps

RULES Federal Acquisition Regulation: Fair Pay and Safe Workplaces; Injunction, 91636-91641 2016-30091 Federal Acquisition Circular 2005-93; Small Entity Compliance Guide, 91641-91642 2016-30092 Federal Acquisition Circular 2005-93; Introduction, 91626 2016-30089 Paid Sick Leave for Federal Contractors, 91627-91636 2016-30090 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91143-91144 2016-30271 Arms Sales, 91144-91150 2016-30225 2016-30229 Meetings: Military Family Readiness Council, 91147-91148 2016-30274
Education Department Education Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Measuring Educational Gain in the National Reporting System for Adult Education, 91157 2016-30322 Rehabilitation Services Administration Grant Re-allotment Form, 91155-91156 2016-30321 Meetings: National Assessment Governing Board; Teleconference, 91156-91157 2016-30328 Employment and Training Employment and Training Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Joint Quarterly Narrative Progress Report Template, 91200-91201 2016-30204 Meetings: Advisory Committee on Apprenticeship, 91200 2016-30205 Energy Department Energy Department See

Federal Energy Regulatory Commission

RULES Energy Conservation Programs: Test Procedures for Cooking Products, 91418-91452 2016-29077 PROPOSED RULES Energy Efficiency Program for Commercial and Industrial Equipment: Availability of Provisional Analysis Tools and Notice of Data Availability, 91049 2016-30299
Engineers Engineers Corps PROPOSED RULES Use of U.S. Army Corps of Engineers Reservoir Projects for Domestic, Municipal & Industrial Water Supply, 91556-91590 2016-30017 NOTICES Environmental Impact Statements; Availability, etc.: Draft Missouri River Recovery Management Plan, 91151-91154 2016-30294 Update of Water Control Manuals and Water Supply Storage Assessment for the Apalachicola-Chattahoochee-Flint River Basin, 91154-91155 2016-30295 Floodplain Management as Amended by the Federal Flood Risk Management Standard, 91150-91151 2016-30240 Environmental Protection Environmental Protection Agency RULES Air Quality State Implementation Plans; Approvals and Promulgations: Ohio; Redesignation of the Ohio Portion of the Cincinnati, Ohio-Kentucky-Indiana Area to Attainment of the 2008 Ozone Standard, 91035-91037 2016-30054 Tennessee; Revisions to the Knox County Portion of the Tennessee State Implementation Plan, 91033-91035 2016-30056 PROPOSED RULES Air Quality State Implementation Plans; Approvals and Promulgations: Determinations of Attainment by the Attainment Date, Determinations of Failure to Attain by the Attainment Date and Reclassification for Certain Nonattainment Areas, etc., 91088-91097 2016-30174 Regulation of Certain Uses under Toxic Substances Control Act: Trichloroethylene, 91592-91624 2016-30063 NOTICES Certain New Chemicals: Receipt and Status Information for November 2016, 91162-91168 2016-30325 Consent Decrees: Clean Air Act Citizen Suit, 91169-91171 2016-30329 Environmental Impact Statements; Availability, etc.: Weekly Receipts, 91169 2016-30350 Permits: Pesticide Experimental Use; Receipt of Application, 91168-91169 2016-30326 Federal Aviation Federal Aviation Administration RULES Airworthiness Directives: Airbus Airplanes, 90958-90961, 90964-90969, 90971-90974 2016-29249 2016-30036 2016-30038 Bombardier, Inc. Airplanes, 90961-90964 2016-29815 International Aero Engines AG Turbofan Engines, 90969-90971 2016-30064 Rolls-Royce plc Turbofan Engines, 90974-90976 2016-30065 The Boeing Company Airplanes, 90955-90958 2016-29251 Class D Airspace; Amendments: St. Petersburg, FL, 90976-90977 2016-29634 IFR Altitudes; Miscellaneous Amendments, 90978-90979 2016-29429 Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers; Related Aircraft Amendment, 90979-90983 2016-30211 PROPOSED RULES Airworthiness Directives: Airbus Airplanes, 91060-91066 2016-28802 2016-29676 Bombardier, Inc. Airplanes, 91058-91060 2016-29671 Fokker Services B.V. Airplanes, 91068-91071 2016-28669 The Boeing Company Airplanes, 91066-91068 2016-29670 NOTICES Airport Property Releases: Quitclaim Deed and Grant Assurance Obligations at Reno Stead Airport, Reno, Washoe County, NV, 91238 2016-30210 Federal Communications Federal Communications Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91171 2016-30230 Federal Deposit Federal Deposit Insurance Corporation RULES Expanded Examination Cycle for Certain Small Insured Depository Institutions and United States Branches and Agencies of Foreign Banks, 90949-90952 2016-30133 Federal Energy Federal Energy Regulatory Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91160-91162 2016-30208 Applications: Appalachian Power Co., 91157-91158 2016-30202 Environmental Assessments; Availability, etc.: Hawks Nest Hydro, LLC, 91162 2016-30201 Northern Natural Gas Co., Cedar Station Upgrade Project, 91159-91160 2016-30207 Petitions for Declaratory Orders: Ad Hoc Renewable Energy Financing Group, 91158-91159 2016-30290 Schedules for Environmental Review: Columbia Gas Transmission, LLC, WB XPress Project, 91159 2016-30206 Federal Motor Federal Motor Carrier Safety Administration NOTICES Qualification of Drivers; Exemption Applications: Diabetes, 91242-91245 2016-30281 Implantable Cardioverter Defibrillators, 91238-91239 2016-30283 Vision, 91239-91242 2016-30286 Federal Railroad Federal Railroad Administration NOTICES Application for Approval of Discontinuance or Modification of a Railroad Signal System, 91245 2016-30141 Federal Reserve Federal Reserve System RULES Capital Rules: Implementation of Capital Requirements for Global Systemically Important Bank Holding Companies, 90952-90955 2016-29966 Expanded Examination Cycle for Certain Small Insured Depository Institutions and United States Branches and Agencies of Foreign Banks, 90949-90952 2016-30133 NOTICES Banking Organization Systemic Risk Report, 91171-91173 2016-29967 Formations of, Acquisitions by, and Mergers of Bank Holding Companies, 91173-91174 2016-30301 Fish Fish and Wildlife Service RULES Eagle Permits: Eagle Incidental Take and Take of Eagle Nests, 91494-91554 2016-29908 NOTICES Environmental Impact Statements; Availability, etc.: Silvio O. Conte National Fish and Wildlife Refuge, 91185-91187 2016-30420 Food and Drug Food and Drug Administration PROPOSED RULES List of Bulk Drug Substances that can be used to Compound Drug Products, 91071-91082 2016-30109 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Requirement for Submission of Information on Pediatric Subpopulations That Suffer From a Disease or Condition That a Device Is Intended to Treat, Diagnose, or Cure, 91181-91183 2016-30243 Guidance: Gifts to the Food and Drug Administration; Evaluation and Acceptance, 91180-91181 2016-30312 International Cooperation on Harmonisation of Technical Requirements for Registration of Veterinary Medicinal Products; Bioequivalence—Blood Level Bioequivalence Study, 91179-91180 2016-30309 Foreign Trade Foreign-Trade Zones Board NOTICES AGRU America Charleston, LLC, Foreign-Trade Zone 21, North Charleston, SC, 91115 2016-30341 General Services General Services Administration RULES Federal Acquisition Regulation: Fair Pay and Safe Workplaces; Injunction, 91636-91641 2016-30091 Federal Acquisition Circular 2005-93; Small Entity Compliance Guide, 91641-91642 2016-30092 Federal Acquisition Circular 2005-93; Introduction, 91626 2016-30089 Paid Sick Leave for Federal Contractors, 91627-91636 2016-30090 Health and Human Health and Human Services Department See

Centers for Medicare & Medicaid Services

See

Children and Families Administration

See

Food and Drug Administration

See

National Institutes of Health

Homeland Homeland Security Department See

Coast Guard

See

Transportation Security Administration

See

U.S. Customs and Border Protection

Housing Housing and Urban Development Department RULES Modernizing the Consolidated Planning Process To Narrow the Digital Divide and Increase Resilience to Natural Hazards, 90997-91012 2016-30421 PROPOSED RULES Manufactured Housing Program: Minimum Payments to the States, 91083-91086 2016-30153 NOTICES Federal Properties Suitable as Facilities to Assist the Homeless, 91185 2016-29821 Industry Industry and Security Bureau RULES Implementation of the February 2015 Australia Group Intersessional Decisions and the June 2015 Australia Group Plenary Understandings, 90983-90987 2016-30099 Interior Interior Department See

Fish and Wildlife Service

See

Land Management Bureau

See

National Park Service

See

Ocean Energy Management Bureau

Internal Revenue Internal Revenue Service RULES Treatment of Certain Transfers of Property to Foreign Corporations, 91012-91032 2016-29791 International Trade Adm International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Certain Biaxial Integral Geogrid Products From the People's Republic of China, 91136 2016-30311 Certain Hardwood Plywood Products from the People's Republic of China, 91131-91136 2016-30304 Certain Hardwood Plywood Products from the People's Republic of China; Initiation of Less Than Fair Value Investigation, 91125-91131 2016-30305 Certain Pasta from Italy; Final Results of Antidumping Duty Administrative Review; 2014-2015, 91120-91122 2016-30324 Diffusion-Annealed, Nickel-Plated Flat-Rolled Steel Products from Japan: Administrative Review; 2013-2015, 91116-91118 2016-30306 Initiation of Administrative Reviews, 91122-91125 2016-30310 Lightweight Thermal Paper from the People's Republic of China; Administrative Review, 2014-2015, 91115-91116 2016-30308 Stainless Steel Bar From India, 91118-91120 2016-30323 International Trade Com International Trade Commission NOTICES Investigations; Determinations, Modifications, and Rulings, etc.: Carbon and Alloy Seamless Standard, Line, and Pressure Pipe from Japan and Romania, 91199-91200 2016-30226 Certain Automated Teller Machines, ATM Products, Components Thereof, and Products Containing the Same, 91197-91198 2016-30298 Certain Iron Mechanical Transfer Drive Components from Canada and China, 91198-91199 2016-30244 Circular Welded Carbon-Quality Steel Pipe from Oman, Pakistan, the United Arab Emirates, and Vietnam, 91199 2016-30250 Labor Department Labor Department See

Employment and Training Administration

See

Occupational Safety and Health Administration

Land Land Management Bureau NOTICES Public Land Orders: Miller Lake Recreational Area, OR, 91188-91189 2016-30317 Records of Decision: Energy Gateway South Transmission Project and Approved Land use Plan Amendments in Colorado, Utah, and Wyoming, 91187-91188 2016-30346 TransWest Express Transmission Project in Wyoming, Colorado, Utah and Nevada, 91189-91191 2016-30345 Legal Legal Services Corporation RULES Procedures for Disclosure of Information under the Freedom of Information Act, 91037-91045 2016-30144 Maritime Maritime Administration NOTICES Requests for Administrative Waivers of the Coastwise Trade Laws: Vessel FOUR CAPTAINS, 91246-91247 2016-30196 Vessel OUTRIDER, 91245-91246 2016-30198 Vessel TIGRESS, 91247 2016-30197 NASA National Aeronautics and Space Administration RULES Federal Acquisition Regulation Supplement: Contractor Financial Reporting of Property, 91045-91048 2016-30157 Federal Acquisition Regulation: Fair Pay and Safe Workplaces; Injunction, 91636-91641 2016-30091 Federal Acquisition Circular 2005-93; Small Entity Compliance Guide, 91641-91642 2016-30092 Federal Acquisition Circular 2005-93; Introduction, 91626 2016-30089 Paid Sick Leave for Federal Contractors, 91627-91636 2016-30090 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91206 2016-30319 National Institute National Institutes of Health NOTICES Extension of Effective Date of NIH Policy on the Use of a Single Institutional Review Board for Multi-Site Research, 91183 2016-30398 Meetings: National Advisory Council on Alcohol Abuse and Alcoholism, 91183-91184 2016-30218 National Institute on Alcohol Abuse and Alcoholism, 91184 2016-30219 National Institute on Drug Abuse, 91184 2016-30220 National Oceanic National Oceanic and Atmospheric Administration PROPOSED RULES Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic: Snapper-Grouper Fishery of the South Atlantic Region; Amendment 37, 91104-91114 2016-30223 Sea Turtle Conservation: Shrimp Trawling Requirements, 91097-91104 2016-30224 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91136-91137, 91140 2016-30215 2016-30217 Agency Information Collection Activities; Proposals, Submissions, and Approvals: Atlantic Highly Migratory Species Release Reports, 91137 2016-30216 Environmental Impact Statements; Availability, etc.: Alabama Trustee Implementation Group; Provide and Enhance Recreational Opportunities, 91138-91140 2016-29952 He'eia National Estuarine Research Reserve Management Plan, 91137-91138 2016-30441 National Park National Park Service NOTICES Environmental Impact Statements; Availability, etc.: Presence of Wolves at Isle Royale National Park, MI, 91192-91193 2016-30247 Extension of Concession Contracts, 91196 2016-30248 Inventory Completions: Office of the State Archaeologist, University of Iowa, Iowa City, IA, 91195-91196 2016-30339 Seminole Tribe of Florida, Clewiston, FL, 91193-91195 2016-30335 St. Joseph Museums, Inc., St. Joseph, MO, 91192 2016-30336 Thomas Burke Memorial Washington State Museum, University of Washington, Seattle, WA; Correction, 91196-91197 2016-30337 Repatriation of Cultural Items: Allen County-Fort Wayne Historical Society, Fort Wayne, IN, 91191-91192 2016-30338 Nuclear Regulatory Nuclear Regulatory Commission NOTICES Guidance: Program-Specific Guidance about Possession Licenses for Production of Radioactive Material Using an Accelerator, 91206-91207 2016-30343 Meetings; Sunshine Act, 91207-91208 2016-30494 Occupational Safety Health Adm Occupational Safety and Health Administration NOTICES Expansion of Recognition; Applications: Intertek Testing Services NA, Inc., 91204-91206 2016-30287 Recognition; Applications: Bay Area Compliance Laboratories Corp., 91201-91204 2016-30288 Ocean Energy Management Ocean Energy Management Bureau NOTICES Atlantic Wind Lease Sales: Commercial Leasing for Wind Power on Outer Continental Shelf Offshore New York: Final Sale Notice; Correction, 91197 2016-30352 Pension Benefit Pension Benefit Guaranty Corporation RULES Benefits Payable in Terminated Single-Employer Plans: Interest Assumptions for Paying Benefits, 91032-91033 2016-30098 Personnel Personnel Management Office NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91208 2016-30316 Postal Regulatory Postal Regulatory Commission NOTICES New Postal Products, 91208-91209 2016-30239 Postal Service Postal Service NOTICES Product Changes: First-Class Package Service Negotiated Service Agreement, 91210-91211 2016-30227 2016-30238 Priority Mail and First-Class Package Service Negotiated Service Agreement, 91210-91211 2016-30231 2016-30232 2016-30233 Priority Mail Express and Priority Mail Negotiated Service Agreement, 91209-91210 2016-30228 Priority Mail Negotiated Service Agreement, 2016-30234 2016-30235 91210-91211 2016-30236 2016-30237 Securities Securities and Exchange Commission NOTICES Applications: Alpha Architect ETF Trust, et al., 91215-91216 2016-30251 Self-Regulatory Organizations; Proposed Rule Changes: Bats EDGX Exchange, Inc., 91235-91237 2016-30254 BOX Options Exchange LLC, 91227-91230 2016-30258 Depository Trust Co.; Fixed Income Clearing Corp.; National Securities Clearing Corp., 91232-91235 2016-30256 International Securities Exchange, LLC, 91221-91227 2016-30257 Investors Exchange LLC, 91211-91215 2016-30255 NASDAQ Stock Market LLC, 91216-91220 2016-30259 NYSE Arca, Inc., 91220-91221 2016-30252 NYSE MKT LLC, 91230-91232 2016-30253 Small Business Small Business Administration PROPOSED RULES Small Business Investment Companies—Administrative Fees, 91049-91058 2016-30104 Social Social Security Administration RULES Ensuring Program Uniformity at the Hearing and Appeals Council Levels of the Administrative Review Process, 90987-90997 2016-30103 Surface Transportation Surface Transportation Board NOTICES Discontinuance of Service Exemptions: CSX Transportation, Inc. in Perry County, KY, 91237 2016-30275 Revisions to Arbitration Procedures, 91237-91238 2016-30249 Transportation Department Transportation Department See

Federal Aviation Administration

See

Federal Motor Carrier Safety Administration

See

Federal Railroad Administration

See

Maritime Administration

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Requirements for Establishing U.S. Citizenship, 91247-91248 2016-30200
Security Transportation Security Administration PROPOSED RULES Security Training for Surface Transportation Employees, 91336-91401 2016-28298 Surface Transportation Vulnerability Assessments and Security Plans, 91401-91416 2016-28300 Treasury Treasury Department See

Comptroller of the Currency

See

Internal Revenue Service

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 91248-91249 2016-30260
Customs U.S. Customs and Border Protection NOTICES Commercial Gaugers and Laboratories; Accreditations and Approvals: Intertek USA, Inc., 91184-91185 2016-30297 Veteran Affairs Veterans Affairs Department NOTICES Meetings: Health Services Research and Development Service Scientific Merit Review Board, 91249 2016-30334 Separate Parts In This Issue Part II Commodity Futures Trading Commission, 91252-91334 2016-29368 Part III Homeland Security Department, Transportation Security Administration, 91336-91416 2016-28298 2016-28300 Part IV Energy Department, 91418-91452 2016-29077 Part V Commodity Futures Trading Commission, 91454-91492 2016-29582 Part VI Interior Department, Fish and Wildlife Service, 91494-91554 2016-29908 Part VII Defense Department, Engineers Corps, 91556-91590 2016-30017 Part VIII Environmental Protection Agency, 91592-91624 2016-30063 Part IX Defense Department, 91626-91642 2016-30091 2016-30092 2016-30089 2016-30090 General Services Administration, 2016-30091 91626-91642 2016-30092 2016-30089 2016-30090 National Aeronautics and Space Administration, 91626-91642 2016-30091 2016-30092 2016-30089 2016-30090 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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81 242 Friday, December 16, 2016 Rules and Regulations DEPARTMENT OF TREASURY Office of the Comptroller of the Currency 12 CFR Part 4 [Docket ID OCC-2016-0001] RIN 1557-AE01 FEDERAL RESERVE SYSTEM 12 CFR Parts 208 and 211 [Docket No. R-1531] RIN 7100-AE45 FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Parts 337, 347, and 390 RIN 3064-AE42 Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks AGENCY:

Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System (Board); and Federal Deposit Insurance Corporation (FDIC).

ACTION:

Joint final rules.

SUMMARY:

The OCC, Board, and FDIC (collectively, the agencies) are jointly adopting as final and without change the agencies' interim final rules published in the Federal Register on February 29, 2016, that implemented section 83001 of the Fixing America's Surface Transportation Act (FAST Act). Section 83001 of the FAST Act permits the agencies to conduct a full-scope, on-site examination of qualifying insured depository institutions with less than $1 billion in total assets no less than once during each 18-month period. Prior to enactment of the FAST Act, only qualifying insured depository institutions with less than $500 million in total assets were eligible for an 18-month on-site examination cycle. The final rules, like the interim final rules, generally allow well capitalized and well managed institutions with less than $1 billion in total assets to benefit from the extended 18-month examination schedule. In addition, the final rules adopt as final parallel changes to the agencies' regulations governing the on-site examination cycle for U.S. branches and agencies of foreign banks, consistent with the International Banking Act of 1978. Finally, through this rulemaking, the FDIC has integrated its regulations regarding the frequency of safety and soundness examinations for State nonmember banks and State savings associations.

DATES:

Effective on January 17, 2017.

FOR FURTHER INFORMATION CONTACT:

OCC: Deborah Katz, Assistant Director, or Melissa J. Lisenbee, Attorney, Legislative and Regulatory Activities Division, (202) 649-5490; Scott Schainost, Midsize and Community Bank Supervision Liaison, Midsize and Community Bank Supervision, (202) 649-8173.

Board: Division of Banking Supervision and Regulation—Richard Naylor, Associate Director, (202) 728-5854; Richard Watkins, Deputy Associate Director, (202) 452-3421; Virginia Gibbs, Manager, (202) 452-2521; or Alexander Kobulsky, Supervisory Financial Analyst, (202) 452-2031; and Legal Division—Laurie Schaffer, Associate General Counsel, (202) 452-2277; Brian Chernoff, Senior Attorney, (202) 452-2952; or Mary Watkins, Attorney, (202) 452-3722.

FDIC: Thomas F. Lyons, Chief, Policy and Program Development, (202) 898-6850, Karen Jones Currie, Senior Examination Specialist, (202) 898-3981 for the Division of Risk Management Supervision; Mark A. Mellon, Counsel, (202) 898-3884 for revisions to 12 CFR part 337; Rodney D. Ray, Counsel, (202) 898-3556 for revisions to 12 CFR part 347; Suzanne J. Dawley, Senior Attorney, (202) 898-6509 for revisions to 12 CFR part 390 for the Legal Division.

SUPPLEMENTARY INFORMATION:

I. Background

Section 10(d) of the Federal Deposit Insurance Act (FDI Act) 1 generally requires the appropriate Federal banking agency for an insured depository institution (IDI) to conduct a full-scope, on-site examination of the institution at least once during each 12-month period. Prior to enactment of section 83001 of the FAST Act,2 section 10(d)(4) of the FDI Act authorized the appropriate Federal banking agency to extend the on-site examination cycle for an IDI to at least once during an 18-month period if the IDI (1) had total assets of less than $500 million; (2) was well capitalized (as defined in 12 U.S.C. 1831o); (3) was found, at its most recent examination, to be well managed 3 and to have a composite condition of “outstanding” or, in the case of an institution that has total assets of not more than $100 million, “outstanding” or “good;” (4) was not subject to a formal enforcement proceeding or order by the FDIC or its appropriate Federal banking agency; and (5) had not undergone a change in control during the previous 12-month period in which a full-scope, on-site examination otherwise would have been required. Section 10(d)(10) of the FDI Act, prior to the enactment of section 83001 of the FAST Act, also gave the agencies discretionary authority to raise the eligibility size limit for the 18-month examination cycle for otherwise qualifying IDIs with an “outstanding” or “good” composite rating from $100 million to an amount not to exceed $500 million in total assets if the agencies determined that the higher limit would be consistent with the principles of safety and soundness.4 Under section 10(d)(3), the Board and the FDIC, as the appropriate Federal banking agencies for State-chartered insured banks and savings associations, are permitted to conduct on-site examinations of such IDIs on alternating 12-month or 18-month periods with the institution's State supervisor, if the Board or FDIC, as appropriate, determines that the alternating examination conducted by the State carries out the purposes of section 10(d) of the FDI Act.5

1 12 U.S.C. 1820(d). Section 10(d) of the FDI Act was added by section 111 of the Federal Deposit Insurance Corporation Improvement Act of 1991.

2 Public Law 114-94, 129 Stat. 1312 (2015).

3 Depository institutions are evaluated under the Uniform Financial Institutions Rating System (commonly referred to as “CAMELS”). CAMELS is an acronym that is drawn from the first letters of the individual components of the rating system: Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. CAMELS ratings of “1” and “2” correspond with ratings of “outstanding” and “good.” In addition to having a CAMELS composite rating of “1” or “2,” an IDI is considered to be “well managed” for the purposes of section 10(d) of the FDI Act only if the IDI also received a rating of “1” or “2” for the management component of the CAMELS rating at its most recent examination. See 72 FR 17798 (Apr. 10, 2007).

4 12 U.S.C. 1820(d)(10).

5 12 U.S.C. 1820(d)(3).

Section 7(c)(1)(C) of the International Banking Act (IBA) provides that a Federal or a State branch or agency of a foreign bank shall be subject to on-site examination by its appropriate Federal banking agency or State bank supervisor as frequently as a national or State bank would be subject to such an examination by the agency.6 The agencies previously adopted regulations to implement the examination cycle requirements of section 10(d) of the FDI Act and section 7(c)(1)(C) of the IBA, including the extended 18-month examination cycle available to qualifying small institutions and U.S. branches and agencies of foreign banks.7 The agencies have also exercised their discretion, under section 10(d)(10) of the FDI Act, to extend the 18-month examination cycle for otherwise qualifying institutions with “good” composite ratings,8 first, in 1997, for such institutions with total assets of $250 million or less, and, again, in 2007, for such institutions with total assets of $500 million or less.9

6 12 U.S.C. 3105(c)(1)(C).

7 See 12 CFR 4.6 and 4.7 (OCC), 12 CFR 208.64 and 211.26 (Board), 12 CFR 337.12, 347.211, and 390.351 (FDIC).

8 Corresponding to a CAMELS or Risk management, Operational controls, Compliance, and Asset quality (ROCA) rating of “2.”

9 See 62 FR 6449 (Feb. 12, 1997) (interim final rule); see also 63 FR 16377 (Apr. 2, 1998) (final rule); see also 72 FR 17798 (Apr. 10, 2007) (interim final rule); see also 72 FR 54347 (Sept. 25, 2007) (final rule).

Section 83001 of the FAST Act, effective on December 4, 2015, amended section 10(d) of the FDI Act to raise, from $500 million to $1 billion, the total asset threshold below which an agency may apply an 18-month (rather than a 12-month) on-site examination cycle for IDIs with “outstanding” composite ratings, and to raise, from not more than $100 million to not more than $200 million, the total asset threshold below which an agency may apply an 18-month examination cycle to an institution with an “outstanding” or “good” composite rating.10 Section 83001 also amended section 10(d)(10) of the FDI Act to authorize the appropriate Federal banking agency to increase, by regulation, the maximum amount limitation for IDIs with “outstanding” or “good” composite ratings from not more than $200 million to not more than $1 billion if the appropriate Federal banking agency determines that the higher amount would be consistent with the principles of safety and soundness for IDIs.11

10 Public Law 114-94, 129 Stat. 1312 (2015).

11Id.

These FAST Act amendments reduce regulatory burdens on small, well capitalized, and well managed institutions and allow the agencies to better focus their supervisory resources on those IDIs and U.S. branches and agencies of foreign banks that may present capital, managerial, or other issues of supervisory concern.

II. Discussion of the Final Rules

On February 29, 2016, the agencies published and requested comment on interim final rules to implement the amendments to section 10(d) made by section 83001 of the FAST Act.12 The agencies are adopting the interim final rules as final without change. In particular, the agencies are adopting as final the increase, from $500 million to $1 billion, in the total asset threshold below which an IDI that meets the criteria in section 10(d) and the agencies' rules may qualify for an 18-month, full-scope, on-site examination cycle. In addition, as authorized by section 83001 of the FAST Act, the agencies have determined that it is consistent with principles of safety and soundness to permit institutions with total assets of $200 million or greater and not exceeding $1 billion that received a composite CAMELS rating of “1” or “2,” and that meet other qualifying criteria set forth in section 10(d) and the agencies' rules, to qualify for an 18-month examination cycle. Consistent with section 7(c)(1)(C) of the IBA, the agencies also are adopting as final conforming changes to the regulations that govern the on-site examination cycle of a U.S. branch or agency of a foreign bank. These changes permit a U.S. branch or agency of a foreign bank with total assets of less than $1 billion to qualify for an 18-month examination cycle if the U.S. branch or agency of a foreign bank received a composite ROCA rating of “1” or “2” at its most recent examination and meets the other applicable criteria.

12 81 FR 10063 (Feb. 29, 2016).

The FDIC analyzed the frequency with which institutions rated a composite CAMELS rating of “1” or “2” failed within five years, versus the frequency with which institutions rated a composite CAMELS rating of “3,” “4,” or “5” failed within five years. FDIC analysis indicates that between 1985 and 2011,13 FDIC-insured depository institutions with assets less than $1 billion and a composite CAMELS rating of “1” or “2” had a five-year failure rate that was one-seventh as high as institutions with a CAMELS rating of “3,” “4,” or “5.” Moreover, the relationship between failure rates in the two ratings groups did not meaningfully change when the analysis was restricted to institutions with assets between $200 million and $500 million compared to institutions with assets between $500 million to $1 billion. This analysis suggests that extending the examination cycle for well-rated institutions with $500 million to $1 billion in assets by an additional six months, combined with the agencies' off-site monitoring activities and ability to examine an institution more frequently as necessary or appropriate, is unlikely to negatively affect the safe and sound operations of qualifying institutions or the ability of the agencies to effectively supervise and protect the safety and soundness of institutions with total assets of less than $1 billion.14 Furthermore, the agencies note that, in order to qualify for an 18-month examination cycle, any institution with total assets of less than $1 billion—including one with a CAMELS composite rating of “2”—must meet the other capital, managerial, and supervisory criteria set forth in section 10(d). The agencies estimate that the changes adopted by the final rules will increase the number of institutions that may qualify for an extended 18-month examination cycle by approximately 611 institutions (372 of which are supervised by the FDIC, 142 by the OCC, and 97 by the Board), bringing the total number of institutions that may qualify for an extended 18-month examination cycle to 4,793 IDIs.15 Approximately 89 U.S. branches and agencies of foreign banks would be eligible for the extended examination cycle based on the final rules, an increase of 30 (one of which is supervised by the FDIC, four by the OCC, and 25 by the Board).16

13 A list of failed institutions can be found on the FDIC's Web site at https://www.fdic.gov/bank/individual/failed/banklist.html.

14 The agencies continue to reserve the right in their regulations to examine an IDI or U.S. branch or agency of a foreign bank more frequently than is required by the FDI Act or IBA. See 12 CFR 4.6(c) and 4.7(c) (OCC), 12 CFR 208.64(c) and 211.26(c)(3) (Board), 12 CFR 337.12(c), 347.211(c) (FDIC), and 390.351(c).

15 Call report data, March 31, 2016.

16Id.

Finally, the FDIC is adopting as final changes made in the interim final rules to integrate its regulations regarding the frequency of safety and soundness examinations for State nonmember banks and State savings associations. Twelve CFR 390.351 was rescinded and removed because it was substantively identical to 12 CFR 337.12 and, therefore, redundant to section 12 CFR 337.12. Twelve CFR 337.12 was amended to reflect the authority of the FDIC under section 4(a) of the Home Owners' Loan Act to provide for the examination and safe and sound operation of State savings associations. State savings associations now are within the scope of 12 CFR 337.12, and, all FDIC-supervised institutions, including State savings associations, are subject to the requirements of 12 CFR 337.12.

The agencies received three comment letters in response to the interim final rules. Two commenters, both industry trade groups, supported the interim final rules. Both commenters agreed that extending the examination cycle for IDIs that meet the interim final rules' criteria would not negatively affect the safe and sound operations of the institutions or the ability of the agencies to supervise them. The third commenter, an individual, did not support the interim final rules, but offered no specific reasons for that opposition.

For the reasons described in this section, the agencies are adopting these rules as final without change.

Effective Date

The Administrative Procedure Act (APA) generally requires that a final rule be published in the Federal Register no less than 30 days before its effective date.17 Therefore, the final rules will become effective on January 17, 2017. The interim final rules will continue to be in effect until the final rules become effective.

17 5 U.S.C. 553(d).

Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 (RCDRIA) requires that each Federal banking agency, in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosures, or other requirements on IDIs, consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations.18 Further, new regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally must take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.19 The final rules adopt the interim final rules without change. The RCDRIA does not apply to the final rules because the rules do not impose any additional reporting, disclosures, or other new requirements on IDIs.

18 12 U.S.C. 4802(a).

19 12 U.S.C. 4802(b).

III. Regulatory Analysis A. Plain Language

Section 722 of the Gramm-Leach-Bliley Act 20 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The agencies' staff believe the final rules are presented in a clear and straightforward manner and having received no comments on how to make the interim final rules easier to understand, the agencies adopt the final rules without change.

20 Pub. L. 106-102, section 722, 113 Stat. 1338, 1471 (1999).

B. Regulatory Flexibility Act

Board: Regulatory Flexibility Act 21 (RFA) requires an agency to prepare a final regulatory flexibility analysis (FRFA) when an agency promulgates a final rule, unless pursuant to section 605(b) of the RFA, the agency certifies that the final rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. In this context, small entities include banking entities with total assets less than or equal to $550 million.

21 5 U.S.C. 601 et seq.

The final rules do not have a significant impact on a substantial number of small entities. Like the interim final rules, the final rules expand the number of institutions eligible for an extended examination cycle, thus reducing the regulatory burden associated with on-site examinations for these institutions. Further, only 22 of the 122 Board-regulated institutions affected by the final rules have assets between $500 million and $550 million and thus would be considered small entities. These 22 institutions represent a small percentage (3.3 percent) of the 657 Board-supervised institutions with total assets less than $550 million.22 For these reasons, the Board certifies that the final rules will not have a significant impact on a substantial number of small entities as defined in the RFA,23 and therefore, a regulatory flexibility analysis is not required.

22 Call report data, March 31, 2016.

23 5 U.S.C. 601 et seq.

FDIC: The RFA24 requires an agency, in connection with a notice of final rulemaking, to prepare a FRFA analysis describing the impact of the rule on small entities (defined by the Small Business Administration for the purposes of the RFA to include banking entities with total assets of $550 million or less) or to certify that the final rule will not have a significant economic impact on a substantial number of small entities.

24 Id.

The final rule does not impose any significant economic impact on a substantial number of small entities. The final rule raises the asset eligibility threshold for extended examination cycles from $500 million to $1 billion, expanding the number of qualifying institutions and U.S. branches and agencies of foreign banks, and reduces the regulatory burden associated with on-site examinations. Of the 372 FDIC-supervised institutions that could be impacted by the rule, only 71 of the FDIC-supervised institutions have total assets between $500 million and $550 million which is a very small share (2.5 percent) of the 2,817 FDIC-supervised institutions with total assets less than $550 million.25 For this reason, the FDIC certifies that the final rule will not have a significant economic impact on a substantial number of small entities as defined in the RFA, and therefore, a regulatory flexibility analysis is not required.

25 Call report data, March 31, 2016.

OCC: The RFA applies only to rules for which an agency publishes a general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). Consistent with section 553(b)(B) of the APA, the agencies determined for good cause that general notice and opportunity for public comment were not necessary and issued an interim final rule rather than a proposed rule. Accordingly, the RFA's requirements relating to initial and final regulatory flexibility analyses do not apply.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 26 states that no agency may conduct or sponsor, nor is the respondent required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. Because the final rules do not create a new, or revise an existing collection of information, no information collection submission needs to be made to OMB.

26 44 U.S.C. 3501-3521.

D. The Economic Growth and Regulatory Paperwork Reduction Act

Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA),27 the agencies are required to conduct a review at least once every 10 years to identify any outdated or otherwise unnecessary regulations. The agencies completed the last comprehensive review of their regulations under EGRPRA in 2006 and are currently conducting the next decennial review. The burden reduction evidenced in these final rules is consistent with the objectives of the EGRPRA review process.

27 Public Law 104-208, 110 Stat. 3309 (1996).

Authority and Issuance For the reasons set forth in the joint preamble, the interim rule published on February 29, 2016 at 81 FR 10063, is adopted as final without change. Dated: October 19, 2016. Thomas J. Curry, Comptroller of the Currency. Board of Governors of the Federal Reserve System, December 6, 2016. Robert deV. Frierson, Secretary of the Board. Dated at Washington, DC, this 19th day of October 2016.

By order of the Board of Directors.

Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary.
[FR Doc. 2016-30133 Filed 12-15-16; 8:45 am] BILLING CODE 4810-33-P 6210-01-P 6714-01-P
FEDERAL RESERVE SYSTEM 12 CFR Part 217 Regulation Q [Docket No. R-1535; RIN 7100 AE-49] Regulatory Capital Rules: Implementation of Capital Requirements for Global Systemically Important Bank Holding Companies AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Final rule.

SUMMARY:

The Board of Governors of the Federal Reserve System (Board) is adopting a final rule to make several revisions to its rule regarding risk-based capital surcharges for U.S.-based global systemically important bank holding companies (GSIB surcharge rule). The final rule modifies the GSIB surcharge rule to provide that a bank holding company subject to the rule should continue to calculate its method 1 score and method 2 score under the rule annually using data reported on the firm's Banking Organization Systemic Risk Report (FR Y-15) as of December 31 of the previous calendar year. In addition, the final rule clarifies that a bank holding company subject to the GSIB surcharge rule must calculate its method 2 score using systemic indicator amounts expressed in billions of dollars.

DATES:

The final rule is effective January 17, 2017.

FOR FURTHER INFORMATION CONTACT:

Anna Lee Hewko, Associate Director, (202) 530-6260, Constance M. Horsley, Assistant Director, (202) 452-5239, Elizabeth MacDonald, Manager, (202) 475-6316, or Sean Healey, Supervisory Financial Analyst, (202) 912-4611, Division of Banking Supervision and Regulation; or Benjamin McDonough, Special Counsel, (202) 452-2036, Mark Buresh, Senior Attorney, (202) 452-5270, or Mary Watkins, Attorney, (202) 452-3722, Legal Division. Board of Governors of the Federal Reserve System, 20th and C Streets NW., Washington, DC 20551. For the hearing impaired only, Telecommunications Device for the Deaf (TDD) users may contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

Table of Contents I. Introduction II. Background III. Description of the Final Rule A. Revisions Related to FR Y-15 Reporting Frequency B. Revision To Clarify the Method 2 Score Calculation C. Comment Received on the Proposed Rule V. Regulatory Analysis A. Paperwork Reduction Act B. Regulatory Flexibility Analysis C. Riegle Community Development and Regulatory Improvement Act of 1994 D. Plain Language I. Introduction

Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) authorizes the Board of Governors of the Federal Reserve System (Board) to establish enhanced prudential standards for bank holding companies with $50 billion or more in total consolidated assets and for nonbank financial companies that the Financial Stability Oversight Council has designated for supervision by the Board.1 These standards must include risk-based capital requirements as well as other enumerated standards. Pursuant to section 165 of the Dodd-Frank Act, the Board adopted a rule regarding risk-based capital surcharges for U.S.-based global systemically important bank holding companies (GSIB surcharge rule) in July 2015 to impose a risk-based-capital surcharge on bank holding companies identified under the rule as global systemically important bank holding companies (GSIBs).2 In April 2016, the Board invited public comment on a notice of proposed rulemaking (proposal or proposed rule) to make clarifying revisions to the Board's GSIB surcharge rule.3 The Board now is issuing a final rule implementing the proposal without change (final rule).

1See, 12 U.S.C. 5365.

2 80 FR 49082 (August 14, 2015).

3 81 FR 20579 (April 8, 2016).

II. Background

The GSIB surcharge rule works to mitigate the potential risk that the material financial distress or failure of a GSIB could pose to U.S. financial stability by increasing the stringency of capital standards for GSIBs, thereby increasing the resiliency of these firms. The GSIB surcharge rule establishes a methodology to identify whether a U.S. top-tier bank holding company is a GSIB and imposes a risk-based capital surcharge on such an institution. The GSIB surcharge rule takes into consideration the nature, scope, size, scale, concentration, interconnectedness, and mix of activities of each company subject to the rule in its methodology for determining whether the company is a GSIB and the size of the surcharge. These factors are captured in the GSIB surcharge rule's method 1 and method 2 scores, which use quantitative metrics reported on the FR Y-15 reporting form to measure a firm's systemic footprint.

Specifically, the GSIB surcharge rule requires each U.S. bank holding company that qualifies as an advanced approaches institution under the Board's capital rules to calculate an aggregate systemic indicator score based on five indicators of systemic importance (method 1 score).4 A bank holding company whose method 1 score exceeds a defined threshold is identified as a GSIB. Advanced approaches institutions must calculate their method 1 scores on an annual basis using data reported on the FR Y-15 reporting form as of December 31 of the prior year.5

4See, 12 CFR 217.100(b)(1); 12 CFR part 217, subpart H.

5 The GSIB surcharge rule includes transition provisions for the first years that it is effective. See 12 CFR 217.400(b)(2).

A bank holding company identified as a GSIB must also calculate a score under method 2. Such a firm must calculate a method 2 score each year using data reported on the firm's FR Y-15 as of December 31 of the prior year. GSIB surcharges are established using the method 1 and method 2 scores, and GSIBs with higher scores are subject to higher GSIB surcharges.

Method 1 uses five equally-weighted categories that are correlated with systemic importance—size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity—as measured by twelve systemic indicators.6 For each systemic indicator, a firm divides its own measure of the systemic indicator by an aggregate global indicator amount. Each resulting value is then weighted and put onto a standard scale. The firm's method 1 score is the sum of its weighted systemic indicator scores. Method 2 uses similar inputs to those used in method 1, but replaces the substitutability category with a measure of short-term wholesale funding.7 The GSIB surcharge for the firm is the higher of the two surcharges determined under method 1 and method 2.8 Method 2 is calibrated differently from method 1 and generally results in a higher GSIB surcharge.

6 12 CFR 217.404.

7 12 CFR 217.405.

8 12 CFR 217.403.

The FR Y-15 reporting form collects systemic risk data from U.S. bank holding companies and covered savings and loan holding companies 9 with total consolidated assets of $50 billion or more. The information reported on the FR Y-15 is used in part in the calculation of a bank holding company's method 1 and method 2 scores under the GSIB surcharge rule.10

9 Covered savings and loan holding companies are those which are not substantially engaged in insurance or commercial activities. For more information, see the definition of “covered savings and loan holding company” provided in 12 CFR 217.2.

10 The FR Y-15 requires reporting of the components used in calculating the method 1 and method 2 scores on the FR Y-15, but does not require reporting of the scores themselves. As of January 1, 2016, a bank holding company that is subject to a GSIB surcharge is required to report its applicable GSIB surcharge on line 67 of the Federal Financial Institutions Examination Council 101 report, Regulatory Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework.

In April 2016, the Board invited comment on a proposed rule to clarify certain aspects of the GSIB surcharge rule.11 Because the FR Y-15 had become a quarterly, rather than an annual report, the proposed rule would have clarified that a bank holding company subject to the rule should continue to use the systemic indicator amount from the FR Y-15 regulatory report as of December 31 of the prior calendar year to calculate its method 1 and method 2 scores. The proposal also would have clarified the units used for purposes of the method 2 score calculation under the capital surcharge rule. In connection with these proposed changes, the preamble to the proposal provided clarifying information on how a firm identified as a GSIB should calculate its short-term wholesale funding score for purposes of calculating its method 2 score.

11 81 FR 20579 (April 8, 2016).

III. Description of the Final Rule A. Revisions Related to FR Y-15 Reporting Frequency

The FR Y-15, as implemented on December 31, 2012, was an annual report.12 The Board recently revised the FR Y-15 to require that the FR Y-15 to be filed on a quarterly basis, beginning with the report as of June 30, 2016.13 Under the GSIB surcharge rule, bank holding companies calculate their method 1 and method 2 scores using data from their most recent FR Y-15.14 These calculations were intended to be conducted annually using data as of December 31 of the prior calendar year, consistent with the frequency of the FR Y-15 at the time.

12See 77 FR 76487 (December 28, 2012). The Board subsequently revised the FR Y-15 in December 2013. See 78 FR 77128 (December 20, 2013).

13 80 FR 77344 (December 14, 2015).

14 80 FR 49082 (August 14, 2015).

The proposed rule sought comment on revising the GSIB surcharge rule to require continued use of a December 31 as-of date for purposes of a bank holding company's calculation of its method 1 and method 2 scores. The proposed revisions to sections 217.404 and 217.405 of the GSIB surcharge rule would provide that the systemic indicator amount used in the calculations would be drawn from a firm's FR Y-15 as of December 31 of the previous calendar year even after the FR Y-15 becomes a quarterly report.

The Board received no comments on this aspect of the proposal and is finalizing this portion of the rule as proposed.

B. Revision To Clarify the Method 2 Score Calculation

The proposed rule also sought to revise section 217.405 of the Board's Regulation Q to clarify that, for purposes of calculating its method 2 score, a GSIB should convert its systemic indicator amounts as reported on the FR Y-15 to billions of dollars. The FR Y-15 requires these data to be reported in thousands of dollars, while the fixed coefficients used in the calculation of a firm's method 2 score are determined using aggregate data expressed in billions of dollars.15 Therefore, to properly use the fixed coefficients in the method 2 score methodology, a firm should reflect its systemic indicator amounts used in the method 2 score calculation in billions of dollars.

15See, 80 FR 49082, 49088.

The Board received no comments on this aspect of the proposal and is finalizing this portion of the rule as proposed.

C. Comment Received on the Proposed Rule

The Board received one public comment on the proposed rule. The commenter generally expressed support for the proposed rule, but expressed concerns regarding the interaction of the timing of the FR Y-15 and the Federal Reserve's complex institution liquidity monitoring report, the FR 2052a. The FR Y-15, as noted above, collects data regarding a firm's systemic risk, while the FR 2052a collects data on an institution's overall liquidity profile.16 The commenter expressed concern that if the initial effective date of Schedule G of the FR Y-15 preceded the initial effective date of the FR 2052a this difference would reduce the time that certain firms have to fully implement the FR 2052a. Specifically, the commenter observed that, because data from the FR 2052a will be used to complete Schedule G of the FR Y-15, it was inconsistent to require firms with total assets of $50 billion or more to file Schedule G of the FR Y-15 as of December 31, 2016, but provide firms with total assets equal to or greater than $50 billion, but less than $250 billion until July 31, 2017 to file the FR 2052a. The commenter therefore argued that firms should be given additional time to complete Schedule G of the FR Y-15 in order to allow them to make use of the full implementation period for the FR 2052a.

16See 77 FR 76487 (December 28, 2012). The Board subsequently revised the FR Y-15 in December 2013. See 78 FR 77128 (December 20, 2013). See 80 FR 71795 (November, 17, 2015).

In response to the comment, the Board is issuing an interim final rule concurrently with this final rule to provide additional time for certain smaller firms to complete Schedule G of the FR Y-15 for the first time.

V. Regulatory Analysis A. Paperwork Reduction Act (PRA)

There is no new collection of information pursuant to the PRA (44 U.S.C. 3501 et seq.) contained in this final rule.

B. Regulatory Flexibility Act Analysis

The Board is providing a final regulatory flexibility analysis with respect to this final rule. The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA), generally requires that an agency provide a regulatory flexibility analysis in connection with a final rulemaking. This final rule amends the Board's GSIB surcharge rule, which only applies to bank holding companies that are advanced approaches Board-regulated institutions for purposes of the Board's Regulation Q (advanced approaches bank holding companies). Generally, advanced approaches bank holding companies are those that: Have total consolidated assets of $250 billion or more; have total consolidated on-balance sheet foreign exposures of $10 billion or more; have subsidiary depository institutions that are advanced approaches institutions; or elect to use the advanced approaches framework.17 Under regulations issued by the Small Business Administration, a small entity includes a depository institution, bank holding company, or savings and loan holding company with assets of $550 million or less (small banking organizations).18 As of June 30, 2016, there were approximately 3,203 top-tier small bank holding companies. Bank holding companies that are subject to the final rule therefore are expected to substantially exceed the $550 million asset threshold at which a banking entity would qualify as a small bank holding company. As a result, the final rule is not expected to apply to any small bank holding company for purposes of the RFA.

17See 12 CFR 217.100.

18See 13 CFR 121.201. Effective July 14, 2014, the Small Business Administration revised the size standards for banking organizations to $550 million in assets from $500 million in assets. 79 FR 33647 (June 12, 2014). The Small Business Administration's June 12, 2014, interim final rule was adopted without change as a final rule by the Small Business Administration on January 12, 2016. 81 FR 3949 (January 25, 2016).

Therefore, there are no significant alternatives to the final rule that would have less economic impact on small bank holding companies. As discussed above, there are no projected reporting, recordkeeping, and other compliance requirements of the final rule. The Board does not believe that the final rule duplicates, overlaps, or conflicts with any other Federal rules. In light of the foregoing, the Board does not believe that the final rule would have a significant economic impact on a substantial number of small entities.

The Board sought comment on whether the proposed rule would impose undue burdens on, or have unintended consequences for, small organizations, and received no comments on this aspect of the proposal. In light of the foregoing, the Board does not believe that the final rule will have a significant impact on small entities.

C. Riegle Community Development and Regulatory Improvement Act of 1994

In determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on state member banks, the Board is required to consider, consistent with the principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, and the benefits of such regulations.19 In addition, new regulations that impose additional reporting disclosures or other new requirements on insured depository institutions generally must take effect on the first day of a calendar quarter which begins on or after the date on which the regulations are published in final form.20

19See Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 (“RCDRIA”), 12 U.S.C. 4802.

20 12 U.S.C. 4802(b).

The final rule is only applicable to advanced approaches bank holding companies. Therefore, the requirements of the Riegle Community Development and Regulatory Improvement Act of 1994 are not applicable to this final rule.

D. Plain Language

Section 722 of the Gramm-Leach-Bliley Act requires the Board to use plain language in all proposed and final rules published after January 1, 2000. The Board has sought to present the final rule in a simple straightforward manner. The Board did not receive any comment on its use of plain language.

List of Subjects in 12 CFR Part 217

Administrative practice and procedure, Banks, banking, Holding companies, Reporting and recordkeeping requirements, Securities.

Board of Governors of the Federal Reserve System 12 CFR Chapter II Authority and Issuance

For the reasons set forth in the preamble, the Board amends chapter II of title 12 of the Code of Federal Regulations as follows:

PART 217—CAPITAL ADEQUACY OF BANK HOLDING COMPANIES, SAVINGS AND LOAN HOLDING COMPANIES, AND STATE MEMBER BANKS (REGULATION Q) 1. The authority citation for part 217 continues to read as follows: Authority:

12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 1818, 1828, 1831n, 1831o, 1831p-1, 1831w, 1835, 1844(b), 1851, 3904, 3906-3909, 4808, 5365, 5368, 5371.

2. In § 217.404, paragraph (b)(1) is revised to read as follows:
§ 217.404 Method 1 score.

(b) * * *

(1) Except as provided in paragraph (b)(2) of this section, the systemic indicator score in basis points for a given systemic indicator is equal to:

(i) The ratio of:

(A) The amount of that systemic indicator, as reported by the bank holding company as of December 31 of the previous calendar year; to

(B) The aggregate global indicator amount for that systemic indicator published by the Board in the fourth quarter of that year;

(ii) Multiplied by 10,000; and

(iii) Multiplied by the indicator weight corresponding to the systemic indicator as set forth in Table 1 of this section.

3. In § 217.405, paragraph (b)(1) is revised to read as follows:
§ 217.405 Method 2 score.

(b) * * *

(1) The amount of the systemic indicator, as reported by the bank holding company as of December 31 of the previous calendar year, expressed in billions of dollars;

By order of the Board of Governors of the Federal Reserve System, December 9, 2016. Robert deV. Frierson, Secretary of the Board.
[FR Doc. 2016-29966 Filed 12-14-16; 11:15 am] BILLING CODE P
DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-3142; Directorate Identifier 2015-NM-003-AD; Amendment 39-18725; AD 2016-25-02] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

Federal Aviation Administration (FAA), DOT.

ACTION:

Final rule.

SUMMARY:

We are adopting a new airworthiness directive (AD) for certain The Boeing Company Model 787-8 airplanes. This AD was prompted by reports of the accumulation of very fine particle deposits in the power control unit (PCU) electro-hydraulic servo valves (EHSVs) used in the flight control system; this accumulation caused degraded performance due to reduced EHSV internal hydraulic supply pressures, resulting in the display of PCU fault status messages from the engine indication and crew alerting system (EICAS). This AD requires installing markers to limit the hydraulic system fluid used to a specific brand, doing hydraulic fluid tests of the hydraulic systems, replacing hydraulic system fluid if necessary, and doing all applicable related investigative and corrective actions. We are issuing this AD to address the unsafe condition on these products.

DATES:

This AD is effective January 20, 2017.

The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of January 20, 2017.

ADDRESSES:

For service information identified in this final rule, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740; telephone 562-797-1717; Internet https://www.myboeingfleet.com. 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-3142.

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-2015-3142; 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 regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is Docket 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:

Fnu Winarto, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6659; fax: 425-917-6590; 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 certain The Boeing Company Model 787-8 airplanes. The NPRM published in the Federal Register on August 19, 2015 (80 FR 50233) (“the NPRM”). The NPRM was prompted by reports of the accumulation of very fine particle deposits in the PCU EHSVs used in the flight control system; this accumulation caused degraded performance due to reduced EHSV internal hydraulic supply pressures, resulting in the display of PCU fault status messages from the EICAS. The NPRM proposed to require installing markers to limit the hydraulic system fluid used to a specific brand, doing hydraulic fluid tests of the hydraulic systems, replacing hydraulic system fluid if necessary, and doing all applicable related investigative and corrective actions. We are issuing this AD to prevent the failure of flight control hydraulic PCUs, which could lead to reduced controllability of the airplane.

Comments

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment.

Request To Refer to Revised Service Information

United Airlines (UAL) stated that there are many errors, omissions, and inconsistencies in Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014, and provided examples of those mistakes. UAL asked that this service information be revised to correct these problems.

Boeing has issued Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016. The revised service information corrects typographical errors and makes clarifications to the Accomplishment Instructions in Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014. We have included Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016, in paragraphs (c) and (h) of this AD. We have also included a new paragraph (i) in this AD to provide credit for actions done prior to the effective date of this AD using Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014. The subsequent paragraphs have been redesignated accordingly.

Request To Clarify the Reason for the Unsafe Condition

Boeing asked that we remove all references to hydraulic fluid contamination causing EHSV restriction, in the SUMMARY, the Discussion section of the NPRM, and paragraph (e) of the proposed AD. Boeing stated that the issue is not hydraulic fluid contamination causing EHSV restriction, but the accumulation of very fine particle deposits within the EHSV causing degraded performance due to reduced EHSV internal hydraulic supply pressures. Boeing added that the solution is to change the hydraulic fluid to a specific brand, considering that it has been verified to significantly reduce the rate of accumulation of particles in the EHSVs. Boeing concluded that this would clarify the cause of the EICAS messages.

We agree that the reason for the unsafe condition should be clarified, for the reasons provided. Therefore, we have removed the references to hydraulic fluid contamination causing EHSV restriction and replaced that language with a more accurate reason for the unsafe condition in the SUMMARY, the Discussion section of the final rule, and paragraph (e) of this AD.

Request To Issue Global Alternative Method of Compliance (AMOC)

UAL asked that a fleet-wide AMOC be issued for Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, to correct a part number (P/N) reference. Task 1, Figure 1, and Task 2, Figure 1, of Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, identify P/N 710Z7290-9##ALT1 for the left and right engine diagonal braces; however, the correct P/N is 710Z7290-9 with no ##ALT suffix. UAL stated that the correct part number is identified in the Illustrated Parts Catalog (IPC).

We acknowledge the commenter's concern that an incorrect part number for the left and right engine diagonal braces is identified in Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014. We have discussed this error with Boeing, and it was confirmed that the part number in the IPC (as noted by UAL) is correct and should be used. In light of this information, we do not agree that a global AMOC should be issued. However, we have added a new Note 2 to paragraph (g) of this AD to clarify the correct part number.

Request To Change Certain Instructions in the Service Information

UAL stated that Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, includes procedures for the HyJet V marker installation, which is a “Required for Compliance (RC)” item in Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014, and must be done before or concurrently with that service information. UAL noted that there is no RC language in Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, which makes the entire service bulletin “RC.” UAL asked that the steps that specify access and close be marked as non-RC steps.

We do not agree to change Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, to mark the steps RC and non-RC. However, we do agree to clarify the steps that are required to accomplish the marker installation. Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014, has an RC step that specifies to install markers. That RC step does not specify to perform access and close steps for the marker installation; therefore those access and close steps are not required by this AD. We have not changed this AD in this regard.

UAL also asked we change the procedures in Part 4 of Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014, which specify options for either replacing the hydraulic fluid again, or draining and filling the hydraulic reservoir. UAL stated that if either option is used, then Part 2 of the service information titled “Cycle Hydraulic Fluid” must again be done, or the airplane must be flown at least one flight cycle, and then a sample drawn for testing. UAL added that this procedure, done in accordance with the instructions in the referenced service information, results in excessive cycling if the operator needs to only replace a small amount of fluid and chooses the reservoir drain-and-fill option. UAL asked to use a procedure that would specify draining and filling the reservoir, flight control cycling, and taking a fresh sample for testing, all at the same time. UAL noted that Option 10 specifies “Drain and Fill Hydraulic Reservoir” and is acceptable to operate the flight controls six to eight times to let the fluid flow through all the systems. UAL stated that this is the procedure used by Boeing before taking fluid samples per the Boeing 787 Airplane Maintenance Manual.

We do not agree to change the procedure for servicing the hydraulic fluid. Although UAL's proposal is an accepted procedure in the Boeing 787 Airplane Maintenance Manual, this procedure does not include operating the other hydraulic-powered subsystems, such as the landing gear, thrust reverser, and brakes. Subsequently, it could result in stagnant fluid measurements not intermixing with other hydraulic system fluid following replacement of the hydraulic system fluid, and could generate fluid test samples that do not include the entire system. In light of these factors, we have not changed this AD in this regard.

Clarification to Paragraph (g) of This AD

We have added a new Note 1 to paragraph (g) of this AD to refer to Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, as an additional source of guidance for installing markers to allow servicing of hydraulic systems with only HyJet V hydraulic fluid.

Conclusion

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously and 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.

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

Related Service Information Under 1 CFR Part 51

We have reviewed Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016. This service information describes procedures for installing markers to limit the hydraulic system fluid used to a specific brand; doing hydraulic fluid tests of the hydraulic systems, replacing the hydraulic system fluid if necessary, and related investigative and corrective actions. 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.

Costs of Compliance

We estimate that this AD affects 11 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
    Install markers 2 work-hours × $85 per hour = $170 $95 $265 $2,915 Test and replace left, center, and right hydraulic system fluid 104 work-hours × $85 per hour = $8,840 1,020 9,860 108,460

    We estimate the following costs to do any necessary replacements that may be required based on the results of the inspection. We have no way of determining the number of aircraft that might need these replacements:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Replace power control unit of elevator 9 × $85 per hour = $765 $108,000 $108,765 Replace power control unit of aileron 9 × $85 per hour = $765 118,000 118,765

    According to the manufacturer, some of the costs of this 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

    This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

    For the reasons discussed above, I certify that this AD:

    (1) Is not a “significant regulatory action” under Executive Order 12866,

    (2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

    (3) Will not affect intrastate aviation in Alaska, 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): 2016-25-02 The Boeing Company: Amendment 39-18725; Docket No. FAA-2015-3142; Directorate Identifier 2015-NM-003-AD. (a) Effective Date

    This AD is effective January 20, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to The Boeing Company Model 787-8 series airplanes, certificated in any category, as identified in Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016.

    (d) Subject

    Air Transport Association (ATA) of America Code 27, Flight Control Systems.

    (e) Unsafe Condition

    This AD was prompted by reports of the accumulation of very fine particle deposits in the power control unit (PCU) electro-hydraulic servo valves (EHSVs) used in the flight control system; this accumulation caused degraded performance due to reduced EHSV internal hydraulic supply pressures, resulting in the display of PCU fault status messages from the engine indication and crew alerting system (EICAS). We are issuing this AD to prevent failure of flight control hydraulic PCUs, which could lead to reduced controllability of the airplane.

    (f) Compliance

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

    (g) Marker Installation

    Within 36 months after the effective date of this AD, install markers to allow servicing of hydraulic systems with only HyJet V hydraulic fluid, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016.

    Note 1 to paragraph (g) of this AD:

    Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016, refers to Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, as an additional source of guidance for installing markers to allow servicing of hydraulic systems with only HyJet V hydraulic fluid.

    Note 2 to paragraph (g) of this AD:

    Task 1, Figure 1, and Task 2, Figure 1, of Boeing Service Bulletin B787-81205-SB290022-00, Issue 001, dated September 4, 2014, identify P/N 710Z7290-9##ALT1 for the left and right engine diagonal braces; however, the correct P/N is 710Z7290-9 with no ##ALT suffix.

    (h) Fluid Tests of the Left, Right, and Center Hydraulic Systems

    For airplanes identified in Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016, as Group 1, Configuration 2, Group 2: Within 36 months after the effective date of this AD, do hydraulic fluid tests of the left, right, and center hydraulic systems, replace the hydraulic system fluid, if necessary, and do all applicable related investigative and corrective actions, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016. Do all applicable related investigative and corrective actions within 36 months after the effective date of this AD.

    (i) Credit for Previous Actions

    This paragraph provides credit for the actions required by paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD using Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 001, dated November 25, 2014.

    (j) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (k)(1) of this AD. Information may be emailed to: [email protected].

    (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.

    (3) For service information that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (j)(3)(i) and (j)(3)(ii) apply.

    (i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. If a step or sub-step is labeled “RC Exempt,” then the RC requirement is removed from that step or sub-step. An AMOC is required for any deviations to RC steps, including substeps and identified figures.

    (ii) Steps not labeled as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the RC steps, including substeps and identified figures, can still be done as specified, and the airplane can be put back in an airworthy condition.

    (4) An AMOC that provides an acceptable level of safety may be used for any repair required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Seattle ACO to make those findings. For a repair method to be approved, the repair must meet the certification basis of the airplane, and the approval must specifically refer to this AD.

    (k) Related Information

    (1) For more information about this AD, contact Fnu Winarto, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle ACO, 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6659; fax: 425-917-6590; email: [email protected].

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (l)(3) and (l)(4) of this AD.

    (l) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.

    (i) Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016.

    (ii) Reserved.

    (3) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740; telephone 562-797-1717; Internet https://www.myboeingfleet.com.

    (4) 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.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on November 25, 2016. John P. Piccola, Jr., Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-29251 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9509; Directorate Identifier 2016-NM-177-AD; Amendment 39-18750; AD 2016-25-24] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain Airbus Model A319, A320, and A321 series airplanes. This AD requires repetitive general visual inspections for broken battery retaining rods and replacement if necessary. We are issuing this AD to address the unsafe condition on these products.

    DATES:

    This AD becomes effective January 3, 2017.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of January 3, 2017.

    We must receive comments on this 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: U.S. Department of Transportation, Docket Operations, M-30, 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.

    For service information identified in this final rule, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email: [email protected]; Internet: http://www.airbus.com. 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9509.

    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-2016-9509; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this 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:

    Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; fax: 425-227-1149.

    SUPPLEMENTARY INFORMATION: Discussion

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2016-0204, dated October 13, 2016; corrected October 19, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”); to correct an unsafe condition for certain Airbus Model A319, A320, and A321 series airplanes. The MCAI states:

    Several occurrences have been reported of battery [retaining] rod failures on certain Airbus aeroplanes. Subsequent examination of broken [battery retaining] rod parts determined that these failures were due to quality defects of the material used during parts manufacturing. Each battery is secured on an aeroplane by two [battery retaining] rods. Failure of one rod, in case of severe turbulence during flight or hard landing, could lead to battery displacement, or roll on the remaining rod side, up to a point where the remaining rod could be disengaged. The battery could ultimately detach from its housing and damage relays, connectors, contactor boxes, air ducts and surrounding structure.

    This condition, if not detected and corrected, could lead to the loss of the normal electrical generation not followed by an automatic recovery of essential network.

    To address this potential unsafe condition, Airbus issued Alert Operators Transmission (AOT) A92N001-16 (later revised) to provide instructions for inspection and replacement of battery [retaining] rods.

    For the reason described above, this [EASA] AD requires repetitive general visual inspections (GVI) of the four battery [retaining] rods (two per battery), and, in case of findings, replacement of [broken] battery [retaining] rods.

    Pending the outcome of the on-going investigation, this [EASA] AD is considered an interim action and further [EASA] AD action may follow.

    This [EASA] AD is republished to add two missing models to the applicability (the respective MSN were already listed in the original [EASA] AD) and to correct the battery [retaining] rod Part Number (P/N).

    You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9509.

    Related Service Information Under 1 CFR Part 51

    Airbus has issued Alert Operators Transmission (AOT) A92N001-16, Rev 01, dated October 10, 2016. The service information describes procedures for general visual inspections to look for broken battery retaining rods. 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.

    Differences Between This AD and the MCAI or Service Information

    The MCAI specifies to replace broken rods in accordance with Airbus AOT A92N001-16, Rev 01, dated October 10, 2016. However, Airbus AOT A92N001-16, Rev 01, dated October 10, 2016, does not include procedures to replace broken rods. This AD requires that broken rods be replaced using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA Design Organization Approval (DOA).

    FAA's Determination and Requirements of This 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 issuing this AD because we evaluated all pertinent information and determined the unsafe condition exists and is likely to exist or develop on other products of these same type designs.

    FAA's Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because the detachment of a battery from the housing and damage to other electrical equipment and surrounding structure could lead to loss of normal electrical power generation and recovery of essential network and consequential control of the airplane. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days.

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-9509; Directorate Identifier 2016-NM-177-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this 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 AD.

    Costs of Compliance

    We estimate that this AD affects 330 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 1 work-hour × $85 per hour = $185 $0 $85 $28,050

    We estimate the following costs to do any necessary replacements that would be required based on the results of the inspection. We have no way of determining the number of aircraft that might need this replacement.

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Replace Battery Rod 1 work-hour × $85 per hour = $85 per battery rod 1 $0 $85 per battery rod. 1 Parts costs are not available from the manufacturer.

    According to the manufacturer, some of the costs of this 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 AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

    For the reasons discussed above, I certify that this AD:

    1. Is not a “significant regulatory action” under Executive Order 12866;

    2. Is not a “significant rule” under 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.

    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): 2016-25-24 Airbus: Amendment 39-18750; Docket No. FAA-2016-9509; Directorate Identifier 2016-NM-177-AD. (a) Effective Date

    This AD becomes effective January 3, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Airbus Model A319-111, A319-112, A319-113, A319-114, A319-115, A319-131, A319-132, A319-133, A320-211, A320-212, A320-214, A320-231, A320-232, A320-233, A320-251N, A320-271N, A321-111, A321-112, A321-131, A321-211, A321-212, A321-213, A321-231, and A321-232 airplanes, certificated in any category, manufacturer serial numbers (MSN) 5182, 5295, 5327, 5406, 5470, 5545, 5650, 5656, 5664, 5671, 5679, 5685, 5690, 5700, 5701, 5711, 5717, 5722, 5725, 5731, 5732, 5734, 5738, 5740, 5742, 5744, 5746, 5748, 5750 through 5752 inclusive, 5754 through 5756 inclusive, 5758 through 5760 inclusive, 5762, 5763, 5765 through 6100 inclusive, 6102 through 6285 inclusive, 6287 through 6418 inclusive, 6420 through 6463 inclusive, 6465 through 6619 inclusive, 6621 through 6641 inclusive, 6643 through 6672 inclusive, 6674 through 6719 inclusive, 6721 through 6771 inclusive, 6773 through 6828 inclusive, 6830 through 6832 inclusive, 6834 through 6838 inclusive, 6840 through 6867 inclusive, 6869 through 6903 inclusive, 6905, 6906, 6908 through 6913 inclusive, 6915 through 6919 inclusive, 6921 through 6944 inclusive, 6947 through 6951 inclusive, 6953 through 6966 inclusive, 6968 through 6972 inclusive, 6974, 6976 through 6992 inclusive, 6994 through 7000 inclusive, 7002 through 7010 inclusive, 7012, 7014 through 7032 inclusive, 7034 through 7045 inclusive, 7047 through 7050 inclusive, 7052, 7054 through 7059 inclusive, 7061 through 7071 inclusive, 7073 through 7078 inclusive, 7080, 7081, 7084 through 7093 inclusive, 7095 through 7098 inclusive, 7100, 7101, 7104, 7105, 7108 through 7110 inclusive, 7112 through 7121 inclusive, 7123, 7125, 7127, 7128, 7130, 7132, 7133, 7135, 7136, 7138 through 7140 inclusive, 7142 through 7146 inclusive, 7148, 7149, 7152 through 7156 inclusive, 7158, 7160, 7161, 7163 through 7167 inclusive, 7169 through 7171 inclusive, 7173, 7174, 7176, 7177, 7179, 7180, 7182 through 7184 inclusive, 7187, 7189, 7191, 7194, 7196 through 7200 inclusive, 7203, 7204, 7206, 7207, 7210, 7212 through 7225 inclusive, 7227, 7228, 7230, 7232, 7235, 7238, 7241 through 7244 inclusive, 7248, and 7261.

    (d) Subject

    Air Transport Association (ATA) of America Code 92, Electrical System Installation.

    (e) Reason

    This AD was prompted by reports of broken battery retaining rods. We are issuing this AD to detect and correct broken battery retaining rods, which, in the event of a hard landing or severe turbulence, can cause the battery to detach from its housing, resulting in damage to other electrical equipment and surrounding structure. This condition could lead to loss of normal electrical power generation and subsequent inability to restore electrical power to essential airplane systems.

    (f) Compliance

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

    (g) Repetitive Inspections

    Within 4 months after the effective date of this AD, and thereafter at intervals not to exceed 4 months, accomplish a general visual inspection of each battery retaining rod part number (P/N) D9241023700000, in accordance with the instructions of Airbus Alert Operators Transmission (AOT) A92N001-16, Rev 01, dated October 10, 2016.

    (h) Additional Inspections After Any Hard Landing or Any Flight in Severe Turbulence

    In addition to the inspections required by paragraph (g) of this AD, after any hard landing, or after any flight in severe turbulence: Before further flight, accomplish a general visual inspection of each battery retaining rod P/N D9241023700000, in accordance with the instructions of Airbus AOT A92N001-16, Rev 01, dated October 10, 2016.

    (i) Corrective Action

    If, during any general visual inspection required by paragraph (g) or (h) of this AD, as applicable, any battery retaining rod is found broken, before further flight, replace each affected battery retaining rod with a serviceable part using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA).

    Note 1 to paragraph (i) of this AD: Additional guidance for the replacement of battery retaining rods can be found in Tasks 24-38-51-000-001-A, Removal of the Batteries, and 24-38-51-400-001-A, Installation of the Batteries, of the Airbus A319/A320/A321 Aircraft Maintenance Manual (AMM).

    (j) Provision Regarding Terminating Action

    Replacement of failed battery retaining rods on an airplane with serviceable parts, as required by paragraph (i) of this AD, does not constitute terminating action for the repetitive general visual inspections required by paragraphs (g) and (h) of this AD for that airplane.

    (k) Credit for Previous Actions

    This paragraph provides credit for actions required by paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD using Airbus AOT A92N001-16, dated August 25, 2016.

    (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: Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; 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. The AMOC approval letter must specifically reference this AD.

    (2) Contacting the Manufacturer: For any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature.

    (m) Special Flight Permits

    Special flight permits, as described in Section 21.197 and Section 21.199 of the Federal Aviation Regulations (14 CFR 21.197 and 21.199), are not allowed.

    (n) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2016-0204, dated October 13, 2016; corrected October 19, 2016; for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9509.

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (o)(3) and (o)(4) of this AD.

    (o) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.

    (i) Airbus Alert Operators Transmission (AOT) A92N001-16, Rev 01, dated October 10, 2016.

    (ii) Reserved.

    (3) For service information identified in this AD, contact Airbus, Airworthiness Office-EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email: [email protected]; Internet: http://www.airbus.com.

    (4) 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.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on December 2, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-30038 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9503; Directorate Identifier 2016-NM-179-AD; Amendment 39-18744; AD 2016-25-18] RIN 2120-AA64 Airworthiness Directives; Bombardier, Inc. Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. This AD requires an inspection for discrepancies of the attachment points of the links between the engine rear mount assemblies, and corrective actions if necessary. This AD was prompted by a report indicating that during maintenance, an engine mount pin was found backed out of the rear mount link, and the associated retaining bolt was also found fractured. We are issuing this AD to address the unsafe condition on these products.

    DATES:

    This AD becomes effective January 3, 2017.

    The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of January 3, 2017.

    We must receive comments on this 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: U.S. Department of Transportation, Docket Operations, M-30, 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.

    For service information identified in this final rule, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone: 514-855-5000; fax: 514-855-7401; email: [email protected]; Internet: http://www.bombardier.com. 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9503.

    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-2016-9503; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this 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:

    Aziz Ahmed, Airframe Engineer, Airframe and Mechanical Systems Branch, ANE-171, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone: 516-228-7329; fax: 516-794-5531.

    SUPPLEMENTARY INFORMATION:

    Discussion

    Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian AD CF-2016-23, dated July 28, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model BD-700-1A10 and BD-700-1A11 airplanes. The MCAI states:

    Bombardier reported that during maintenance of a BD-700 aeroplane, the engine mount pin, part number (P/N) BRR15838, was found backed out of the rear mount link. The retaining bolt, P/N AS54020, which passes through the engine mount pin was also found fractured at the groove which holds the locking spring. An investigation revealed the most probable root cause of failure to be a single axial tension static overload, with no evidence of fatigue contributing to the failure.

    The above condition if not detected, may result in the loss of engine attachment to the airframe.

    Bombardier has issued Service Bulletins (SBs) 700-71-002, 700-71-6002, 700-71-5002 and 700-1A11-71-002 to inspect the attachment points of the links between the engine rear mount assemblies, and installation of replacement hardware if required.

    This [Canadian] AD mandates incorporation of the above Bombardier SBs to inspect [for discrepancies (including missing or broken bolts, missing nuts, incorrect torque values, and an incorrect gap between the bushing and washer), noncompliant gaps and torque values, broken or missing attachment hardware; and corrective actions, including installation of replacement hardware if necessary] and maintain integrity of the affected engine rear mount assembly. Bombardier is developing design changes for the parts in question. Further mandatory action may be required when the new parts become available.

    You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9503.

    Related Service Information Under 1 CFR Part 51

    We reviewed the following service information:

    • Bombardier Service Bulletin 700-71-002, Revision 01, dated June 30, 2016.

    • Bombardier Service Bulletin 700-71-6002, Revision 01, dated June 30, 2016.

    • Bombardier Service Bulletin 700-71-5002, Revision 01, dated June 30, 2016.

    • Bombardier Service Bulletin 700-1A11-71-002, Revision 01, dated June 30, 2016.

    The service information describes procedures for an inspection for discrepancies of the attachment points of the links between the engine rear mount assemblies, and corrective actions. These documents are distinct since they apply to different airplane models and serial numbers. 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 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 issuing this AD because we evaluated all pertinent information and determined the unsafe condition exists and is likely to exist or develop on other products of these same type designs.

    FAA's Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because broken engine attachment hardware could result in separation of an engine from the airplane. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days.

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-9503; Directorate Identifier 2016-NM-179-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this 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 AD.

    Costs of Compliance

    We estimate that this AD affects 97 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 1 work-hour × $85 per hour = $85 per airplane $0 $85 $8,245

    We estimate the following costs to do any necessary corrective actions that would be required based on the results of the inspection. We have no way of determining the number of aircraft that might need these corrective actions:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Bolt and Nut Replacement 1 work-hour × $85 per hour = $85 $730 $815 Torque Change on Affected Bolts 1 work-hour × $85 per hour = $85 0 85

    We have received no definitive data that would enable us to provide cost estimates for other on-condition actions specified in this AD.

    According to the manufacturer, some of the costs of this 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 available 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 AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

    For the reasons discussed above, I certify that this AD:

    1. Is not a “significant regulatory action” under Executive Order 12866;

    2. Is not a “significant rule” under 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.

    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): 2016-25-18  Bombardier Inc.: Amendment 39-18744; Docket No. FAA-2016-9503; Directorate Identifier 2016-NM-179-AD. (a) Effective Date

    This AD becomes effective January 3, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Bombardier Inc. Model BD-700-1A10 and BD-700-1A11 airplanes, certificated in any category, serial numbers (S/Ns) 9002 through 9763 inclusive, 9765, 9767 through 9770 inclusive, and 9998.

    (d) Subject

    Air Transport Association (ATA) of America Code 72, Engine.

    (e) Reason

    This AD was prompted by a report indicating that during maintenance, an engine mount pin was found backed out of the rear mount link, and the associated retaining bolt was also found fractured at the groove that holds the locking spring. We are issuing this AD to detect and correct broken engine attachment hardware, which could result in separation of an engine from the airplane.

    (f) Compliance

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

    (g) Inspection

    Within 500 flight hours or 4 months, whichever occurs first after the effective date of this AD: Do an inspection for discrepancies of the engine rear mount assemblies (including missing or broken bolts, missing nuts, incorrect torque values, and an incorrect gap between the bushing and washer); in accordance with Part A of the Accomplishment Instructions of the applicable service information specified in paragraphs (g)(1) through (g)(4) of this AD.

    (1) Bombardier Service Bulletin 700-71-002, Revision 01, dated June 30, 2016 (for Bombardier Model BD-700-1A10 airplanes).

    (2) Bombardier Service Bulletin 700-71-6002, Revision 01, dated June 30, 2016 (for Bombardier Model BD-700-1A10 airplanes).

    (3) Bombardier Service Bulletin 700-71-5002, Revision 01, dated June 30, 2016 (for Bombardier Model BD-700-1A11 airplanes).

    (4) Bombardier Service Bulletin 700-1A11-71-002, Revision 01, dated June 30, 2016 (for Bombardier Model BD-700-1A11 airplanes).

    (h) Corrective Action

    If any discrepancy is detected during the inspection required by paragraph (g) of this AD, before further flight, replace missing parts and correct noncompliant gaps and bolt torque, as specified in the Accomplishment Instructions of the applicable service information specified in paragraphs (g)(1) through (g)(4) of this AD, except as required by paragraph (i) of this AD.

    (i) Exceptions to Service Information Specifications

    Where the applicable Bombardier service bulletin provides no instructions for corrective actions, or specifies to contact Bombardier for appropriate action, accomplish corrective actions in accordance with the procedures specified in paragraph (k)(2) of this AD.

    (j) Credit for Previous Actions

    This paragraph provides credit for actions required by paragraphs (g) and (h) of this AD, if those actions were performed before the effective date of this AD in accordance with the Accomplishment Instructions of the applicable service information specified in paragraphs (j)(1) through (j)(4) of this AD.

    (1) Bombardier Service Bulletin 700-71-002, dated May 31, 2016.

    (2) Bombardier Service Bulletin 700-71-6002, dated May 31, 2016.

    (3) Bombardier Service Bulletin 700-71-5002, dated May 31, 2016.

    (4) Bombardier Service Bulletin 700-1A11-71-002, dated May 31, 2016.

    (k) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, New York Aircraft Certification Office (ACO), ANE-170, 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 New York ACO, send it to ATTN: Program Manager, Continuing Operational Safety, FAA, New York ACO, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; fax 516-794-5531. 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. The AMOC approval letter must specifically reference this AD.

    (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, New York ACO, ANE-170, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier, Inc.'s TCCA Design Approval Organization (DAO). If approved by the DAO, the approval must include the DAO-authorized signature.

    (l) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian Airworthiness Directive CF-2016-23, dated July 28, 2016, for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9503.

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (m)(3) and (m)(4) of this AD.

    (m) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.

    (i) Bombardier Service Bulletin 700-71-002, Revision 01, dated June 30, 2016.

    (ii) Bombardier Service Bulletin 700-71-6002, Revision 01, dated June 30, 2016.

    (iii) Bombardier Service Bulletin 700-71-5002, Revision 01, dated June 30, 2016.

    (iv) Bombardier Service Bulletin 700-1A11-71-002, Revision 01, dated June 30, 2016.

    (3) For service information identified in this AD, contact Bombardier, Inc., 400 Côte-Vertu Road West, Dorval, Québec H4S 1Y9, Canada; telephone 514-855-5000; fax 514-855-7401; email [email protected]; Internet http://www.bombardier.com.

    (4) 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.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on December 2, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-29815 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-4228; Directorate Identifier 2015-NM-107-AD; Amendment 39-18734; AD 2016-25-08] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), Department of Transportation (DOT).

    ACTION:

    Final rule.

    SUMMARY:

    We are superseding Airworthiness Directive (AD) 2014-13-12 for all Airbus Model A318, A319, A320, and A321 series airplanes. AD 2014-13-12 required identifying the part number and serial number of each passenger oxygen container, replacing the oxygen generator manifold of any affected oxygen container with a serviceable manifold, performing an operational check of the manual mask release, and doing corrective actions if necessary. This new AD retains the requirements of AD 2014-13-12, and requires replacing the oxygen generator manifold of any affected DAe oxygen container with a serviceable manifold. This AD was prompted by reports of silicon particles inside the oxygen generator manifolds, which had chafed from the mask hoses during installation onto the generator outlets. We are issuing this AD to address the unsafe condition on these products.

    DATES:

    This AD is effective January 20, 2017.

    The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of January 20, 2017.

    The Director of the Federal Register approved the incorporation by reference of certain other publications listed in this AD as of September 9, 2014 (79 FR 45317, August 5, 2014).

    ADDRESSES:

    For Airbus service information identified in this final rule, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com.

    For B/E AEROSPACE service information identified in this final rule, contact BE Aerospace Systems GmbH, Revalstrasse 1, 23560 Lübeck, Germany; telephone (49) 451 4093-2976; fax (49) 451 4093-4488.

    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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-4228.

    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-2016-4228; 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 regulatory evaluation, any comments received, and other information. The address for the Docket Office (telephone 800-647-5527) is Docket 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:

    Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1405; fax 425-227-1149.

    SUPPLEMENTARY INFORMATION: Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2014-13-12, Amendment 39-17888 (79 FR 45317, August 5, 2014) (“AD 2014-13-12”). AD 2014-13-12 applied to all Airbus Model A318, A319, A320, and A321 series airplanes. The NPRM published in the Federal Register on March 21, 2016 (81 FR 14990). The NPRM was prompted by reports of silicon particles inside the oxygen generator manifolds, which had chafed from the mask hoses during installation onto the generator outlets. The NPRM proposed to continue to require identifying the part number and serial number of each passenger oxygen container, replacing the oxygen generator manifold of any affected oxygen container with a serviceable manifold, and performing an operational check of the manual mask release, and doing corrective actions if necessary. The NPRM also proposed to require replacing the oxygen generator manifold of any affected DAe oxygen container with a serviceable manifold. We are issuing this AD to detect and correct nonserviceable oxygen generator manifolds, which could reduce or block the oxygen supply and result in injury to passengers when oxygen supply is needed.

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2014-0208, dated September 16, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition. The MCAI states:

    During production of passenger oxygen containers, the manufacturer, B/E Aerospace, detected some silicon particles inside the oxygen generator manifolds. Investigation revealed that those particles (chips) had chafed from the mask hoses during installation onto the generator outlets. It was discovered that a defective mask hose installation device had caused the chafing.

    This condition, if not detected and corrected, could reduce or block the oxygen supply, possibly resulting in injury to passengers when oxygen supply is needed.

    To address this potential unsafe condition, EASA issued AD 2011-0167 to require the identification and modification of the affected oxygen container assemblies. That [EASA] AD also prohibited the installation of the affected containers on any aeroplane as replacement parts. It was subsequently established that Models A318-121 and A318-122 were missing from the Applicability of the [EASA] AD, and clarification was necessary regarding the affected containers.

    Consequently, EASA issued AD 2012-0083 [which corresponds to FAA AD 2014-13-12], retaining the requirements of EASA AD 2011-0167, which was superseded, expanded the Applicability by adding two aeroplane models, and provided clarity by providing a list of affected passenger oxygen containers.

    Since that [EASA] AD was issued, it was found that the affected containers have not only been marked with company name B/E Aerospace, as was specified, but also, for a brief period, with the former company name DAe Systems.

    For the reason described above, this [EASA] AD retains the requirements of EASA AD 2012-0083, which is superseded, and expands the affected group of containers to include those that have the name “DAe Systems” on the identification plate.

    This [EASA] AD also clearly separates the serial number (s/n) groups of containers into those manufactured by B/E Aerospace and those manufactured by DAe Systems, for which additional compliance time is provided.

    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-2016-4228.

    Comments

    We gave the public the opportunity to participate in developing this AD. The following presents the comment received on the NPRM and the FAA's response to the comment.

    Request To Revise Compliance Time

    United Airlines (UAL) requested that we revise the compliance time for DAe Systems units from within “2,500 flight cycles, or 3,750 flight hours, or 12 months, whichever occurs first, after the effective date of this AD,” to within “5,000 flight cycles, or 7,500 flight hours, or 24 months, whichever occurs first after the effective date of this AD.” UAL stated that this would make both units have the same compliance time. UAL explained that it has inspected 97 out of 152 airplanes in compliance with AD 2014-13-12, and due to the new requirements in the NPRM, it will have to re-start the inspection for the entire UAL Model A319/A320 fleet.

    We do not agree with UAL's request. As allowed by the phrase “unless already done” in paragraph (f) of this AD, if the inspection required by this AD has already been accomplished, this AD does not require that action to be repeated. The EASA, as the State of Design Authority for Airbus products, has determined this AD's compliance times based on the overall risk to the fleet, including the severity of the failure and the likelihood of the failure's occurrence. We are unaware of any information or data that would substantiate the compliance time change that UAL has requested. UAL did not provide any substantiation to support its request. The EASA works closely with Airbus to ensure that all appropriate actions are taken at the appropriate times to mitigate risk to the fleet to meet our collective safety goals. Under the provisions of paragraph (q)(1) of this AD, we will consider requests for approval of an extension of the compliance time if sufficient data are submitted to substantiate that the change would provide an acceptable level of safety. We have not changed this AD in this regard.

    Conclusion

    We reviewed the available data, including 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 Under 1 CFR Part 51

    B/E AEROSPACE has issued Service Bulletins 1XCXX-0100-35-005 and 22CXX-0100-35-003, both Revision 2, both dated July 10, 2014. The service information describes procedures for replacement of the oxygen generator manifold. These service bulletins are distinct since they apply to different products.

    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.

    Costs of Compliance

    We estimate that this AD affects 22 airplanes of U.S. registry.

    The actions required by AD 2014-13-12, and retained in this AD take about 6 work-hours per product, at an average labor rate of $85 per work-hour. Based on these figures, the estimated cost of the actions that were required by AD 2014-13-12 is $510 per product.

    We also estimate that it takes about 6 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this AD on U.S. operators to be $11,220, or $510 per product.

    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 that 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; 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 removing Airworthiness Directive (AD) 2014-13-12, Amendment 39-17888 (79 FR 45317, August 5, 2014), and adding the following new AD: 2016-25-08 Airbus: Amendment 39-18734; Docket No. FAA-2016-4228; Directorate Identifier 2015-NM-107-AD. (a) Effective Date

    This AD is effective January 20, 2017.

    (b) Affected ADs

    This AD replaces AD 2014-13-12, Amendment 39-17888 (79 FR 45317, August 5, 2014) (“AD 2014-13-12”).

    (c) Applicability

    This AD applies to the Airbus airplanes identified in paragraphs (c)(1) through (c)(4) of this AD, certificated in any category, all manufacturer serial numbers.

    (1) Model A318-111, -112, -121, and -122 airplanes.

    (2) Model A319-111, -112, -113, -114, -115, -131, -132, and -133 airplanes.

    (3) Model A320-211, -212, -214, -231, -232, -233, and -271 airplanes.

    (4) Model A321-111, -112, -131, -211, -212, -213, -231, and -232 airplanes.

    (d) Subject

    Air Transport Association (ATA) of America Code 35, Oxygen.

    (e) Reason

    This AD was prompted by reports of silicon particles inside the oxygen generator manifolds, which had chafed from the mask hoses during installation onto the generator outlets. We are issuing this AD to detect and correct nonserviceable oxygen generator manifolds, which could reduce or block the oxygen supply and result in injury to passengers when oxygen supply is needed.

    (f) Compliance

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

    (g) Retained Part Number and Serial Number Identification, With No Changes

    This paragraph restates the requirements of paragraph (g) of AD 2014-13-12, with no changes. Within 5,000 flight cycles, or 7,500 flight hours, or 24 months, whichever occurs first after September 9, 2014 (the effective date of AD 2014-13-12), identify the part number and serial number of each passenger oxygen container. A review of airplane maintenance records is acceptable in lieu of this identification if the part number and serial number of the oxygen container can be conclusively determined from that review.

    (h) Retained Replacement, Check, and Repair, With Paragraph (h)(5) and Note 1 to Paragraph (h) of AD 2014-13-12 Removed, and Revised Repair Instructions

    This paragraph restates the requirements of paragraph (h) of AD 2014-13-12, with paragraph (h)(5) and Note 1 to paragraph (h) of AD 2014-13-12 removed, and revised repair instructions. If the part number of the passenger oxygen container is listed in paragraph (h)(1) of this AD and the serial number of the passenger oxygen container is listed in paragraph (h)(2) of this AD: Within the compliance time specified in paragraph (g) of this AD, do the actions specified in paragraphs (h)(3) and (h)(4) of this AD, except as provided by paragraphs (i)(1) through (i)(7) of this AD.

    (1) (Type I: 15 and 22 minutes) 12C15Lxxxxx0100, 12C15Rxxxxx0100, 13C15Lxxxxx0100, 13C15Rxxxxx0100, 14C15Lxxxxx0100, 14C15Rxxxxx0100, 12C22Lxxxxx0100, 12C22Rxxxxx0100, 13C22Lxxxxx0100, 13C22Rxxxxx0100, 14C22Lxxxxx0100, and 14C22Rxxxxx0100; and (Type II: 15 and 22 minutes) 22C15Lxxxxx0100, 22C15Rxxxxx0100, 22C22Lxxxxx0100, and 22C22Rxxxxx0100.

    (2) ARBA-0000 to ARBA-9999 inclusive, ARBB-0000 to ARBB-9999 inclusive, ARBC-0000 to ARBC-9999 inclusive, ARBD-0000 to ARBD-9999 inclusive, ARBE-0000 to ARBE-9999 inclusive, BEBF-0000 to BEBF-9999 inclusive, BEBH-0000 to BEBH-9999 inclusive, BEBK-0000 to BEBK-9999 inclusive, BEBL-0000 to BEBL-9999 inclusive, and BEBM-0000 to BEBM-9999 inclusive.

    (3) Replace the oxygen generator manifold of any affected oxygen passenger container with a serviceable manifold, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011.

    (4) Do an operational check of the manual mask release, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011. If the operational check fails, before further flight, repair the manual mask release, using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA).

    (i) Retained Exceptions, With No Changes

    This paragraph restates the provisions of paragraph (i) of AD 2014-13-12, with no changes.

    (1) Oxygen containers that meet the conditions specified in paragraph (i)(1)(i) or (i)(1)(ii) of this AD are compliant with the requirements of paragraph (h) of this AD.

    (i) Oxygen containers Type I having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (h)(2) of this AD, that have been modified prior to September 9, 2014 (the effective date of AD 2014-13-12), as specified in the Accomplishment Instructions of B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 1, dated December 15, 2012.

    (ii) Oxygen containers Type II having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (h)(2) of this AD, that have been modified prior to September 9, 2014 (the effective date of AD 2014-13-12), as specified in the Accomplishment Instructions of B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 1, dated December 20, 2011.

    (2) Airplanes on which Airbus Modification 150703 or Airbus Modification 150704 has not been embodied in production do not have to comply with the requirements of paragraph (h) of this AD, unless an oxygen container having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (h)(2) of this AD has been installed since the airplane's first flight.

    (3) Airplanes on which Airbus Modification 150703 or Airbus Modification 150704 has been embodied in production and which are not listed by model and manufacturer serial number in Airbus Service Bulletin A320-35A1047, dated March 29, 2011, are not subject to the requirements of paragraphs (g) and (h) of this AD, unless an oxygen container having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (h)(2) of this AD has been installed since the airplane's first flight.

    (4) Model A319 airplanes that are equipped with a gaseous oxygen system for passengers, installed in production with Airbus Modification 33125, do not have the affected passenger oxygen containers installed. Unless these airplanes have been modified in service (no approved Airbus modification exists), the requirements of paragraphs (g) and (h) of this AD do not apply to these airplanes.

    (5) Airplanes that have already been inspected prior to the effective date of this AD, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011, must be inspected and, depending on the findings, corrected, within the compliance time defined in paragraph (g) of this AD, as required by paragraph (h) of this AD, as applicable, except as specified in paragraph (i)(6) of this AD.

    (6) Airplanes on which the passenger oxygen container has been replaced before the effective date of this AD, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011, are compliant with the requirements of the paragraph (h) of this AD for that passenger oxygen container.

    (7) The requirements of paragraphs (g) and (h) of this AD apply only to passenger oxygen containers that are Design A, as defined in figure 1 to paragraph (i)(7) of this AD.

    ER16DE16.036 Note 1 to figure 1 to paragraph (i)(7) of this AD:

    Figure 1 is a reproduction of material from EASA AD 2012-0083, dated May 16, 2012. The words “Appendix 1 of this AD” in this figure refer to Appendix 1 of EASA AD 2012-0083, dated May 16, 2012.

    Note 2 to figure 1 to paragraph (i)(7) of this AD:

    For “Design A,” the placard on the passenger oxygen container test button is as described in “Picture A” in figure 1 to paragraph (i)(7) of this AD. The mask configuration (“ZZ” in “Picture A”) is a number, and the test button is as shown in “Picture B.”

    (j) Retained Parts Installation Limitations, With No Changes

    This paragraph restates the requirements of paragraph (j) of AD 2014-13-12, with no changes. As of September 9, 2014 (the effective date of AD 2014-13-12), no person may install an oxygen container having a part number specified in paragraph (h)(1) of this AD and having a serial number specified in paragraph (h)(2) of this AD, on any airplane, unless the container has been modified in accordance with the Accomplishment Instructions of any of the service information specified in paragraph (j)(1), (j)(2), or (j)(3) of this AD, as applicable.

    (1) Airbus Service Bulletin A320-35A1047, dated March 29, 2011.

    (2) B/E AEROSPACE Service Bulletin 1XCXX-0100-35-005, Revision 1, dated December 15, 2012.

    (3) B/E AEROSPACE Service Bulletin 22CXX-0100-35-003, Revision 1, dated December 20, 2011.

    (k) New Requirement of This AD: Identification of Oxygen Containers

    At the applicable time specified in paragraphs (k)(1) and (k)(2) of this AD: Identify the part number and serial number of each passenger oxygen container. A review of airplane maintenance records is acceptable in lieu of this identification if the part number and serial number of the oxygen container can be conclusively determined from that review.

    (1) For units with “B/E AEROSPACE” on the identification plate: Within 5,000 flight cycles, or 7,500 flight hours, or 24 months, whichever occurs first after the effective date of this AD.

    (2) For units with “DAe Systems” on the identification plate: Within 2,500 flight cycles, or 3,750 flight hours, or 12 months, whichever occurs first, after the effective date of this AD.

    (l) New Requirement of This AD: Modification of Oxygen Containers

    If a passenger oxygen container has a part number listed in paragraph (h)(1) of this AD and a serial number listed in paragraph (m)(1) or (m)(2) of this AD: At the applicable time specified in paragraphs (k)(1) and (k)(2) of this AD, do the actions specified in paragraphs (l)(1), (l)(2), and (l)(3) of this AD.

    (1) Replace the oxygen generator manifold of any affected oxygen container with a serviceable manifold, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011.

    (2) Do an operational check of the manual mask release, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011. If the operational check fails, before further flight, repair the manual mask release, using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the EASA; or Airbus's EASA DOA.

    (3) Check if the part number of the passenger oxygen container is listed in B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 2, dated July 10, 2014; or B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 2, dated July 10, 2014, as applicable. If the part number is not listed in B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 2, dated July 10, 2014; or B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 2, dated July 10, 2014; within the compliance time specified in paragraphs (k)(1) and (k)(2) of this AD, repair the passenger oxygen container using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the EASA; or Airbus's EASA DOA.

    (m) New Requirement of This AD: Part Numbers and Serial Numbers for the Parts Affected by Paragraph (l) of This AD Requirements

    Affected parts for the actions required by paragraph (l) of this AD are identified in paragraphs (m)(1) and (m)(2) of this AD.

    (1) For oxygen containers with “DAe Systems” on the identification plate: Units having a part number identified in paragraphs (h)(1) of this AD, where part number “xxxxx” stands for any alphanumerical value, and a serial number identified in paragraphs (m)(1)(i) through (m)(1)(vi) of this AD.

    (i) ARBA-0000 to ARBA-9999 inclusive.

    (ii) ARBB-0000 to ARBB-9999 inclusive.

    (iii) ARBC-0000 to ARBC-9999 inclusive.

    (iv) ARBD-0000 to ARBD-9999 inclusive.

    (v) ARBE-0000 to ARBE-9999 inclusive.

    (vi) BEBE-0000 to BEBE-9999 inclusive.

    (2) For oxygen containers with “B/E AEROSPACE” on the identification plate: Units having a part number identified in paragraphs (h)(1) of this AD, where part number “xxxxx” stands for any alphanumerical value, and a serial number identified in paragraphs (m)(2)(i) through (m)(2)(v) of this AD.

    (i) BEBF-0000 to BEBF-9999 inclusive.

    (ii) BEBH-0000 to BEBH-9999 inclusive.

    (iii) BEBK-0000 to BEBK-9999 inclusive.

    (iv) BEBL-0000 to BEBL-9999 inclusive.

    (v) BEBM-0000 to BEBM-9999 inclusive.

    (n) New Requirement of This AD: Exceptions

    (1) Oxygen containers that meet the conditions specified in paragraph (n)(1)(i) or (n)(1)(ii) of this AD are compliant with the requirements of paragraph (l) of this AD.

    (i) Oxygen containers Type I having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (m)(1) or (m)(2), as applicable, of this AD, that have been modified prior to the effective date of this AD, as specified in the Accomplishment Instructions of B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 1, dated December 15, 2012; or B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 2, dated July 10, 2014.

    (ii) Oxygen containers Type II having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (m)(1) or (m)(2) of this AD, as applicable, that have been modified prior to the effective date of this AD, as specified in the Accomplishment Instructions of B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 1, dated December 20, 2011; or B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 2, dated July 10, 2014.

    (2) Airplanes on which Airbus Modification 150703 or Airbus Modification 150704 has not been embodied in production do not have to comply with the requirements of paragraph (l) of this AD, unless an oxygen container having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (m)(1) or (m)(2) of this AD, as applicable, of this AD has been installed since the airplane's first flight.

    (3) Airplanes on which Airbus Modification 150703 or Airbus Modification 150704 has been embodied in production and which are not listed by model and manufacturer serial number in Airbus Service Bulletin A320-35A1047, dated March 29, 2011, are not subject to the requirements of paragraphs (k) and (l) of this AD, unless an oxygen container having a part number listed in paragraph (h)(1) of this AD and having a serial number listed in paragraph (m)(1) or (m)(2) of this AD, as applicable, of this AD has been installed since the airplane's first flight.

    (4) Model A319 airplanes that are equipped with a gaseous oxygen system for passengers, installed in production with Airbus Modification 33125, do not have the affected passenger oxygen containers installed. Unless these airplanes have been modified in service (no approved Airbus modification exists), the requirements of paragraphs (k) and (l) of this AD do not apply to these airplanes.

    (5) Airplanes that have already been inspected prior to the effective date of this AD, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011, must be inspected and, depending on the findings, corrected, within the compliance time defined in paragraphs (k)(1) and (k)(2) of this AD, as applicable, as required by paragraph (l) of this AD, as applicable, except as specified in paragraph (n)(6) of this AD.

    (6) Airplanes on which the passenger oxygen container has been replaced before the effective date of this AD, in accordance with the Accomplishment Instructions of Airbus Service Bulletin A320-35A1047, dated March 29, 2011, are compliant with the requirements of the paragraph (l) of this AD for that passenger oxygen container.

    (7) The requirements of paragraphs (k) and (l) of this AD apply only to passenger oxygen containers that are Design A, as defined in figure 1 to paragraph (i)(7) of this AD.

    (o) New Requirement of This AD: Parts Installation Limitations

    As of the effective date of this AD, no person may install an oxygen container having a part number specified in paragraph (h)(1) of this AD and having a serial number specified in paragraph (m)(1) or (m)(2) of this AD, as applicable, on any airplane, unless the container has been modified in accordance with the Accomplishment Instructions of any of the service information specified in paragraph (o)(1), (o)(2), or (o)(3) of this AD, as applicable to the oxygen container part number.

    (1) Airbus Service Bulletin A320-35A1047, dated March 29, 2011.

    (2) B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 2, dated July 10, 2014.

    (3) B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 2, dated July 10, 2014.

    (p) Credit for Previous Actions

    (1) This paragraph restates the requirements of paragraph (k) of AD 2014-13-12, with no changes. This paragraph provides credit for the actions required by paragraph (h) of this AD, if those actions were performed before September 9, 2014 (the effective date of AD 2014-13-12) using the service information specified in paragraph (p)(1)(i) or (p)(1)(ii) of this AD, as applicable to the oxygen container part number.

    (i) B/E Aerospace Service Bulletin 1XCXX-0100-35-005, dated March 14, 2011, which is not incorporated by reference in this AD.

    (ii) B/E Aerospace Service Bulletin 22CXX-0100-35-003, dated March 17, 2011, which is not incorporated by reference in this AD.

    (2) This paragraph provides credit for the actions required by paragraphs (l)(3) and (o) of this AD, if those actions were performed before the effective date of this AD using the service information specified in paragraph (p)(2)(i) or (p)(2)(ii) of this AD, as applicable to the oxygen container part number.

    (i) B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 1, dated December 15, 2012, which was incorporated by reference in AD 2014-13-12.

    (ii) B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 1, dated December 20, 2011, which was incorporated by reference in AD 2014-13-12.

    (q) 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: Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1405; fax-425-227-1149. Information may be emailed to: [email protected]

    (i) 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. The AMOC approval letter must specifically reference this AD.

    (ii) AMOCs approved previously for AD 2014-13-12, are approved as AMOCs for the corresponding provisions of paragraphs (g) through (j) of this AD.

    (2) Contacting the Manufacturer: As of the effective date of this AD, for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature.

    (r) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2014-0208, dated September 16, 2014, 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-2016-4228.

    (2) Service information identified in this AD that is not incorporated by reference is available at the addresses specified in paragraphs (s)(5), (s)(6), and (s)(7) of this AD.

    (s) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.

    (3) The following service information was approved for IBR on January 20, 2017.

    (i) B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 2, dated July 10, 2014.

    (ii) B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 2, dated July 10, 2014.

    (4) The following service information was approved for IBR on September 9, 2014 (79 FR 45317, August 5, 2014).

    (i) Airbus Service Bulletin A320-35A1047, dated March 29, 2011.

    (ii) B/E Aerospace Service Bulletin 1XCXX-0100-35-005, Revision 1, dated December 15, 2012.

    (iii) B/E Aerospace Service Bulletin 22CXX-0100-35-003, Revision 1, dated December 20, 2011.

    (5) For Airbus service information identified in this AD, contact Airbus service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com.

    (6) For B/E Aerospace service information identified in this AD, contact BE Aerospace Systems GmbH, Revalstrasse 1, 23560 Lübeck, Germany; telephone (49) 451 4093-2976; fax (49) 451 4093-4488.

    (7) 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.

    (8) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on November 25, 2016. John P. Piccola, Jr., Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-29249 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-7099; Directorate Identifier 2016-NE-15-AD; Amendment 39-18737; AD 2016-25-11] RIN 2120-AA64 Airworthiness Directives; International Aero Engines AG Turbofan Engines AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain International Aero Engines AG (IAE) V2522-A5, V2524-A5, V2527-A5, V2527E-A5, V2527M-A5, V2530-A5, V2533-A5, V2525-D5, V2528-D5, and V2531-E5 turbofan engines. This AD was prompted by nine in-flight shutdowns (IFSDs) that resulted from premature failure of the No. 3 bearing. This AD requires inspections and corrective actions for bearing damage. This AD also requires removal of the No. 3 bearing from service at the next engine shop visit. We are issuing this AD to correct the unsafe condition on these products.

    DATES:

    This AD is effective January 20, 2017.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of January 20, 2017.

    ADDRESSES:

    For service information identified in this final rule, contact International Aero Engines AG, 400 Main Street, East Hartford, CT 06118; phone: 860-565-0140; email: [email protected]; Internet: http://fleetcare.pw.utc.com.

    You may view this referenced service information at the FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125. It is also available on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-7099.

    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-2016-7099; 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 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:

    Brian Kierstead, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7772; 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 certain IAE V2522-A5, V2524-A5, V2527-A5, V2527E-A5, V2527M-A5, V2530-A5, V2533-A5, V2525-D5, V2528-D5, and V2531-E5 turbofan engines. The NPRM published in the Federal Register on July 21, 2016 (81 FR 47313). The NPRM was prompted by nine IFSDs resulting from premature failure of the No. 3 bearing. This condition, if not corrected, could result in failure of the No. 3 bearing, failure of one or more engines, loss of thrust control, and loss of the airplane. The NPRM proposed to require removal of the No. 3 bearing from service at the next engine shop visit. We are issuing this AD to prevent failure of the No. 3 bearing, failure of one or more engines, loss of thrust control, and loss of the airplane.

    Comments

    We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM and the FAA's response to each comment. Boeing supported the NPRM.

    Request To Add Terminating Action

    MTU Maintenance Hanover GmbH (MTU) requested that IAE Non Modification Service Bulletin (NMSB) V2500-ENG-72-0673, dated June 3, 2016, be added as a terminating action in this AD. MTU also requested IAE NMSB V2500-ENG-72-0673 be included in credit for previous action. They reason that following the issue of IAE NMSB V2500-ENG-72-0671, dated March 22, 2016, IAE released IAE NMSB V2500-ENG-72-0673, which recommends removal of No. 3 bearing serial numbers (S/Ns) identical to those listed in IAE NMSB V2500-ENG-72-0671.

    We partially agree. We agree that the removal of the suspect bearing in accordance with IAE NMSB V2500-ENG-72-0673, dated June 3, 2016 would accomplish both the (e)(3) compliance and (f) terminating action requirements of this AD because both IAE service documents reference identical bearing S/Ns.

    We disagree that including IAE NMSB V2500-ENG-72-0673 as a terminating action or listing as credit for previous action is necessary since replacement of a bearing S/N per IAE NMSB V2500-ENG-72-0673, dated June 3, 2016, makes the engine no longer applicable to the AD. We did not change this AD.

    Request To Remove Certain Engine Models From Applicability

    IAE and MTU request engine models V2525-D5, V2528-D5, and V2531-E5 be removed from the applicability section of this AD. IAE states that the suspect No. 3 bearings referenced by this AD have all been installed in A5 series engines as specified in IAE NMSB V2500-ENG-72-0671, dated March 22, 2016 and requests alignment with the service instructions in order to provide consistency between the IAE NMSB V2500-ENG-72-0671 and this AD. MTU reasons that the IAE NMSBs V2500-ENG-72-0671 and V2500-ENG-72-0673 do not list V2525-D5, V2528-D5, and V2531-E5 engine models, therefore, this AD should not be applicable to these models.

    We disagree. The applicability section of this AD identifies all V2500 engine models of the same type design where the suspect bearing could be installed. This AD further refines the applicability section with identification of specific No. 3 bearing S/Ns listed in IAE NMSB V2500-ENG-72-0671, Appendix 1, dated March 22, 2016. We did not change this AD.

    Request To Identify Applicability by Either Engine S/N or Bearing S/N

    Cathay Pacific Airways (CPA) requests the applicability section be revised to identify either the engine S/N or the No. 3 bearing S/N listed in IAE NMSB V2500-ENG-72-0671, dated March 22, 2016. CPA suggests that operators might identify engine applicability based on the No. 3 bearing S/N or the engine S/N, as both are listed in IAE NMSB V2500-ENG-72-0671, Appendix 1, dated March 22, 2016.

    We disagree. Determining applicability by engine S/N in lieu of the No. 3 bearing S/N is not adequate, as the suspect bearing may have been reinstalled in another engine. We did not change this AD.

    Conclusion

    We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD as proposed.

    Related Service Information Under 1 CFR Part 51

    We reviewed IAE NMSB V2500-ENG-72-0671, dated March 22, 2016. The NMSB describes procedures for inspecting the MMCD and further actions if metallic debris is found. 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

    We reviewed IAE NMSB V2500-ENG-72-0673, dated June 3, 2016. The NMSB describes procedures for removal and replacement of the No. 3 bearing.

    Costs of Compliance

    We estimate that this AD affects 11 engines installed on airplanes of U.S. registry. We estimate that it would take about 1 hour to perform the inspection. The average labor rate is $85 per hour. We estimate the cost to replace a No. 3 bearing to be $54,510. Based on these figures, we estimate the cost of this AD on U.S. operators to be $600,545.

    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

    This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

    For the reasons discussed above, I certify that this AD:

    (1) Is not a “significant regulatory action” under Executive Order 12866,

    (2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

    (3) Will not affect intrastate aviation in Alaska, 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): 2016-25-11 International Aero Engines AG: Amendment 39-18737; Docket No. FAA-2016-7099; Directorate Identifier 2016-NE-15-AD. (a) Effective Date

    This AD is effective January 20, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to International Aero Engines AG (IAE) V2522-A5, V2524-A5, V2527-A5, V2527E-A5, V2527M-A5, V2530-A5, V2533-A5, V2525-D5, V2528-D5, and V2531-E5 turbofan engines with No. 3 bearing serial numbers (S/Ns) listed in Appendix 1 of IAE Non-Modification Service Bulletin (NMSB) V2500-ENG-72-0671, dated March 22, 2016.

    (d) Unsafe Condition

    This AD was prompted by several in-flight shutdowns that resulted from premature failure of the No. 3 bearing. We are issuing this AD to correct the unsafe condition on these products.

    (e) Compliance

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

    (1) Prior to accumulating 125 flight hours (FH) after the effective date of this AD, inspect the master magnetic chip detector (MMCD) for metallic debris. If no metallic debris is found during the MMCD inspection, repeat the inspection within every 125 FH.

    (2) If metallic debris is found during the MMCD inspection, evaluate the debris using paragraph 2.B. of the Accomplishment Instructions in IAE NMSB V2500-ENG-72-0671, dated March 22, 2016. Perform additional inspections or remove the engine from service in accordance with the Accomplishment Instructions in IAE NMSB V2500-ENG-72-0671.

    (3) Remove the No. 3 bearing from service at the next engine shop visit and replace it with a bearing part/serial number combination not listed in Appendix 1 of IAE NMSB V2500-ENG-72-0671, dated March 22, 2016.

    (f) Mandatory Terminating Action

    Removal of the No. 3 bearing from service at the next engine shop visit and replacement with a bearing not listed in Appendix 1 of IAE NMSB V2500-ENG-72-0671, dated March 22, 2016, is terminating action to this AD.

    (g) Definition

    For the purpose of this AD, 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 does not constitute an engine shop visit.

    (h) 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]

    (i) Related Information

    (1) For more information about this AD, contact Brian Kierstead, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7772; fax: 781-238-7199; email: [email protected]

    (2) IAE NMSB V2500-ENG-72-0673, dated June 3, 2016, can be obtained from IAE using the contact information in paragraph (j)(3) of this AD.

    (j) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.

    (i) International Aero Engines AG (IAE) Non-Modification Service Bulletin V2500-ENG-72-0671, dated March 22, 2016.

    (ii) Reserved.

    (3) For IAE service information identified in this AD, contact International Aero Engines AG, 400 Main Street, East Hartford, CT 06118; phone: 860-565-0140; email: [email protected]; Internet: http://fleetcare.pw.utc.com.

    (4) You may view this service information at FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Burlington, Massachusetts, on November 28, 2016. Colleen M. D'Alessandro, Manager, Engine & Propeller Directorate, Aircraft Certification Service.
    [FR Doc. 2016-30064 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9515; Directorate Identifier 2016-NM-181-AD; Amendment 39-18749; AD 2016-25-23] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for certain Airbus Model A319-115 and -132 airplanes, and Model A320-214, -232, and -233 airplanes. This AD requires revising the airplane flight manual (AFM) to include information that introduces a fuel limitation for certain types of fuel and a fuel gravity feed ceiling procedure for airplanes equipped with jet pumps. This AD was prompted by a report indicating that certain modified airplanes do not have electrical ground wires on the fuel level sensing control unit (FLSCU), which adversely affects gravity feeding operation. We are issuing this AD to address the unsafe condition on these products.

    DATES:

    This AD becomes effective January 3, 2017.

    The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of January 3, 2017.

    We must receive comments on this 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: U.S. Department of Transportation, Docket Operations, M-30, 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.

    For service information identified in this final rule, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email: [email protected]; Internet: http://www.airbus.com. 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9515.

    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-2016-9515; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this 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:

    Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; fax: 425-227-1149.

    SUPPLEMENTARY INFORMATION:

    Discussion

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2016-0205, dated October 13, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Airbus Model A319-115 and -132 airplanes, and Model A320-214, -232, and -233 airplanes. The MCAI states:

    Airbus introduced mod 154327 on A319 and A320 aeroplanes which substituted the pump fuel feed system from the centre fuel tank with a jet pump transfer system, based on the Airbus A321 design.

    Following the modification introduction, it was discovered that the modified aeroplanes do not have electrical ground signals that replicate those from the deleted centre tank pump pressure switches. These signals are used as part of the fuel recirculation inhibition request logic.

    Subsequent investigation determined that ground wires had not been installed on the Fuel Level Sensing Control Units (FLSCU) of the modified A319 and A320 aeroplanes, due to a drawing error on the fuel system recirculation Principle Diagram. Without these ground wires providing inputs, the FLSCU logic is not correctly implemented for gravity feeding operation.

    This condition, if not corrected, could lead to reduced fuel pressure at the engine inlet, possibly resulting in an uncommanded in-flight shut-down when flying at the gravity feed ceiling levels, as defined in the Aircraft Flight Manual (AFM).

    To address this potential unsafe condition, Airbus issued AFM Temporary Revision (TR) 695 Issue 1 and AFM TR699 Issue 1 to prohibit the use of Jet B and JP4 fuel and AFM TR700 Issue 1 to provide instructions for amendment of the gravity feed procedure for the other fuels.

    For the reasons described above, this [EASA] AD requires amendment of the applicable AFM to include the new gravity feed procedure and reduce the list of authorised fuels.

    This [EASA] AD is considered to be an interim measure and further [EASA] AD action may follow.

    You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9515.

    Related Service Information Under 1 CFR Part 51

    Airbus has issued the following service information.

    • Airbus A318/A319/A320/A321 Temporary Revision TR695, Issue 1.0, dated August 1, 2016; and Airbus A318/A319/A320/A321 Temporary Revision TR699, Issue 1.0, dated August 1, 2016. This service information describes revising the Limitations section of the AFM to include a fuel limitation that removes JET B and JP4 fuels from the list of usable fuels for airplanes equipped with jet pumps. These documents are distinct since they apply to different airplane configurations.

    • Airbus A318/A319/A320/A321 Temporary Revision TR700, Issue 1.0, dated August 1, 2016. This service information describes revising the Abnormal Procedures section of the AFM to include information to modify the fuel gravity feed ceiling procedure for airplanes equipped with jet pumps.

    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 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 issuing this AD because we evaluated all pertinent information and determined the unsafe condition exists and is likely to exist or develop on other products of these same type designs.

    Interim Action

    We consider this AD interim action. If final action is later identified, we might consider further rulemaking at that time.

    FAA's Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because the current AFM procedure may lead to reduced fuel pressure at the engine inlet, possibly resulting in an uncommanded in-flight shutdown when flying at the fuel gravity feed ceiling levels. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days.

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-9515; Directorate Identifier 2016-NM-181-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this 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 AD.

    Costs of Compliance

    We estimate that this AD affects 58 airplanes of U.S. registry.

    We also estimate that it will take about 1 work-hour per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this AD on U.S. operators to be $4,930, or $85 per product.

    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 that 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; 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): 2016-25-23 Airbus: Amendment 39-18749; Docket No. FAA-2016-9515; Directorate Identifier 2016-NM-181-AD. (a) Effective Date

    This AD becomes effective January 3, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Airbus Model A319-115 and -132 airplanes, and Model A320-214, -232, and -233 airplanes, certificated in any category, all manufacturer serial numbers on which Airbus modification 154327 has been embodied in production.

    (d) Subject

    Air Transport Association (ATA) of America Code 28, Fuel.

    (e) Reason

    This AD was prompted by a report indicating that, for airplanes on which Airbus modification 154327 (which substitutes the pump fuel feed system from the center fuel tank with a jet pump transfer system) was done, the modified airplanes do not have electrical ground wires on the fuel level sensing control unit (FLSCU), which adversely affects gravity feeding operation. We are issuing this AD to prevent reduced fuel pressure at the engine inlet, potentially resulting in an uncommanded in-flight shutdown when flying at the fuel gravity feed ceiling levels.

    (f) Compliance

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

    (g) Revision of the Airplane Flight Manual (AFM)

    (1) Within 30 days after the effective date of this AD, revise the Limitations section of the AFM by inserting a copy of Airbus A318/A319/A320/A321 Temporary Revision TR695, Issue 1.0, dated August 1, 2016; or Airbus A318/A319/A320/A321 Temporary Revision TR699, Issue 1.0, dated August 1, 2016; as applicable; and revise the Abnormal Procedures section of the AFM by inserting a copy of Airbus A318/A319/A320/A321 Temporary Revision TR700, Issue 1.0, dated August 1, 2016. These temporary revisions introduce a fuel limitation for certain types of fuel and a fuel gravity feed ceiling procedure for airplanes equipped with jet pumps. Thereafter, operate the airplane according to the limitation and procedure in the applicable temporary revision.

    (2) When the information in Airbus A318/A319/A320/A321 Temporary Revision TR695, Issue 1.0, dated August 1, 2016; or Airbus A318/A319/A320/A321 Temporary Revision TR699, Issue 1.0, dated August 1, 2016; as applicable; and Airbus A318/A319/A320/A321 Temporary Revision TR700, Issue 1.0, dated August 1, 2016; has been included in the general revisions of the AFM, the general revisions may be inserted in the AFM, and the temporary revisions may be removed.

    (h) Special Flight Permits

    Special flight permits, as described in Section 21.197 and Section 21.199 of the Federal Aviation Regulations (14 CFR 21.197 and 21.199), are not allowed.

    (i) 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: Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; 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 Airbus's EASA Design Organization Approval (DOA). If approved by the DOA, the approval must include the DOA-authorized signature.

    (j) Related Information

    Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2016-0205, dated October 13, 2016, for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9515.

    (k) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless this AD specifies otherwise.

    (i) Airbus A318/A319/A320/A321 Temporary Revision TR695, Issue 1.0, dated August 1, 2016.

    (ii) Airbus A318/A319/A320/A321 Temporary Revision TR699, Issue 1.0, dated August 1, 2016.

    (iii) Airbus A318/A319/A320/A321 Temporary Revision TR700, Issue 1.0, dated August 1, 2016.

    (3) For service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email: [email protected]; Internet: http://www.airbus.com.

    (4) 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.

    (5) You may view this service information that is incorporated by reference at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on December 2, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-30036 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6744; Directorate Identifier 2016-NE-12-AD; Amendment 39-18736; AD 2016-25-10] 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 certain 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 machining and inspecting parts related to the high-pressure compressor (HPC) and replacing HPC parts found defective. This AD was prompted by inspection of RR Trent 800 engines returned from service that revealed flame erosion and axial cracking on the stage 3 disk rim of the HPC stage 1-4 rotor disks shaft. We are issuing this AD to correct the unsafe condition on these products.

    DATES:

    This AD becomes effective January 20, 2017.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of January 20, 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6744.

    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-2016-6744; 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:

    Robert Green, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7754; fax: 781-238-7199; email: [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 26, 2016 (81 FR 48724). The NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

    Inspection of Trent 800 engines returned from service revealed flame eroded areas and axial cracking on the rear Stage 3 disc of the High Pressure Compressor (HPC) Stage 1-4 drum. This is considered to be the result of a localised fire originating from an excessive rub at the stage 3-4 forward seal fin.

    This condition, if not detected and corrected, could lead to an uncontained engine failure and release of high energy debris, possibly resulting in damage to the aeroplane and injury to occupants.

    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-2016-6744.

    Comments

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

    Request To Revise Inspection for Wear and Cracks

    American Airlines, Inc., (AAL) requested that the requirement in paragraph (e)(1)(i) of this AD be revised to allow the standards in the RR Trent 800 Engine Manual (EM) to be used in the assessment for wear and cracks. AAL indicated that RR Trent 800 EM task 72-41-31-200-801 addresses the conditions of wear and cracking and provides limits and rejection criteria. AAL commented that RR has noted that the types of damage described in RR Standard Practices Manual 70-01-02-200-000 including the terms “burned/charred” and “eroded” provide an adequate description of flame erosion.

    AAL further indicated that if, based on the proposed requirement in paragraph (e)(1)(ii) of this AD, any wear is found on the forward stage 3-4 seal fin, then the HPC 1-4 rotor would have to be replaced. AAL noted, however, that EM task 72-41-31-200-801 allows the seal fin to exhibit wear within the diametral limits of 23.665 to 23.722 inches.

    RR indicated that the requirement in this AD to reject the part for evidence of wear should be eliminated. RR noted that the EM for the affected engines already includes inspections for wear and other damage.

    We partially agree. We agree with AAL's assessment that the EM task would allow wear as defined above while paragraph (e)(1)(i) in this AD, as proposed, would not have allowed any wear. We also agree with RR that it is not necessary to specify an inspection for wear.

    We disagree that it is necessary to refer to the EM task in the requirements of this AD. We have revised the requirements of this AD to remove the requirement to inspect for “wear.” We are removing this requirement because seal tooth wear serviceability limits are already defined in the RR Trent 800 EM.

    Request To Revise Requirement to Machine HPC Stage 3 Inner Shroud

    RR and AAL requested that the requirement in paragraph (e)(1)(ii) of this AD to machine the HPC stage 3 inner shroud be revised. AAL noted that the HPC 1-4 disks shaft is a life-limited part; therefore, AAL tracks its cycle use, both total part cycles and cycles since last piece-part inspection. There is, however, no mandatory tracking requirement for the HPC stage 3 inner shroud. AAL, therefore, cannot ensure that it can comply with RR Service Bulletin (SB) RB211.72-J195, dated February 26, 2016, before exceeding 5,000 duty cycles since new or since last piece-part inspection of the HPC stage 1-4 rotor disks shaft, as proposed in this AD. AAL and RR suggested that the requirement in paragraph (e)(1)(ii) of this AD become an optional terminating action.

    We partially agree. We disagree with revising the requirement in paragraph (e)(1)(ii) in this AD to machine the HPC stage 1-3 shroud because that addresses the unsafe seal clearance condition. We agree, however, that the proposed language in paragraph (e)(1) may be misinterpreted to refer to tracking the cycles on the HPC stage 3 inner shroud. Therefore, we clarified paragraph (e)(1) of this AD to read: “(1) Before the HPC stage 1-4 rotor disks shaft cyclic life exceeds 5,000 duty cycles since new, or 5,000 duty cycles since last HPC stage 1-4 rotor disks shaft piece-part inspection, whichever occurs later, do the following: . . . .” This change clarifies that the 5,000 duty cycles since new criterion in this AD applies only to the HPC stage 1-4 rotor disks and not the HPC stage 3 inner shroud.

    Support for the NPRM

    The Boeing Company, Inc., commented that it supported the proposed rule as written.

    Conclusion

    We reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously. We determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

    Related Service Information Under 1 CFR Part 51

    RR has issued SB RB.211-72-J195, dated February 26, 2016. The SB describes procedures to machine the HPC stage 3 inner shroud and to inspect the HPC stage 1-4 rotor disks shaft. 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.

    Costs of Compliance

    We estimate that this AD affects 125 engines installed on airplanes of U.S. registry. We did not estimate any time to machine the HPC stage 3 inner shroud because this is accomplished during routine overhaul. 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 of the HPC stage 1-4 rotor disks 8 work-hours × $85 per hour = $680 $0 $680 $85,000
    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): 2016-25-10 Rolls-Royce plc: Amendment 39-18736; Docket No. FAA-2016-6744; Directorate Identifier 2016-NE-12-AD. (a) Effective Date

    This AD becomes effective January 20, 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 that have not incorporated RR modification 72-J195, in production, or RR Service Bulletin RB.211-72-J195, dated February 26, 2016, in service.

    (d) Reason

    This AD was prompted by inspection of RR Trent 800 model engines returned from service that revealed flame erosion and axial cracking on the aft face of the stage 3 disk rim of the high-pressure compressor (HPC) stage 1-4 rotor disks shaft. We are issuing this AD to correct the unsafe condition on these products.

    (e) Actions and Compliance

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

    (1) Before the HPC stage 1-4 rotor disks shaft cyclic life exceeds 5,000 duty cycles since new, or 5,000 duty cycles since last HPC stage 1-4 rotor disks shaft piece-part inspection, whichever occurs later, do the following:

    (i) Perform fluorescent penetrant and visual inspections of the HPC stage 1-4 rotor disks shaft forward stage 3-4 seal fin and aft face of the stage 3 disk rim for cracks and flame erosion. Any findings of cracks or flame erosion constitute a failure of the HPC stage 1-4 rotor disks shaft.

    (ii) Machine the HPC stage 3 inner shroud to the dimensions shown in Figure 1 of RR Service Bulletin (SB) RB.211-72-J195, dated February 26, 2016.

    (2) If the HPC stage 1-4 rotor disks shaft fails the inspections required by paragraph (e)(1)(i) of this AD, replace with a part eligible for installation before further flight.

    (f) 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]

    (g) Related Information

    (1) For more information about this AD, contact Robert Green, Aerospace Engineer, Engine Certification Office, FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA 01803; phone: 781-238-7754; fax: 781-238-7199; email: [email protected]

    (2) Refer to MCAI European Aviation Safety Agency AD 2016-0078, dated April 20, 2016 (corrected April 27, 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-2016-6744.

    (h) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the incorporation by reference (IBR) of the service information listed in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.

    (2) You must use this service information as applicable to do the actions required by this AD, unless the AD specifies otherwise.

    (i) Rolls-Royce plc (RR) SB RB.211-72-J195, dated February 26, 2016.

    (ii) Reserved.

    (3) For RR 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.

    (4) You may view this service information at FAA, Engine & Propeller Directorate, 1200 District Avenue, Burlington, MA. For information on the availability of this material at the FAA, call 781-238-7125.

    (5) You may view this service information at the National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Burlington, Massachusetts, on November 23, 2016. Colleen M. D'Alessandro, Manager, Engine & Propeller Directorate, Aircraft Certification Service.
    [FR Doc. 2016-30065 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2016-9375; Airspace Docket No. 16-ASO-16] Amendment of Class D Airspace for St. Petersburg, FL AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    This action amends the ceiling of the Class D Airspace area at St. Petersburg-Clearwater International Airport, St. Petersburg, FL. This would allow the Tampa International Airport Air Traffic Control Tower (ATCT) to carry out Letter of Agreement procedures between St. Petersburg Air Traffic Control Tower and Tampa Terminal Radar Approach Control (TRACON) for the safety and management of standard instrument approach procedures (SIAPs), and for Instrument Flight Rule (IFR) operations in the area.

    DATES:

    Effective 0901 UTC, January 5, 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 on line 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:

    John Fornito, Operations Support Group, Eastern Service Center, Federal Aviation Administration, P.O. Box 20636, Atlanta, Georgia 30320; telephone (404) 305-6364.

    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 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 Class D airspace at St. Petersburg-Clearwater International Airport, St. Petersburg, FL.

    History

    In a review of the airspace, the FAA found the Class D airspace description for St. Petersburg-Clearwater International Airport, St. Petersburg, FL, published in FAA Order 7400.11A, describes the ceiling as extending upward from the surface to and including 2,500 feet MSL. The Tampa International Airport Class B airspace area has control of aircraft operating at and above 1,800 feet MSL in the St. Petersburg, FL, Class D airspace area.

    The FAA is lowering the Class D airspace area to 1,600 feet MSL to avoid the overlap of controlled airspace between the two airports. To avoid confusion on the part of pilots overflying the St. Petersburg, FL, area, the FAA finds that notice and public procedure under 5 U.S.C. 553(b) are impracticable and contrary to the public interest. To be consistent with the FAA's safety mandate when an unsafe condition exists, the FAA finds good cause pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days to promote the safe and efficient handling of air traffic in the area.

    Class D airspace designations are published in paragraphs 5000 of FAA Order 7400.11A dated August 3, 2016, and effective September 15, 2016, which is incorporated by reference in 14 CFR part 71.1. The Class D airspace designations listed in this document will be published subsequently in the Order.

    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

    This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 by lowering the ceiling of the Class D airspace area from 2,500 feet MSL to upward from the surface to and including 1,600 feet MSL at St. Petersburg-Clearwater International Airport, St. Petersburg, FL. The Letter of Agreement between Tampa TRACON and St. Petersburg-Clearwater International Airport ATCT, established February 13, 2015, states that Tampa TRACON shall control aircraft operating at or above 1,800 feet MSL in the St. Petersburg-Clearwater International Airport Class D airspace area. This airspace change eliminates confusion on the part of pilots operating aircraft at or above 1,600 feet MSL in the St. Petersburg-Clearwater International Airport Class D airspace area. Also, an adjustment to the geographic coordinates of St. Petersburg-Clearwater International Airport is made to be in concert with the FAA's aeronautical database.

    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 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 only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does 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 qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

    Lists 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 FAA Order 7400.11A, Airspace Designations and Reporting Points, dated August 3, 2016, effective September 15, 2016, is amended as follows: Paragraph 5000 Class D Airspace. ASO FL D St. Petersburg, FL [Amended] St. Petersburg-Clearwater International Airport, FL (Lat. 27°54′31″ N., long. 82°41′11″ W.)

    That airspace extending upward from the surface to and including 1,600 feet MSL within a 4.2-mile radius of St. Petersburg-Clearwater International Airport; excluding that portion within the Tampa International Airport, FL, Class B airspace area. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to Airmen. The effective date and time will thereafter be continuously published in the Chart Supplement (previously called Airport/Facility Directory).

    Issued in College Park, Georgia, on December 1, 2016. Ryan W. Almasy, Manager, Operations Support Group Eastern Service Center, Air Traffic Organization.
    [FR Doc. 2016-29634 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 95 [Docket No. 31111; Amdt. No. 530] IFR Altitudes; Miscellaneous Amendments AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    This amendment adopts miscellaneous amendments to the required IFR (instrument flight rules) altitudes and changeover points for certain Federal airways, jet routes, or direct routes for which a minimum or maximum en route authorized IFR altitude is prescribed. This regulatory action is needed because of changes occurring in the National Airspace System. These changes are designed to provide for the safe and efficient use of the navigable airspace under instrument conditions in the affected areas.

    DATES:

    Effective 0901 UTC, January 5, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Thomas J. Nichols, Flight Procedure Standards Branch (AMCAFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082, Oklahoma City, OK 73125), telephone: (405) 954-4164.

    SUPPLEMENTARY INFORMATION:

    This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.

    The Rule

    The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.

    Conclusion

    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 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. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

    List of Subjects in 14 CFR Part 95

    Airspace, Navigation (air).

    Issued in Washington, DC, on December 2, 2016. John Duncan, Director, Flight Standards Service. Adoption of the Amendment

    Accordingly, pursuant to the authority delegated to me by the Administrator, part 95 of the Federal Aviation Regulations (14 CFR part 95) is amended as follows effective at 0901 UTC, January 5, 2017.

    PART 95 [AMENDED] 1. The authority citation for part 95 continues to read as follows: Authority:

    49 U.S.C. 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44719, 44721.

    2. Part 95 is amended to read as follows: Revisions to IFR Altitudes & Changeover Point [Amendment 530 Effective Date, January 5, 2017] From To MEA Color Routes § 95.60 Blue Federal Airway B1 is Amended to Delete WOODY ISLAND, AK NDB ILIAMNA, AK NDB/DME *10000 *9100—MOCA § 95.6 Blue Federal Airway B12 is Amended by Adding WOODY ISLAND, AK NDB ILIAMNA, AK NDB/DME *10000 *9300—MOCA § 95.6001 Victor Routes—U.S. § 95.6052 VOR Federal Airway V52 is Amended to Read in Part CENTRAL CITY, KY VORTAC *BOWLING GREEN, KY VORTAC 2400 *11000—MCA BOWLING GREEN, KY VORTAC, SE BND BOWLING GREEN, KY VORTAC LIVINGSTON, TN VOR/DME 11000 § 95.6116 VOR Federal Airway V116 is Amended to Read in Part ERIE, PA VORTAC BRADFORD, PA VOR/DME *5000 *3900—MOCA § 95.6126 VOR Federal Airway V126 is Amended to Read in Part ERIE, PA VORTAC BRADFORD, PA VOR/DME *5000 *3900—MOCA § 95.6140 VOR Federal Airway V140 is Amended to Read in Part NASHVILLE, TN VORTAC HARME, TN FIX E BND *3000 W BND *6000 *2400—MOCA HARME, TN FIX LIVINGSTON, TN VOR/DME *6000 *2900—MOCA § 95.6141 VOR Federal Airway V141 is Amended to Read in Part MANCHESTER, NH VOR/DME CONCORD, NH VOR/DME *2900 *2100—MOCA CONCORD, NH VOR/DME KELLI, NH FIX 5000 § 95.6170 VOR Federal Airway V170 is Amended to Read in Part ERIE, PA VORTAC BRADFORD, PA VOR/DME *5000 *3900—MOCA § 95.6321 VOR Federal Airway V321 is Amended to Read in Part SHELBYVILLE, TN VOR/DME LIVINGSTON, TN VOR/DME 3800 § 95.6384 VOR Federal Airway V384 is Amended to Read in Part LIVINGSTON, TN VOR/DME VOLUNTEER, TN VORTAC 6100 § 95.6493 VOR Federal Airway V493 is Amended to Read in Part LIVINGSTON, TN VOR/DME LEXINGTON, KY VORTAC 3600 § 95.6513 VOR Federal Airway V513 is Amended to Read in Part LIVINGSTON, TN VOR/DME NEW HOPE, KY VOR/DME 4000 From To Changeover points Distance From § 95.8003 VOR Federal Airway Changeover Point Airway Segment is Amended to Add Changeover Point V321 SHELBYVILLE, TN VOR/DME LIVINGSTON, TN VOR/DME 40 SHELBYVILLE
    [FR Doc. 2016-29429 Filed 12-15-16; 8:45 a.m.] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 121 [Docket No.: FAA-2016-9526; Amdt. No. 121-397] RIN 2120-AK95 Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers; Related Aircraft Amendment AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    This rule allows air carriers to seek a deviation from the flight simulation training device (FSTD) requirements for related aircraft proficiency checks. As a result, this rule will eliminate an inconsistency that currently permits carriers that have obtained FAA approval to modify the FSTD requirements for related aircraft differences training, but not for corresponding proficiency checks. In doing so, it corrects an inadvertent omission from the Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers final rule.

    DATES:

    Effective January 17, 2017.

    Submit comments on or before February 14, 2017.

    ADDRESSES:

    Send comments identified by docket number FAA-2016-9526 using any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov and follow the online instructions for sending your comments electronically.

    Mail: Send comments to Docket Operations, M-30; U.S. Department of Transportation (DOT), 1200 New Jersey Avenue SE., Room W12-140, West Building Ground Floor, Washington, DC 20590-0001.

    Hand Delivery or Courier: Take comments to Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    Fax: Fax comments to Docket Operations at 202-493-2251.

    Privacy: 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.dot.gov/privacy.

    Docket: Background documents or comments received may be read at http://www.regulations.gov at any time. Follow the online instructions for accessing the docket or Docket Operations in Room W12-140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    FOR FURTHER INFORMATION CONTACT:

    Sheri Pippin, Air Transportation Division, AFS-200, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone (202) 267-8166; email [email protected]

    SUPPLEMENTARY INFORMATION: I. Executive Summary

    This rule will allow air carriers to seek a deviation from the FSTD requirements for related aircraft proficiency checks based on a related aircraft designation and determination of an equivalent level of safety. As a result, this rule will eliminate an inconsistency that currently permits carriers that have obtained FAA approval to modify the FSTD requirements for related aircraft differences training, but not for corresponding proficiency checks.

    II. Administrative Procedure Act and Legal Authority A. Good Cause for Immediate Adoption

    Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 553) authorizes agencies to dispense with notice and comment procedures for rules when the agency for “good cause” finds 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 FAA finds that notice and public comment to this final rule are unnecessary. This final rule corrects an inadvertent omission from the Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers (Crewmembers and Aircraft Dispatchers Training) final rule by providing certificate holders additional flexibility in the selection of an FSTD for related aircraft proficiency check maneuvers and procedures based on a determination of an equivalent level of safety. As a result, this rule is relieving for certificate holders. In addition, in the process of drafting and implementing the suite of rules culminating in the Crewmembers and Aircraft Dispatchers Training final rule, the FAA sought comment on, and thoroughly considered, comments regarding related aircraft proficiency checks. The updates to § 121.441(f) contained in this final rule offer additional flexibility; in that, air carrier certificate holders can request permission to deviate from related aircraft proficiency check requirements when the proficiency check is conducted in full, or in part, in an FSTD. Therefore, the FAA has determined that notice and public comment are unnecessary prior to the adoption of this amendment.

    B. Comments Invited

    The FAA is adopting this final rule without prior notice and public comment because it corrects an inadvertent omission from the Crewmembers and Aircraft Dispatchers Training final rule and the FAA previously sought comment on and considered comments regarding related aircraft proficiency checks. The Regulatory Policies and Procedures of the Department of Transportation (DOT) (44 FR 1134; February 26, 1979), provide that to the maximum extent possible, operating administrations for the DOT should provide an opportunity for public comment on regulations issued without prior notice. Accordingly, consistent with DOT Regulatory Policies and Procedures and 14 CFR 11.11, the FAA seeks comment on this Final Rule.

    C. Authority for This Rulemaking

    The FAA's authority to issue rules on aviation safety is found in Title 49 of the United States Code. This rulemaking is promulgated under the authority described in 49 U.S.C. 106(f), which vests final authority in the Administrator for carrying out all functions, powers, and duties of the administration relating to the promulgation of regulations and rules, and 49 U.S.C. 44701(a)(5), which requires the Administrator to promulgate regulations and minimum standards for other practices, methods, and procedures necessary for safety in air commerce and national security.

    III. Background

    On November 12, 2013, the FAA published the Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers final rule (78 FR 67800). In that final rule, effective March 12, 2014, the FAA included opportunities for air carriers to modify training program requirements for flightcrew members when the air carrier operates multiple aircraft types with similar design and flight handling characteristics. The final rule also included opportunities for air carriers to seek a deviation to allow credit for flightcrew member qualification requirements, including proficiency checks, when the air carrier operates multiple aircraft types with similar design and flight handling characteristics.1

    1 As the FAA clarified in its final rule, the agency uses the term “related aircraft” when describing two or more aircraft of the same make (with either the same or different type certificates) that have been demonstrated and determined by the Administrator to have commonality to the extent that flightcrew member training, checking, recent experience, operating experience, operating cycles, and line operating flight time for consolidation of knowledge and skills may be reduced while still meeting the training and qualification requirements for service on the other aircraft. 78 FR at 67816.

    The final rule explained that due to differences in instrumentation and installed equipment, crewmembers trained on one variation of aircraft type may require additional training to safely and efficiently operate another variation of the same aircraft type. This additional training is identified in regulations as differences training.2 The final rule further explained that the FAA, through the Flight Standardization Board (FSB), provides an analysis of the differences between variations of an aircraft type, which the FSB documents in an FSB report for a specific aircraft type. This report may include recommendations on reduced training frequency, reduced training elements or events, or use of a lower level FSTD than required by part 121 appendix E (Flight Training Requirements) for a specific maneuver or procedure.

    2 See §§ 121.400 and 121.418.

    Additionally, the final rule explained the rapid advancement in modern technologies, both in manufacturing techniques and systems design and application, can produce aircraft types of differing models and aerodynamic airframes, with similar handling or flight characteristics. These modern aircraft systems and displays may allow different type certificated aircraft to have common flight deck and systems designs, such that minimal differences training may be warranted. The FAA, through the FSB, can analyze these aircraft with different type certificates which may result in recommendations for training reductions.

    Statement of the Problem

    In the Crewmembers and Aircraft Dispatchers Training final rule, the FAA intended to extend fully the differences training concept to aircraft with different type certificates within the new provisions for related aircraft differences training. In addition, an air carrier may seek deviations for related aircraft proficiency checks, operating experience, operating cycles, line operating flight time for consolidation of knowledge and skills, and recency of experience.

    In the Crewmembers and Aircraft Dispatchers Training final rule, the FAA added paragraph (f) to § 121.441, to allow the Administrator to approve a deviation to the proficiency check requirements based on a designation of related aircraft and after the Administrator determines the certificate holder can demonstrate an equivalent level of safety. Specifically, paragraph (f) allows a deviation from the frequency of proficiency checks and from certain procedures and maneuvers required by appendix F (Proficiency Check Requirements). Paragraph (f) did not, however, include an allowance to obtain a deviation from the FSTD requirements specified in appendix F. As currently written, § 121.441(f) does not allow deviation if the FSB determines that the use of a lower level FSTD for a specific maneuver or procedure may be acceptable on a related aircraft proficiency check. Such a determination by the FSB would foreseeably be based on similarities in design and flight characteristics between the base aircraft and the related aircraft.

    IV. Discussion of Final Rule

    This final rule will correct an inadvertent omission from the Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers final rule by eliminating an inconsistency that currently permits air carriers (with FAA approval) to modify the FSTD requirements for related aircraft differences training, but not for related aircraft proficiency checks. Because the FAA intended to extend fully the differences training concept to related aircraft differences training and deviations, the FAA is revising § 121.441(f)(2) to allow a certificate holder to request a deviation from the FSTD requirements in paragraph (c) of § 121.441. To receive a deviation, the certificate holder must provide a designation of related aircraft and demonstrate an equivalent level of safety exists to justify the deviation. By this update, the request for deviation must include the level of FSTD to be used for each maneuver and procedure.

    Requests for deviation remain voluntary. The FAA has determined this change would not adversely affect safety of aircraft operations. A deviation from any proficiency check requirement under § 121.441(f) is only available if the certificate holder has a designation of related aircraft. Such a designation indicates the base aircraft and designated related aircraft have been demonstrated and determined by the Administrator to have commonality; the certificate holder must be able to demonstrate that it can maintain the equivalent level of safety in obtaining the designation.

    V. Regulatory Notices and Analyses A. Regulatory Evaluation

    Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 and Executive Order 13563 direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this final rule.

    Department of Transportation Order DOT 2100.5 prescribes policies and procedures for simplification, analysis, and review of regulations. If the expected cost impact is so minimal that a proposed or final rule does not warrant a full evaluation, this order permits that a statement to that effect and the basis for it to be included in the preamble if a full regulatory evaluation of the cost and benefits is not prepared. Such a determination has been made for this rule. This rule would remove additional requirements with respect to proficiency checks for aircraft of a related type, as long as FAA has made a determination that an equivalent level of safety is maintained. Given the relieving nature of this rule, the economic impact of this rule would be minimal cost.

    The FAA has, therefore, determined that this rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866, and is not “significant” as defined in DOT's Regulatory Policies and Procedures.

    B. Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation. To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.” The RFA covers a wide-range of small entities, including small businesses, not-for-profit organizations, and small governmental jurisdictions.

    Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA.

    However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear.

    This rule would correct an inadvertent omission from the Crewmembers and Aircraft Dispatchers Training final rule and would eliminate an inconsistency that currently permits air carriers (with FAA approval) to modify the FSTD requirements for related aircraft differences training, but not for related aircraft proficiency checks. This action would result in increased flexibility for certificate holders. While the rule would likely impact a substantial number of small entities,3 given the relieving nature of this rule, it would have a minimal positive economic impact.

    3 Based on an analysis of publicly available information, the FAA assumed that the Crewmembers and Aircraft Dispatchers Training final rule would have an impact on a substantial number of small entities. We make the same determination in this rulemaking.

    Therefore, as provided in section 605(b), the head of the FAA certifies that this rulemaking will not result in a significant economic impact on a substantial number of small entities.

    C. International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards. The FAA has assessed the potential effect of this rule and determined that the rule will have the same impact on international and domestic flights and is a safety rule thus is consistent with the Trade Agreements Act.

    D. Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $155 million in lieu of $100 million. This rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply.

    E. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that the FAA consider the impact of paperwork and other information collection burdens imposed on the public. According to the 1995 amendments to the Paperwork Reduction Act (5 CFR 1320.8(b)(1)), an agency may not collect or sponsor the collection of information, nor may it impose an information collection requirement unless it displays a currently valid Office of Management and Budget (OMB) control number.

    The FAA has determined that there is no new information collection associated with this cost relieving amendment to related aircraft proficiency check requirements. The OMB previously approved the collection of such information under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and it was assigned OMB Control Number 2120-0739.

    F. International Compatibility and Cooperation

    In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. The FAA has determined that there are no ICAO Standards and Recommended Practices that correspond to these regulations.

    G. Environmental Analysis

    FAA Order 1050.1F identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environmental Policy Act in the absence of extraordinary circumstances. The FAA has determined this rulemaking action qualifies for the categorical exclusion identified in paragraph 5-6.6 and involves no extraordinary circumstances.

    VI. Executive Order Determinations A. Executive Order 13132, Federalism

    The FAA has analyzed this final rule under the principles and criteria of Executive Order 13132, Federalism. The agency determined that this action will not have a substantial direct effect on the States, or the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, does not have Federalism implications.

    B. Executive Order 13211, Regulations That Significantly Affect Energy Supply, Distribution, or Use

    The FAA analyzed this final rule under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001). The agency has determined that it is not a “significant energy action” under the executive order and it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

    C. Executive Order 13609, Promoting International Regulatory Cooperation

    Executive Order 13609, Promoting International Regulatory Cooperation, promotes international regulatory cooperation to meet shared challenges involving health, safety, labor, security, environmental, and other issues and to reduce, eliminate, or prevent unnecessary differences in regulatory requirements. The FAA has analyzed this action under the policies and agency responsibilities of Executive Order 13609, and has determined that this action would have no effect on international regulatory cooperation.

    VII. How To Obtain Additional Information A. Rulemaking Documents

    An electronic copy of a rulemaking document may be obtained by using the Internet—

    1. Search the Federal eRulemaking Portal (http://www.regulations.gov);

    2. Visit the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies/ or

    3. Access the Government Printing Office's Web page at: http://www.thefederalregister.org/fdsys/.

    Copies may also be obtained by sending a request (identified by notice, amendment, or docket number of this rulemaking) to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267-9677.

    B. Comments Submitted to the Docket

    Comments received may be viewed by going to http://www.regulations.gov and following the online instructions to search the docket number for this action. Anyone is able to search the electronic form of all comments received into any of the FAA's dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.).

    C. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires FAA to comply with small entity requests for information or advice about compliance with statutes and regulations within its jurisdiction. A small entity with questions regarding this document may contact its local FAA official, or the person listed under the FOR FURTHER INFORMATION CONTACT heading at the beginning of the preamble. To find out more about SBREFA on the Internet, visit http://www.faa.gov/regulations_policies/rulemaking/sbre_act/.

    List of Subjects in 14 CFR Part 121

    Air carriers, Aircraft, Airmen, Aviation safety.

    The Amendment

    In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 121 as follows:

    PART 121—OPERATING REQUIREMENTS: DOMESTIC, FLAG, AND SUPPLEMENTAL OPERATIONS 1. The authority citation for part 121 continues to read as follows: Authority:

    49 U.S.C. 106(f), 106(g), 40103, 40113, 40119, 41706, 42301 preceding note added by Pub. L. 112-95, sec. 412, 126 Stat. 89, 44101, 44701-44702, 44705, 44709-44711, 44713, 44716-44717, 44722, 44729, 44732, 46105; Pub. L. 111-216, 124 Stat. 2348 (49 U.S.C. 44701 note); Pub. L. 112-95, 126 Stat. 62 (49 U.S.C. 44732 note).

    2. Amend § 121.441 by revising paragraphs (f)(1), (f)(2) introductory text, and (f)(2)(ii) to read as follows:
    § 121.441 Proficiency checks.

    (f) * * *

    (1) The Administrator may authorize a deviation from the proficiency check requirements of paragraphs (a), (b)(1), and (c) of this section based upon a designation of related aircraft in accordance with § 121.418(b) of this part and a determination that the certificate holder can demonstrate an equivalent level of safety.

    (2) A request for deviation from paragraphs (a), (b)(1), and (c) of this section must be submitted to the Administrator. The request must include the following:

    (ii) Based on review of the related aircraft, the operation, and the duty position:

    (A) For recurrent proficiency checks, the frequency of the related aircraft proficiency check, the maneuvers and procedures to be included in the related aircraft proficiency check, and the level of FSTD to be used for each maneuver and procedure.

    (B) For qualification proficiency checks, the maneuvers and procedures to be included in the related aircraft proficiency check and the level of FSTD to be used for each maneuver and procedure.

    Issued under authority provided by 49 U.S.C. 106(f) and 44701(a) in Washington, DC, on December 8, 2016. Michael P. Huerta, Administrator.
    [FR Doc. 2016-30211 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Part 774 [Docket No. 160922876-6876-01] RIN 0694-AH14 Implementation of the February 2016 Australia Group (AG) Intersessional Decisions and the June 2016 AG Plenary Understandings AGENCY:

    Bureau of Industry and Security, Commerce.

    ACTION:

    Final rule.

    SUMMARY:

    The Bureau of Industry and Security (BIS) publishes this final rule to amend the Export Administration Regulations (EAR) to implement the recommendations presented at the February 2016 Australia Group (AG) Intersessional Implementation Meeting, and later adopted pursuant to the AG silent approval procedure, and the understandings reached at the June 2016 AG Plenary Implementation Meeting. This rule amends two Commerce Control List (CCL) entries to reflect the February 2016 Intersessional Implementation Meeting recommendations that were adopted by the AG. Specifically, this rule amends the CCL entry that controls certain human and zoonotic pathogens and toxins to reflect the AG updates to the nomenclature for certain bacteria and toxins identified on the AG “List of Human and Animal Pathogens and Toxins for Export Control.” In addition, this rule amends the CCL entry that controls equipment capable of handling biological materials to reflect the AG updates to the controls on cross (tangential) flow filtration equipment described on the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software.”

    Consistent with the understandings adopted at the June 2016 AG Plenary Implementation Meeting that updated the AG “List of Human and Animal Pathogens and Toxins for Export Control,” this rule amends the CCL entry that controls certain human and zoonotic pathogens and toxins by removing dengue fever virus, updating the nomenclature of the listing for conotoxin, and consolidating the controls for Shiga toxin and Verotoxin (and other Shiga-like ribosome inactivating proteins) under a single listing. This rule also amends the CCL entry that controls equipment capable of handling biological materials by updating the controls on biological containment facilities and related equipment and the controls on fermenters, consistent with the AG Plenary Implementation Meeting updates to the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software.”

    DATES:

    This rule is effective December 16, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Richard P. Duncan, Ph.D., Director, Chemical and Biological Controls Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, Telephone: (202) 482-3343, Email: [email protected]

    SUPPLEMENTARY INFORMATION:

    The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to implement the recommendations presented at the Australia Group (AG) Intersessional Implementation Meeting held in Brussels, Belgium, on February 2, 2016, and adopted pursuant to the AG silent approval procedure in April 2016, and the understandings reached at the Implementation Meeting of the 2016 AG Plenary held in Paris, France, from June 6-10, 2016. The AG is a multilateral forum consisting of 41 participating countries that maintain export controls on a list of chemicals, biological agents, and related equipment and technology that could be used in a chemical or biological weapons program. The AG periodically reviews items on its control list to enhance the effectiveness of participating governments' national controls and to achieve greater harmonization among these controls.

    Amendments to the CCL Based on the February 2016 AG Intersessional Recommendations ECCN 1C351 (Human and Animal Pathogens and “toxins”)

    This final rule amends Export Control Classification Number (ECCN) 1C351 on the CCL to update the nomenclature for two bacteria and five toxins, consistent with the AG Intersessional Implementation Meeting updates to the AG “List of Human and Animal Pathogens and Toxins for Export Control.” Specifically, this rule updates the nomenclature for the bacteria “Chlamydia pscittaci” and “Salmonella typhi” and the toxin “Viscum Album Lectin 1” to reflect current scientific usage. This rule also removes the word “toxin” from the listings for “Diacetoxyscirpenol toxin,” “Modeccin toxin,” and “Volkensin toxin,” because it was deemed to be redundant (i.e., the abbreviated nomenclature, absent the word “toxin,” adequately identifies these particular toxins). In addition, this rule revises the description for “Microcystin” by making it plural, thereby clarifying that ECCN 1C351.d.9 controls all variants of this toxin. Finally, this rule renumbers the listings for “Viscumin” and “Volkensin” to control these toxins under ECCN 1C351.d.17 and .d.18, respectively, to conform with the June 2016 AG Plenary Implementation Meeting change in which the Shiga toxin and Verotoxin listings (ECCN 1C351.d.13 and .d.17, respectively) were merged into a single listing (ECCN 1C351.d.13). These amendments to ECCN 1C351 are summarized in the following table.

    Previous names of AG-controlled bacteria and toxins Current names of AG-controlled bacteria and
  • toxins
  • Previous CCL
  • designation
  • Current CCL
  • designation
  • Chlamydophila psittaci (formerly known as Chlamydia psittaci) Chlamydia psittaci (Chlamydophila psittaci) ECCN 1C351.c.7 No Change. Salmonella typhi Salmonella enterica subspecies enterica serovar Typhi (Salmonella typhi) ECCN 1C351.c.18 No Change. Diacetoxyscirpenol toxin Diacetoxyscirpenol ECCN 1C351.d.7 No Change. Microcystin (Cyanginosin) Microcystins (Cyanginosins) ECCN 1C351.d.9 No Change. Modeccin toxin Modeccin ECCN 1C351.d.10 No Change. Viscum Album Lectin 1 (Viscumin) Viscumin (Viscum album lectin 1) ECCN 1C351.d.18 ECCN 1C351.d.17. Volkensin toxin Volkensin ECCN 1C351.d.19 ECCN 1C351.d.18.

    The license requirements applicable to the bacteria and toxins affected by these amendments to ECCN 1C351 remain unchanged. Specifically, all of these items continue to require a license for chemical/biological (CB) reasons to destinations indicated under CB Column 1 on the Commerce Country Chart and for anti-terrorism (AT) reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.

    ECCN 2B352 (Equipment Capable of Use in Handling Biological Materials)

    This final rule amends ECCN 2B352 on the CCL to reflect changes to the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software” based on the February 2016 Intersessional Implementation Meeting recommendations that were adopted by the AG pursuant to its silent approval procedure. Specifically, this rule amends the controls on cross (tangential) flow filtration equipment described in 2B352.d.1 by removing the word “pathogenic” from the description of this equipment. This change is made because there is no distinction, with respect to either the technical characteristics or the use of this equipment, between pathogenic and non-pathogenic micro-organisms.

    This rule also amends ECCN 2B352, consistent with the AG intersessional recommendations, by revising the Nota Bene to 2B352.d.1 to clarify that the exclusion from the controls on cross (tangential) flow filtration equipment listed in 2B352.d.1 applies to hemodialysis equipment, as specified by the manufacturer, as well as reverse osmosis equipment (i.e., both hemodialysis equipment and reverse osmosis equipment, as specified by the manufacturer, are excluded from control under ECCN 2B252.d.1).

    All items controlled under ECCN 2B352 require a license for CB reasons to destinations indicated under CB Column 2 on the Commerce Country Chart and for AT reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.

    Amendments to the CCL Based on the June 2016 AG Plenary Understandings ECCN 1C351 (Human and Animal Pathogens and “Toxins”)

    This final rule amends ECCN 1C351 on the CCL to remove the listing for “dengue fever virus,” revise the listing for “Conotoxin,” and merge the listings for “Shiga toxin” and Verotoxin” consistent with the AG Plenary Implementation Meeting updates to the AG “List of Human and Animal Pathogens and Toxins for Export Control.”

    The removal of “dengue fever virus” from control under ECCN 1C351 is designed to reduce barriers to the export of clinical samples, materials, and “technology” required for vaccine development, production, and distribution. To reflect the removal of the ECCN 1C351 controls on “dengue fever virus,” which was controlled under ECCN 1C351.a.11 prior to the publication of this final rule, this rule also makes conforming changes to ECCN 1C351.a by renumbering those items previously designated as 1C351.a.12 through .a.58 as 1C351.a.11 through .a 57. Consistent with this renumbering, this rule revises the Technical Note to newly redesignated ECCN 1C351.a.40 (“reconstructed 1918 influenza virus”) to reference the new designation for this listing. In addition, the listing for “tick-borne encephalitis virus (Siberian subtype)” in ECCN 1C351.b.3 is amended by revising the parenthetical reference therein to “tick-borne encephalitis virus (Far Eastern subtype)” to reflect the new designation for the latter (i.e., ECCN 1C351.a.52).

    This rule also revises the description for “Conotoxin” by making it plural to clarify that ECCN 1C351.d.6 controls all variants of this toxin.

    In addition, the listings for “Shiga toxin” and “Verotoxin” which, prior to the publication of this final rule, were controlled under ECCN 1C351.d.13 and d.17, respectively, are merged into a single listing under ECCN 1C351.d.13 that also includes some changes in nomenclature to clarify the scope of these controls. The revised listing reads as follows: “Shiga toxins (shiga-like toxins, verotoxins, and verocytotoxins).”

    This rule also makes certain conforming changes to other listings in ECCN 1C351 to reflect the merger of the “Shiga toxin” and “Verotoxin” listings and the related nomenclature changes described above. First, the Note to ECCN 1C351.c.19 (Shiga-toxin producing Escherichia coli) is revised to read: “Shiga toxin producing Escherichia coli (STEC) includes, inter alia, enterohaemorrhagic E. coli (EHEC), verotoxin producing E. coli (VTEC) or verocytotoxin producing E. coli (VTEC).” Specifically, this Note is revised by adding the “Verotoxin” nomenclature and by replacing the phrase “also known as” with the phrase “inter alia,” thereby clarifying that this Note does not exclude other relevant shiga-toxin producing strains from the scope of ECCN 1C351.c.19. Second (as referenced in the description of the AG intersessional changes, above), this rule renumbers the listings for “Viscumin” and “Volkensin” to control these toxins under ECCN 1C351.d.17 and .d.18, respectively, to reflect the merger of the Shiga toxin and Verotoxin listings (which were previously designated as ECCN 1C351.d.13 and .d.17, respectively) into a single listing (ECCN 1C351.d.13).

    Except for the dengue fever virus, the license requirements applicable to the viruses, bacteria and toxins affected by these amendments to ECCN 1C351 remain unchanged. Specifically, all of these items, except the dengue fever virus, continue to require a license for CB reasons to destinations indicated under CB Column 1 on the Commerce Country Chart and for AT reasons to destinations indicated in AT Column 1 on the Commerce Country Chart. The dengue fever virus is now designated as EAR99 and, as such, no longer requires a license for CB or AT reasons. However, any item that is subject to the EAR, whether or not it is listed on the CCL, may require a license for reasons described elsewhere in the EAR (e.g., the end-user/end-use controls described in part 744 of the EAR or the embargoes and other special controls described in part 746 of the EAR).

    ECCN 2B352 (Equipment Capable of Use in Handling Biological Materials)

    This final rule also amends ECCN 2B352 on the CCL to reflect changes to the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software” based on the understandings reached at the June 2016 AG Plenary Implementation Meeting. Specifically, this rule amends ECCN 2B352.a by expanding the controls on biological containment facilities and related equipment to include the following equipment designed for fixed installation in complete containment facilities at the P3 or P4 containment level: (1) Double-door pass-through decontamination autoclaves; (2) breathing air suit decontamination showers; and (3) mechanical-seal or inflatable-seal walkthrough doors. This change is made in recognition of the fact that such equipment could be acquired, individually, and subsequently assembled into a functional containment facility that would be subject to the controls described in ECCN 2B352.a.

    In addition, this rule amends ECCN 2B352.b.1 (fermenters) by removing the word “pathogenic” from the description of this equipment. This change is made, because there is no distinction, with respect to either the technical characteristics or the use of this equipment, between pathogenic and non-pathogenic micro-organisms. As revised, ECCN 2B352.b.1 reads: “Fermenters capable of cultivation of micro-organisms or of live cells for the production of viruses or toxins, without the propagation of aerosols, having a capacity of 20 liters or greater.” This clarification to ECCN 2B352.b.1 was adopted by the AG, subsequent to the June 2016 AG Plenary Implementation Meeting, pursuant to their silent approval procedure.

    All items controlled under ECCN 2B352 require a license for CB reasons to destinations indicated under CB Column 2 on the Commerce Country Chart and for AT reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.

    Effect of This Rule on the Scope of the CB Controls in the EAR

    The changes made by this rule only marginally affect the scope of the EAR controls on human and animal pathogens/toxins and equipment capable of use in handling biological materials.

    The scope of the CCL-based CB controls on human and animal pathogens and toxins was not affected by the nomenclature changes involving the following items in ECCN 1C351: the bacteria listed under ECCN 1C351.c.7 (Chlamydia psittaci) or .c.18 (Salmonella); the toxins listed under ECCN 1C351.d.6 (Conotoxins), .d.7 (Diacetoxyscirpenol), .d.9 (Microcystins), or .d.10 (Modeccin); and the toxins Viscumin and Volkensin (renumbered as ECCN 1C351.d.17 and .d.18, respectively). In addition, the merger of the listings for Shiga toxin and Verotoxin (previously controlled under ECCN 1C351.d.13 and .d.17, respectively) under a single listing (ECCN 1C351.d.13), and the related nomenclature changes involving these toxins, clarified the controls applicable to these toxins, but did not affect the scope of these controls. Furthermore, the removal of the dengue fever virus from ECCN 1C351 is not expected to significantly reduce the number of license applications that will have to be submitted for items controlled under this ECCN. Consequently, none of the changes made by this rule to ECCN 1C351 are expected to have a significant impact on the number of license applications that will have to be submitted for the items controlled under this ECCN.

    The updates in this rule to the ECCN 2B352.a controls on biological containment facilities represent an expansion in the number of items that require a license under this ECCN. However, the expanded controls apply to only a relatively small percentage of these types of items that were not controlled under ECCN 2B352 prior to the publication of this rule (i.e., only those double-door pass-through decontamination autoclaves, breathing air suit decontamination showers, and mechanical-seal or inflatable-seal walkthrough doors that are designed for fixed installation in P3 or P4 biological containment facilities). Consequently, any increase in the number of license applications resulting from this change is not expected to be significant, when considered as a percentage of these types of items.

    The scope of the CCL-based CB controls on equipment capable of use in handling biological materials was not affected by the clarifications involving fermenters controlled under ECCN 2B352.b or cross (tangential) flow filtration equipment controlled under ECCN 2B352.d. Consequently, none of these changes to ECCN 2B352 are expected to have a significant impact on the number of license applications that will have to be submitted for the items controlled under this ECCN.

    Export Administration Act

    Although the Export Administration Act 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 52587 (August 8, 2016)), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.). 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 as amended by Executive Order 13637.

    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 designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget.

    2. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be 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 contains a collection of information subject to the requirements of the PRA. This collection has been approved by OMB under Control Number 0694-0088 (Multi-Purpose Application), which carries a burden hour estimate of 58 minutes to prepare and submit form BIS-748. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to Jasmeet Seehra, Office of Management and Budget, by email to [email protected] or by fax to (202) 395-7285; and to the Regulatory Policy Division, Bureau of Industry and Security, Department of Commerce, 14th Street & Pennsylvania Avenue NW., Room 2705, Washington, DC 20230 or by email to [email protected]

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

    4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date, are inapplicable because this regulation involves a military and foreign affairs function of the United States (see 5 U.S.C. 553(a)(1)). Immediate implementation of these amendments is non-discretionary and fulfills the United States' international obligation to the Australia Group (AG). The AG contributes to international security and regional stability through the harmonization of export controls and seeks to ensure that exports do not contribute to the development of chemical and biological weapons. The AG consists of 41 member countries that act on a consensus basis and the amendments set forth in this rule implement changes made to the AG common control lists (as a result of the adoption of the recommendations made at the February 2016 AG Intersessional Implementation Meeting and the understandings reached at the June 2016 AG Plenary Implementation Meeting) and other changes that are necessary to ensure consistency with the controls maintained by the AG. Because the United States is a significant exporter of the items in this rule, immediate implementation of this provision is necessary for the AG to achieve its purpose. Any delay in implementation will create a disruption in the movement of affected items globally because of disharmony between export control measures implemented by AG members, resulting in tension between member countries. Export controls work best when all countries implement the same export controls in a timely manner.

    Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this final rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under the Administrative Procedure Act or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) are not applicable. Therefore, this regulation is issued in final form.

    List of Subjects in 15 CFR Part 774

    Exports, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, part 774 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

    PART 774—[AMENDED] 1. The authority citation for 15 CFR part 774 continues to read as follows: Authority:

    50 U.S.C. 4601 et seq.; 50 U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et seq.; 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 43 U.S.C. 1354; 15 U.S.C. 1824a; 50 U.S.C. 4305; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; 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).

    Supplement No. 1 to Part 774—[Amended] 2. In Supplement No. 1 to Part 774 (the Commerce Control List), Category 1—Special Materials and Related Equipment, Chemicals, “Microorganisms” and “Toxins,” ECCN 1C351 is amended in the “Items” paragraph under the “List of Items Controlled” section: a. By removing paragraph a.11 and redesignating paragraphs a.12 through a.58 as paragraphs a.11 through a.57; b. By revising the Technical Note to newly designated paragraph a.40; c. By revising paragraph b.3; d. By revising paragraphs c.7 and c.18; e. By revising the Note immediately following paragraph c.19; f. By revising paragraphs d.6, d.7, d.9, d.10 and d.13; g. By removing paragraph d.17 and redesignating paragraphs d.18 and d.19 as paragraphs d.17 and d.18, respectively; and h. By revising newly designated paragraphs d.17 and d.18.

    The revisions read as follows:

    1C351 Human and animal pathogens and “toxins”, as follows (see List of Items Controlled). List of Items Controlled Items:

    a. * * *

    a.11. Dobrava-Belgrade virus;

    a.12. Eastern equine encephalitis virus;

    a.13. Ebolavirus (includes all members of the Ebolavirus genus);

    a.14. Foot-and-mouth disease virus;

    a.15. Goatpox virus;

    a.16. Guanarito virus;

    a.17. Hantaan virus;

    a.18. Hendra virus (Equine morbillivirus);

    a.19. Japanese encephalitis virus;

    a.20. Junin virus;

    a.21. Kyasanur Forest disease virus;

    a.22. Laguna Negra virus;

    a.23. Lassa virus;

    a.24. Louping ill virus;

    a.25. Lujo virus;

    a.26. Lumpy skin disease virus;

    a.27. Lymphocytic choriomeningitis virus;

    a.28. Machupo virus;

    a.29. Marburgvirus (includes all members of the Marburgvirus genus);

    a.30. Monkeypox virus;

    a.31. Murray Valley encephalitis virus;

    a.32. Newcastle disease virus;

    a.33. Nipah virus;

    a.34. Omsk hemorrhagic fever virus;

    a.35. Oropouche virus;

    a.36. Peste-des-petits ruminants virus;

    a.37. Porcine Teschovirus;

    a.38. Powassan virus;

    a.39. Rabies virus and all other members of the Lyssavirus genus;

    a.40. Reconstructed 1918 influenza virus;

    Technical Note: 1C351.a.40 includes reconstructed replication competent forms of the 1918 pandemic influenza virus containing any portion of the coding regions of all eight gene segments.

    a.41. Rift Valley fever virus;

    a.42. Rinderpest virus;

    a.43. Rocio virus;

    a.44. Sabia virus;

    a.45. Seoul virus;

    a.46. Severe acute respiratory syndrome-related coronavirus (SARS-related coronavirus);

    a.47. Sheeppox virus;

    a.48. Sin Nombre virus;

    a.49. St. Louis encephalitis virus;

    a.50. Suid herpesvirus 1 (Pseudorabies virus; Aujeszky's disease);

    a.51. Swine vesicular disease virus;

    a.52. Tick-borne encephalitis virus (Far Eastern subtype, formerly known as Russian Spring-Summer encephalitis virus—see 1C351.b.3 for Siberian subtype);

    a.53. Variola virus;

    a.54. Venezuelan equine encephalitis virus;

    a.55. Vesicular stomatitis virus;

    a.56. Western equine encephalitis virus; or

    a.57. Yellow fever virus.

    b. * * *

    b.3. Tick-borne encephalitis virus (Siberian subtype, formerly West Siberian virus—see 1C351.a.52 for Far Eastern subtype).

    c. * * *

    c.7. Chlamydia psittaci (Chlamydophila psittaci);

    c.18. Salmonella enterica subspecies enterica serovar Typhi (Salmonella typhi);

    c.19. * * *

    Note: Shiga toxin producing Escherichia coli (STEC) includes, inter alia, enterohaemorrhagic E. coli (EHEC), verotoxin producing E. coli (VTEC) or verocytotoxin producing E. coli (VTEC).

    d. * * *

    d.6. Conotoxins;

    d.7. Diacetoxyscirpenol;

    d.8. * * *

    d.9. Microcystins (Cyanginosins);

    d.10. Modeccin;

    d.13. Shiga toxins (shiga-like toxins, verotoxins, and verocytotoxins);

    d.17. Viscumin (Viscum album lectin 1); or

    d.18. Volkensin.

    3. In Supplement No. 1 to Part 774 (the Commerce Control List), Category 2—Materials Processing, ECCN 2B352 is amended in the “Items” paragraph, under the List of Items Controlled section, by revising paragraph a, by revising paragraph b.1, by revising the introductory text of paragraph d.1, and by revising the nota bene to paragraph d.1, to read as follows: 2B352 Equipment capable of use in handling biological materials, as follows (see List of Items Controlled). List of Items Controlled Related Controls: * * * Related Definition: * * * Items:

    a. Containment facilities and related equipment, as follows:

    a.1. Complete containment facilities at P3 or P4 containment level.

    Technical Note: P3 or P4 (BL3, BL4, L3, L4) containment levels are as specified in the WHO Laboratory Biosafety Manual (3rd edition, Geneva, 2004).

    a.2. Equipment designed for fixed installation in containment facilities specified in paragraph a.1 of this ECCN, as follows:

    a.2.a. Double-door pass-through decontamination autoclaves;

    a.2.b. Breathing air suit decontamination showers;

    a.2.c. Mechanical-seal or inflatable-seal walkthrough doors.

    b. * * *

    b.1. Fermenters capable of cultivation of micro-organisms or of live cells for the production of viruses or toxins, without the propagation of aerosols, having a capacity of 20 liters or greater.

    d. * * *

    d.1. Cross (tangential) flow filtration equipment capable of separation of microorganisms, viruses, toxins or cell cultures having all of the following characteristics:

    N.B.: 2B352.d.1 does not control reverse osmosis and hemodialysis equipment, as specified by the manufacturer.

    Dated: December 7, 2016. Kevin J. Wolf, Assistant Secretary for Export Administration.
    [FR Doc. 2016-30099 Filed 12-15-16; 8:45 am] BILLING CODE 3510-33-P
    SOCIAL SECURITY ADMINISTRATION 20 CFR Parts 404, 405 and 416 [Docket No. SSA-2014-0052] RIN 0960-AH71 Ensuring Program Uniformity at the Hearing and Appeals Council Levels of the Administrative Review Process AGENCY:

    Social Security Administration.

    ACTION:

    Final rule.

    SUMMARY:

    We are revising our rules so that more of our procedures at the hearing and Appeals Council levels of our administrative review process are consistent nationwide. We anticipate that these nationally consistent procedures will enable us to administer our disability programs more efficiently and better serve the public.

    DATES:

    This final rule will be effective on January 17, 2017. However, compliance is not required until May 1, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Patrick McGuire, Office of Appellate Operations, Social Security Administration, 5107 Leesburg Pike, Falls Church, VA 22041, (703) 605-7100. For information on eligibility or filing for benefits, call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet site, Social Security Online, at http://www.socialsecurity.gov.

    SUPPLEMENTARY INFORMATION Background

    We are revising and making final the rules for creating nationally uniform hearing and Appeals Council procedures, which we proposed in a notice of proposed rulemaking (NPRM) published in the Federal Register on July 12, 2016 (81 FR 45079). In the preamble to the NPRM, we discussed the changes we proposed from our current rules and our reasons for proposing those changes. In the NPRM, we proposed revisions to: (1) The time frame for notifying claimants of a hearing date; (2) the information in our hearing notices; (3) the period when we require claimants to inform us about or submit written evidence, written statements, objections to the issues, and subpoena requests; (4) what constitutes the official record; and (5) the manner in which the Appeals Council would consider additional evidence.

    As we explained in the preamble to our NPRM, we proposed these changes to ensure national consistency in our policy and procedures and improve accuracy and efficiency in our administrative review process. We expect this final rule will positively affect our ability to manage our workloads and lead to better public service. Interested readers may refer to the preamble to the NPRM, available at http://www.regulations.gov under docket number SSA-2014-0052.

    What changes are we making from the NPRM?

    We are making several changes in this final rule from the NPRM based on some of the public comments we received. We briefly outline those changes here and provide additional detail on the changes in the comment and response section that follows. We are also making minor editorial changes throughout this final rule. For the reader's ease of review, we refer to the general requirement that all evidence, objections, or written statements be submitted at least 5 business days before the date of the hearing as the “5-day requirement.” We adopted the following changes from our NPRM in this final rule:

    • We lengthened the time frame for notifying claimants of a hearing date in 20 CFR 404.938 and 416.1438 from at least 60 days to at least 75 days;

    • In 20 CFR 404.935(b)(3)(iv) and 416.1435(b)(3)(iv), we removed the phrase “through no fault of your own” to reduce the evidentiary burden on claimants who are unable to provide evidence;

    • We clarified that the circumstances set forth in 20 CFR 404.935(b)(3)(i) to (b)(3)(iv) and 416.1435(b)(3)(i) to (b)(3)(iv) are merely examples and do not constitute an exhaustive list;

    • We added the same exceptions to the 5-day requirement that we proposed for the submission of evidence in 20 CFR 404.935 and 416.1435 to the deadlines related to objecting to the issues (20 CFR 404.939 and 416.1439), presenting written statements (20 CFR 404.949 and 416.1449), and submitting subpoenas (20 CFR 404.950(d)(2) and 416.1450(d)(2));

    • We added language to 20 CFR 404.949 and 416.1449 to clarify that the 5-day requirement applies only to pre-hearing written statements, not to post-hearing written statements;

    • We added an example of an exception for submitting additional evidence to the Appeals Council in 20 CFR 404.970(b)(3)(v) and 416.1470(b)(3)(v);

    • We reorganized paragraphs (a)(5) and (b) of 20 CFR 404.970 and 416.1470;

    • We removed proposed subsection 20 CFR 404.970(d) and 416.1470(d);

    • We added clarifying cross-references to 20 CFR 404.900 and 416.1400 and 20 CFR 404.929 and 416.1429 to place the 5-day requirement in 20 CFR 404.935 and 416.1435 in context; and,

    • We broadened the existing cross-reference in 20 CFR 404.968 and 416.1468 and 20 CFR 404.979 and 416.1479 to reference the entire section of 20 CFR 404.970 and 416.1470, and we removed the cross reference to 20 CFR 404.976 and 416.1476 in 20 CFR 404.979 and 416.1479.

    Public Comments

    We initially provided a 30-day comment period that would have ended on August 11, 2016. We subsequently extended the comment period for an additional 15 days, until August 26, 2016 (81 FR 51412). We received 154 comments on our proposed rule from the public, interested advocacy groups, and several members of Congress. We did not consider six comments because they either came from employees who commented in their official employment capacity, which is a violation of our policy, or they were outside the scope of this rulemaking. We published and carefully considered the remaining 148 comments and, where appropriate, made changes in response to these comments.

    Below, we summarize and respond to the comments submitted on the proposed rule, and respond to the significant issues relevant to this rulemaking. We do not respond to comments that are outside the scope of this rulemaking proceeding.

    Hearing Notice Requirement

    Comment: Several commenters supported our proposal to provide more advance notice of a hearing, but asked that we adopt the 75-day advance notice requirement currently in place in the Boston region, rather than the 60-day advance notice we proposed in the NPRM. Several of the commenters stated that earlier notice would allow claimants to: (1) Obtain and submit the information and evidence, especially when a medical provider is uncooperative; (2) make arrangements for transportation to the hearing; (3) take into account time frames under the regulations implementing the Health Insurance Portability and Accountability Act (HIPAA) that provide an entity up to 60 days before it must produce records (45 CFR 164.524(b)); and (4) avoid a postponement of hearing due to non-receipt of medical records. Several other commenters said that even a 75-day notice requirement is insufficient, and that we should provide notice 90 to 120 days in advance of a hearing.

    Response: We recognize that claimants and representatives may sometimes face challenges in acquiring medical records. In response to multiple advocate comments indicating a preference for 75 days' advance notice of a hearing instead of 60 days, we are revising the final rule to provide 75 days' advance notice. Since we already have approximately a decade of experience in using the 75-day advance notice period in the Boston Region, we believe its expansion nationwide is justified.

    We proposed a 60-day period in our NPRM because we believed it would promote the efficiency of our hearing process (81 FR at 45081). However, we recognize the concerns that that commenters raised, including stated concerns about the adequacy of a 60-day advance notice requirement in light of the timeframe an entity has to provide evidence to an individual under the HIPAA regulations. In order to minimize the burden on claimants, we have decided to adopt the commenters' suggestion that we continue to provide at least 75-day advance notice of a hearing, as we have done under the rules we have been applying in the Boston region since 2006.

    Some commenters requested that we extend the advance notice period to 90 or 120 days instead of the proposed 60-days advance notice. We have decided not to extend the advance notice period to 90 or 120 days, because providing a hearing date this far in advance would increase the likelihood that an adjudicator's schedule will change by the scheduled hearing date. Moreover, in contrast to the 75-day period, we have no current model to support the use of a longer time period.

    Exceptions to the 5-Day Requirement

    Comment: Several commenters asked that we retain the exception in 20 CFR 404.935(b)(3)(iv) in the final rule because it recognized the difficulties of obtaining medical evidence, while another commenter suggested we eliminate this exception because it was vague and contrary to the intent and purpose of the proposed rule. Several commenters expressed concerns about our exceptions to the 5-day requirement because they were too narrowly defined, too subjective, and would increase our workloads. Other commenters suggested that we add additional exceptions, such as when the claimant is homeless or lacks representation. One commenter requested that the Appeals Council also find good cause for submitting evidence after the 5-day requirement if the claimant was unrepresented or homeless at the hearing level.

    Response: We provide examples of exceptions to the 5-day requirement in final 20 CFR 404.935(b)(3) and 416.1435(b)(3) and have clarified that we did not intend for them to be all-inclusive or to exclude other extenuating circumstances that may result in a claimant being unable to meet the 5-day requirement. To clarify this point, we changed the regulatory text to state that “[e]xamples include, but are not limited to” the outlined exceptions. Because circumstances vary, we determine whether a claimant qualifies for an exception on a case-by-case basis.

    We do not anticipate that evaluating requests for exceptions to the 5-day requirement will increase our workloads. We recognize that compliance with the 5-day requirement will not be possible in all situations; however, based on our experience in the Boston region, we expect that providing at least 75 days' advance notice of a hearing will significantly increase the number of times evidence is obtained and submitted at least 5 business days before the hearing. We also note that in our experience the need to evaluate requests to submit evidence pursuant to one of the exceptions has not caused workload spikes in our Boston region, where a 5-day requirement has been in place for more than a decade. When a claimant or appointed representative is aware that he or she will need more time to submit evidence in accordance with one of the exceptions, we expect that he or she will provide us with the necessary information in advance. To do so, the claimant or representative should notify the administrative law judge (ALJ) of what the evidence generally consists of and the expected volume of evidence (e.g., one visit to a treating physician or a one-week hospital stay). When the claimant or his or her representative timely provides this information to the ALJ, we expect that evaluating the request for an exception will likely be very simple.

    The fact that a claimant is homeless or lacks representation does not automatically excuse him or her from complying with our rules. However, situations such as these may result in circumstances that warrant an exception to the 5-day requirement. We will evaluate these circumstances carefully on a case-by-case basis under the exceptions described in the final rule.

    Comment: Commenters who represented advocacy groups noted that our proposed rule did not include exceptions to deadline requirements for objecting to the issues (20 CFR 404.939 and 416.1439), presenting written statements (20 CFR 404.949 and 416.1449), and submitting subpoenas (20 CFR 404.950(d)(2) and 416.950(d)(2)). Some commenters had concerns that the 5-day requirement, as applied to objections to the issues, could force representatives to develop boilerplate notices that list all possible objections in every case.

    Response: We agree with the commenters' concerns, and we have added exceptions for the deadlines related to objecting to the issues (20 CFR 404.939 and 416.1439), presenting written statements (20 CFR 404.949 and 416.1449), and submitting subpoenas (20 CFR 404.950(d)(2) and 416.1450(d)(2)). The exceptions in 20 CFR 404.939 and 416.1439 should eliminate the need for representatives to develop boilerplate notices.

    Appeals Council Authority

    Comment: While one commenter supported the proposal in subsections 20 CFR 404.970(d) and 416.1470(d) that the Appeals Council conduct hearings to develop evidence, other commenters expressed concern about the proposal. A few of these commenters stated it was an expansion of the Appeals Council's authority and was inconsistent with the Administrative Procedure Act. Other commenters stated that we did not provide an adequate explanation of the authority for such hearings.

    Response: Since the beginning of our hearing process in 1940, our regulations (currently found in sections 20 CFR 404.956 and 416.1456) have authorized the Appeals Council to remove a hearing request from an ALJ and conduct the hearing proceedings, using the rules that ALJs apply. We proposed to revise sections 20 CFR 404.970 and 416.1470 to clarify the Appeals Council's authority in this area. Although we disagree with some of the comments, including concerns that the proposal lacked legal support, we understand the concerns the commenters raised regarding this proposal. As a result, we have decided to remove the rule we proposed in subsections 404.970(d) and 416.1470(d). The Appeals Council will continue to exercise its authority to develop evidence in accordance with 20 CFR 404.976(b) and 416.1446(b).

    “Inform” Option

    Comment: Several commenters stated the proposed rule may have unintended consequences because appointed representatives may rely on the “inform” option in 20 CFR 404.935 and 416.1435 and in 20 CFR 404.1512 and 416.912 to avoid developing evidence. A few commenters stated if we retain the “inform” option, we should require the claimant to inform the hearing office earlier so there would be time to develop the evidence and avoid unnecessary supplemental hearings.

    Response: On April 20, 2015, we implemented a final rule that requires a claimant to “inform us about or submit all evidence known to you that relates to whether you are blind or disabled.” 81 FR 14828. As we stated in the preamble to that proposed rule, we specifically added this option because we did not intend to shift our burden to develop the record to claimants. In the proposed rule, as in this final rule, we recognize that some individuals, many of whom do not have appointed representatives, require our assistance in obtaining medical evidence needed to adjudicate their claims. Claimants who are unable to obtain evidence necessary to adjudicate their claims may inform us of this difficulty and we will continue to seek out evidence on their behalf to develop the record for their hearing. By adopting this final rule, we have not changed our longstanding policy of assisting claimants in developing the record. At the hearing level, this policy has been explicitly set forth in our sub-regulatory instructions.

    Because most claimants are represented at the hearing level, and because we are providing more advance notice of a hearing than we have in the past, we expect to significantly reduce the number of postponed hearings or supplemental hearings needed based on evidence that was available at least 5 business days before the hearing.

    In our experience, the vast majority of representatives act ethically in regard to evidence development and make good faith efforts to assist claimants in obtaining and submitting the required evidence before a hearing, as required under 20 CFR 404.1740(b)(2) and 416.1540(b)(2). Therefore, we do not expect the “inform” option to significantly affect our administrative processes.

    In those circumstances in which hearing offices assist unrepresented claimants in developing evidence, our sub-regulatory instructions will clarify that employees in our hearing offices should undertake development as early as possible to reduce the number of continuances or postponed hearings.

    5-Day Requirement

    Comment: Some commenters thought the 5-day requirement in the proposed rules was inconsistent with our duty to make eligibility decisions based on the evidence presented at the hearing.

    Response: In developing these rules, we were guided by the two principles that we have always applied when we make decisions regarding our programs: As the Supreme Court has observed, the Social Security system “must be fair—and it must work.” 1 These final rules appropriately balance these two guiding principles. These rules are fair because they provide the claimant with more advance notice of his or her hearing, and they provide appropriate exceptions to the 5-day requirement. At the same time, the 5-day requirement promotes the efficiency of our hearings process and allows it to work more effectively by ensuring that ALJs have a more complete evidentiary record when they hold hearings. Striking such a balance in our rules is of paramount importance to us. That balance would not be present if, as some commenters suggested, we merely gave claimants more advance notice of a hearing, without the 5-day requirement. Conversely, that balance would not be present if we simply imposed a 5-day requirement, without giving a claimant more advance notice of a hearing. Given the size of our hearings workloads,2 where the need for efficiency is “self-evident,” 3 these final rules appropriately balance the twin concerns of fairness and efficiency that always guide us.

    1Richardson v. Perales, 402 U.S. 389, 399 (1971).

    2See Annual Statistical Supplement to the Social Security Bulletin, 2015, Table 2.F9, at page 2.81 (April 2016) (setting out the number of hearing level receipts, dispositions, and end-of-year pending cases for fiscal years 012-2014).

    3See Barnhart v. Thomas, 540 U.S. 20, 28-29 (2003) (“As we have observed, `[t]he Social Security hearing system is `probably the largest adjudicative agency in the western world.' . . . The need for efficiency is self-evident.' ”) (quoting Heckler v. Campbell, 461 U.S. 458, 461 n.2 (1983)).

    In publishing this final rule, we do not intend to change the purpose of a hearing, where an ALJ looks fully into the issues and obtains oral testimony from the claimant and witnesses, if any. Additionally, our final rule contemplates that some circumstances may warrant the introduction of new evidence at or after the hearing, and includes appropriate exceptions to accommodate these circumstances. Thus, under our final rule, adjudicators will continue to make decisions based on the evidence of record, including the evidence adduced at the hearing. However, we expect that our final rule will help to ensure that evidentiary records are more complete at the time of the administrative hearing, which should reduce the need for post-hearing proceedings and help us provide better, more timely service to all claimants.

    Comment: Some commenters stated that the philosophical underpinnings of the rule in 20 CFR 404.1512 is that ALJs must have all evidence that is available at the time of the hearing so they can reach the correct decision. The commenters thought that the proposed rule conflicted with our rule requiring claimants to submit all evidence. The commenters noted that it would not make sense to place a duty on the claimant to submit evidence when at the same time, rules are created that would allow an ALJ not to consider that evidence.

    Response: Our approach with this rule is tied to the “philosophical underpinnings” of 20 CFR 404.1512 and 416.912, which describe a claimant's ongoing duty to “inform us about or submit all evidence known to you that relates to whether or not you are blind or disabled.” This rule will ensure claimants have the benefit of a fully developed record at the time our ALJs conduct their hearings. We recognize that there will be circumstances in which claimants cannot produce evidence at least 5 business days before the hearing. As stated above, we have included appropriate exceptions to the 5-day requirement to ensure fairness when a claimant or his or her representative actively and diligently seeks evidence but is unable to obtain it. To bolster this point, in 20 CFR 404.935(b)(3)(iv) and 416.1435(b)(3)(iv), we removed the phrase “through no fault of your own” to ensure that our adjudicators interpret this exception consistent with our intent. We intend the words “actively” and “diligently” to be interpreted using their ordinary English usage. When a claimant or representative shows that he or she made a good faith effort to timely request, obtain, and submit evidence, but he or she did not receive the evidence in time to submit it at least 5 business days before the hearing because of circumstances outside his or her control, we expect that our adjudicators would find that this standard is met.

    Some commenters perceived this rule as an exclusionary procedure designed to prevent the introduction of medical records at the expense of the claimant's case. Our experience is more consistent with one of the commenters from the Boston region who noted that most ALJs “effectively draw the line between evidence which had been available but was not submitted, and previously unavailable evidence” and “do not use the 5-day rule as a punitive device against claimants or their representatives.” Further, in those situations in which an ALJ in the Boston region did not correctly find reason to accept evidence outside the 5-day time frame, the Appeals Council granted review in order to consider the information on appeal where the evidence raised a reasonable probability of changing the outcome of the case. This important practice will continue in our final rule.

    Comment: Some commenters pointed out that the 5-day requirement would preclude a claimant from submitting evidence at the hearing or Appeals Council level of the administrative process, particularly if a claimant is illiterate or does not speak English, or is without an appointed representative or obtained a representative shortly before the hearing date, and this exclusion was an undue burden, fundamentally unfair, and disadvantaged claimants in favor of adjudicators.

    Response: We expect that this final rule will enhance our decision-making process and allow us to provide more timely decisions to claimants. We do not intend to unduly burden claimants with this rule. By asking claimants to inform us about or submit evidence at least 5 business days before the hearing date, we expect that evidentiary records will be more complete and comprehensive at the time of the scheduled hearing. In turn, this should facilitate the ALJ's ability to look fully into the issues at the hearing and produce a timely, accurate decision. As stated above, we will continue our longstanding practice of assisting those individuals who, for various reasons, are unable to develop the record themselves. This rule also incorporates appropriate exceptions to take into account for the needs of individuals who, due to unique circumstances, do not fully understand or are not capable of adhering to our requirements or requests.

    Comment: Some commenters said that the proposed rule makes the administrative review process more formal and adversarial. Commenters also asked the agency to clarify that if a claimant informs an ALJ about evidence at least 5 business days before the hearing, the ALJ must consider the evidence regardless of whether an exception exists. Commenters said that the proposed rule overlooked that an ALJ adjudicates a case through the date of his or her decision, and that he or she needs evidence of ongoing treatment to adjudicate the case. Commenters also said the proposed rule did not provide the claimant with an opportunity to submit evidence to rebut other evidence produced at or after the hearing or permit an ALJ to hold the record open when a new issue arises during the hearing.

    Response: From our experience, similar rules that applied in the Boston region for approximately a decade have not resulted in a more adversarial process or misunderstandings from the public. Moreover, many of our other rules that apply nationwide impose deadlines or other requirements on the public, such as the deadline to appeal a determination or decision. While processing a case, we frequently request that individuals submit a response or provide us with information within certain timeframes. We have not found that these provisions make our process more adversarial. Rather, like this final rule, they are necessary for efficient administration of our programs.

    If a claimant informs an ALJ about evidence 5 or more days before the hearing, there would be no need for the ALJ to find that an exception applies, because the claimant notified us prior to the deadline.

    While it is true that, in many cases, an ALJ adjudicates the case through the date of the hearing decision, our rule is not intended to prevent a claimant from submitting evidence related to ongoing treatment. Rather, we expect that evidence of ongoing treatment, which was unavailable at least 5 business days before the hearing, would qualify under the exception in 20 CFR 404.935(b)(3) and 416.1435(b)(3).

    Similarly, if an ALJ introduces new evidence at or after a hearing, the claimant could use the exception in 20 CFR 404.935(b)(3) and 416.1435(b)(3) to submit rebuttal evidence. The claimant could also rebut evidence introduced at or after the hearing by submitting a written statement to the ALJ. As previously mentioned, we added language to 20 CFR 404.949 and 416.1449 to clarify that the 5-day requirement applies only to pre-hearing written statements, not to post-hearing written statements.

    Comment: Some commenters stated that the 5-day requirement could affect a representative's ability to prepare useful and persuasive pre-hearing statements, given that the Office of Disability Adjudication and Review (ODAR) frequently exhibits files very close to the hearing date.

    Response: For the same reasons we are adopting a 5-day requirement for available evidence, we are adopting this requirement for pre-hearing written statements to ensure that an ALJ has the benefit of reviewing arguments before the hearing. This will allow the ALJ to be fully aware of any unresolved issue(s) that a claimant is raising and which the ALJ may need to address at the hearing. While we are sympathetic to the commenters who noted exhibit numbers were unlikely to be available at least 5 business days before the hearing, we note that this issue existed under our prior rules as well and therefore, this convenience does not outweigh our need for a complete case file before the hearing.

    Comment: Some commenters stated that the 5-day requirement could disadvantage claimants who hire representatives shortly before the hearing date.

    Response: We reiterate that we expect all appointed representatives to make good faith efforts to assist claimants in obtaining and submitting the required evidence before a hearing, as required under 20 CFR 404.1740(b)(2) and 416.1540(b)(2). However, we have included appropriate exceptions to the 5-day requirement to ensure fairness when a claimant or his or her representative actively and diligently seeks evidence but is unable to obtain it. The appointment of a representative shortly before a hearing may be such an exception, depending on the circumstances surrounding the late appointment. In addition, we note that if a claimant informs an ALJ about evidence 5 or more days before the hearing, there would be no need for the ALJ to find that an exception applies, because the claimant notified us prior to the deadline.

    Representation

    Comment: A few commenters argued that when taking a new case, representatives often find that prior counsel was incompetent in obtaining evidence, and this rule, as applied at both the hearing and Appeals Council levels, unjustly harms claimants represented by such individuals.

    Response: We reiterate that we expect all appointed representatives to make good faith efforts to assist claimants in obtaining and submitting the required evidence before a hearing, as required under 20 CFR 404.1740(b)(2) and 416.1540(b)(2). Additionally, if a new representative can show that a prior representative did not adequately uphold his or her duty to the claimant, we expect that our adjudicators would find that this would warrant an exception to the 5-day requirement.

    Other

    Comment: Several commenters stated the new standard at the Appeals Council level would force claimants to choose between filing a new claim and appealing an ALJ's decision to the Appeals Council, which could result in the loss of significant benefits. Another commenter stated it would result in filing more new applications overall or the reopening of prior applications so that a claimant could submit previously excluded evidence.

    Response: It bears reiterating that we expect the final rule will help to ensure that evidentiary records are more complete at the time of the scheduled hearing. However, our final rule contemplates that some circumstances may warrant the introduction of new evidence at or after the hearing, and includes an “inform” option and broad exceptions to accommodate these circumstances. With the “inform” option and the broad exceptions to the 5-day requirement, we do not expect to see a spike in new applications or reopenings.

    Moreover, it is already our policy that if a claimant wants to file a new disability application under the same title and for the same benefit type as a disability claim pending at the Appeals Council level, and the claimant does not have evidence of a new critical or disabling condition, the claimant must choose to continue the appeal of the prior claim or file a new application. Nothing in the proposed or final rule substantively changes this policy.

    Under our current rules in 20 CFR 404.970 and 416.1470, the Appeals Council considers additional evidence only if it is new, material, and related to the period on or before the date of the ALJ's decision. This does not mean, however, that the Appeals Council grants a claimant's request for review of an ALJ's decision whenever additional evidence meets this criteria. In many cases, the Appeals Council adds evidence that meets the criteria to the record, but denies the request for review of the case. Under our current rules, the Appeals Council will review a case in this situation only if it finds that the ALJ's action, findings, or conclusion is contrary to the weight of the evidence currently of record. This final rule provides more clarity to this procedure. Under this final rule, the Appeals Council will grant review of a case based on the receipt of additional evidence if the evidence is new, material, and related to the period on or before the date of the hearing decision and if there is a reasonable probability that the additional evidence would change the outcome of the decision.

    If a claimant submits evidence that the Appeals Council does not consider, the Appeals Council will notify the claimant that if he or she files a new application for disability insurance benefits within 6 months or a new application for Supplemental Security Income within 60 days of the Appeals Council notice, the date of the request for review will constitute a protective filing for a new application.

    Comment: One commenter expressed concerns about the proposed language in 20 CFR 404.951(b) and 416.1451(b) because adding the phrase “appropriate reference” was insufficient to describe what evidence an ALJ must include in the record.

    Response: During the time that substantially the same rule was in place in the Boston region, we did not experience any confusion as to the meaning of the phrase “appropriate reference.” Further, this language is consistent with our longstanding sub-regulatory policies and practices nationwide, and adoption of this language does not change our policies regarding what constitutes the official record.

    Comment: Many commenters submitted a broad statement that there have been “serious problems” and inconsistencies with implementation of the 5-day requirement in the Boston region. The commenters generally presented two main points: (1) There was variance in applying the 5-day requirement between ALJs; and (2) ALJs who did apply the rule varied in when the 5-day requirement ended and in evaluating whether an exception to the 5-day requirement applied.

    Response: We acknowledge that in a report issued by the Administrative Conference of the United States (ACUS) 4 on December 13, 2013, ACUS noted several variances in applying similar rules in the Boston region. However, in response to the ACUS report, we provided additional training to adjudicators and staff regarding application of our Part 405 rules. We also incorporated instructions for processing cases originating in the Boston region into our training materials for all staff, including addressing Part 405 issues in several of our quarterly Videos-On-Demand series that focus on new or problematic areas of adjudication. We updated our sub-regulatory guidance to include references and instructions on how to process cases under Part 405. We will provide the training and instruction necessary to ensure consistent application of our rules nationwide.

    4 Administrative Conference of the United States, “SSA Disability Benefits Adjudication Process: Assessing the Impact of the Region I Pilot Program,” Final Report: December 23, 2013. https://www.acus.gov/sites/default/files/documents/Assessing%20Impact%20of%20Region%20I%20Pilot%20Program%20Report_12_23_13_final.pdf.

    Comment: One commenter asked that if we retain the 5-day requirement, we amend the language to require that each party make every reasonable effort to ensure the ALJ receives all the evidence. The commenter noted that proposed 20 CFR 404.935(a) and 416.1435(a) require “every effort,” which the commenter believed is an impossible standard to meet.

    Response: While our final rule requires a claimant to “make every effort to ensure that the administrative law judge receives all of the evidence,” we do not believe the rule creates an “impossible standard” because it also includes appropriate exceptions to accommodate circumstances when, despite good faith efforts, the claimant cannot satisfy the 5-day requirement.

    Comment: Some commenters stated that 20 CFR 404.944(a)(1) and 416.1444(a)(1) conflict with 20 CFR 404.1512 and 416.912 because one regulation requires an ALJ to “accept[] as evidence any documents that are material to the issues” while the other regulation requires a claimant to submit evidence that “relates to whether or not you are blind or disabled.”

    Response: A claimant continues to have a duty to submit all evidence that relates to whether or not he or she is blind or disabled, subject to our other requirements, at the hearing and Appeals Council levels of the administrative process. Whereas 20 CFR 404.1512 and 416.912 explain a claimant's responsibility, 20 CFR 404.944(a)(1) and 416.1444(a)(1) address actions an administrative law judge will take. We expect claimants to submit evidence that relates to whether they are blind or disabled, but our administrative law judges are responsible for making the legal judgment determination whether evidence is “material to the issues.”

    Regulatory Procedures Executive Order 12866, as Supplemented by Executive Order 13563

    We consulted with the Office of Management and Budget (OMB) and determined that this final rule meets the criteria for a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563. Therefore, OMB reviewed it.

    Regulatory Flexibility Act

    We certify that this final rule would not have a significant economic impact on a substantial number of small entities because it affects individuals only. Therefore, a regulatory flexibility analysis is not required under the Regulatory Flexibility Act, as amended.

    Paperwork Reduction Act

    These final rules contain reporting requirements in regulation sections §§ 404.968, 404.976, 416.1468, and 416.1476 that require OMB clearance under the Paperwork Reduction Act of 1995 (PRA). SSA will submit separate information collection requests to OMB in the future for these regulations sections. We will not collect the information referenced in these burden sections until we receive OMB approval.

    (Catalog of Federal Domestic Assistance Program Nos. 96.001, Social Security—Disability Insurance; 96.002, Social Security—Retirement Insurance; 96.004, Social Security—Survivors Insurance; and 96.006, Supplemental Security Income) List of Subjects 20 CFR Part 404

    Administrative practice and procedure; Blind; Disability benefits; Old-Age, Survivors, and Disability Insurance; Reporting and recordkeeping requirements; Social Security.

    20 CFR Part 405

    Administrative practice and procedure; Blind; Disability benefits; Old-Age, Survivors, and Disability Insurance; Public assistance programs; Reporting and recordkeeping requirements; Social Security; Supplemental Security Income (SSI).

    20 CFR Part 416

    Administrative practice and procedure; Aged, Blind, Disability benefits, Public assistance programs; Reporting and recordkeeping requirements; Supplemental Security Income (SSI).

    Carolyn W. Colvin, Acting Commissioner of Social Security.

    For the reasons set out in the preamble, we amend 20 CFR chapter III, parts 404, 405, and 416 as set forth below:

    PART 404—FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE (1950- ) Subpart J—[Amended] 1. The authority citation for subpart J of part 404 continues to read as follows: Authority:

    Secs. 201(j), 204(f), 205(a)-(b), (d)-(h), and (j), 221, 223(i), 225, and 702(a)(5) of the Social Security Act (42 U.S.C. 401(j), 404(f), 405(a)-(b), (d)-(h), and (j), 421, 423(i), 425, and 902(a)(5)); sec. 5, Pub. L. 97-455, 96 Stat. 2500 (42 U.S.C. 405 note); secs. 5, 6(c)-(e), and 15, Pub. L. 98-460, 98 Stat. 1802 (42 U.S.C. 421 note); sec. 202, Pub. L. 108-203, 118 Stat. 509 (42 U.S.C. 902 note).

    2. In § 404.900, revise the second sentence of paragraph (b) to read as follows:
    § 404.900 Introduction.

    (b) * * * Subject to certain timeframes at the hearing level (see § 404.935) and the limitations on Appeals Council consideration of additional evidence (see § 404.970), we will consider at each step of the review process any information you present as well as all the information in our records.* * *

    3. Revise the fifth and eighth sentences in § 404.929 to read as follows:
    § 404.929 Hearing before an administrative law judge-general.

    * * * You may submit new evidence (subject to the provisions of § 404.935), examine the evidence used in making the determination or decision under review, and present and question witnesses. * * * If you waive your right to appear at the hearing, in person, by video teleconferencing, or by telephone, the administrative law judge will make a decision based on the preponderance of the evidence that is in the file and, subject to the provisions of § 404.935, any new evidence that may have been submitted for consideration.* * *

    4. Revise § 404.935 to read as follows:
    § 404.935 Submitting written evidence to an administrative law judge.

    (a) When you submit your request for hearing, you should also submit information or evidence as required by § 404.1512 or any summary of the evidence to the administrative law judge. Each party must make every effort to ensure that the administrative law judge receives all of the evidence and must inform us about or submit any written evidence, as required in § 404.1512, no later than 5 business days before the date of the scheduled hearing. If you do not comply with this requirement, the administrative law judge may decline to consider or obtain the evidence, unless the circumstances described in paragraph (b) of this section apply.

    (b) If you have evidence required under § 404.1512 but you have missed the deadline described in paragraph (a) of this section, the administrative law judge will accept the evidence if he or she has not yet issued a decision and you did not inform us about or submit the evidence before the deadline because:

    (1) Our action misled you;

    (2) You had a physical, mental, educational, or linguistic limitation(s) that prevented you from informing us about or submitting the evidence earlier; or

    (3) Some other unusual, unexpected, or unavoidable circumstance beyond your control prevented you from informing us about or submitting the evidence earlier. Examples include, but are not limited to:

    (i) You were seriously ill, and your illness prevented you from contacting us in person, in writing, or through a friend, relative, or other person;

    (ii) There was a death or serious illness in your immediate family;

    (iii) Important records were destroyed or damaged by fire or other accidental cause; or

    (iv) You actively and diligently sought evidence from a source and the evidence was not received or was received less than 5 business days prior to the hearing.

    5. In § 404.938, revise paragraphs (a) and (b) to read as follows:
    § 404.938 Notice of a hearing before an administrative law judge.

    (a) Issuing the notice. After we set the time and place of the hearing, we will mail notice of the hearing to you at your last known address, or give the notice to you by personal service, unless you have indicated in writing that you do not wish to receive this notice. We will mail or serve the notice at least 75 days before the date of the hearing.

    (b) Notice information. The notice of hearing will tell you:

    (1) The specific issues to be decided in your case;

    (2) That you may designate a person to represent you during the proceedings;

    (3) How to request that we change the time or place of your hearing;

    (4) That your hearing may be dismissed if neither you nor the person you designate to act as your representative appears at your scheduled hearing without good reason under § 404.957;

    (5) Whether your appearance or that of any other party or witness is scheduled to be made in person, by video teleconferencing, or by telephone. If we have scheduled you to appear at the hearing by video teleconferencing, the notice of hearing will tell you that the scheduled place for the hearing is a video teleconferencing site and explain what it means to appear at your hearing by video teleconferencing;

    (6) That you must make every effort to inform us about or submit all written evidence that is not already in the record no later than 5 business days before the date of the scheduled hearing, unless you show that your circumstances meet the conditions described in § 404.935(b); and

    (7) Any other information about the scheduling and conduct of your hearing.

    6. Revise § 404.939 to read as follows:
    § 404.939 Objections to the issues.

    If you object to the issues to be decided at the hearing, you must notify the administrative law judge in writing at the earliest possible opportunity, but no later than 5 business days before the date set for the hearing, unless you show that your circumstances meet the conditions described in § 404.935(b). You must state the reason(s) for your objection(s). The administrative law judge will make a decision on your objection(s) either at the hearing or in writing before the hearing.

    7. Revise § 404.944 to read as follows:
    § 404.944 Administrative law judge hearing procedures—general.

    A hearing is open to the parties and to other persons the administrative law judge considers necessary and proper. At the hearing, the administrative law judge looks fully into the issues, questions you and the other witnesses, and, subject to the provisions of § 404.935: Accepts as evidence any documents that are material to the issues; may stop the hearing temporarily and continue it at a later date if he or she finds that there is material evidence missing at the hearing; and may reopen the hearing at any time before he or she mails a notice of the decision in order to receive new and material evidence. The administrative law judge may decide when the evidence will be presented and when the issues will be discussed.

    8. Revise § 404.949 to read as follows:
    § 404.949 Presenting written statements and oral arguments.

    You or a person you designate to act as your representative may appear before the administrative law judge to state your case, present a written summary of your case, or enter written statements about the facts and law material to your case in the record. If presenting written statements prior to hearing, you must provide a copy of your written statements for each party no later than 5 business days before the date set for the hearing, unless you show that your circumstances meet the conditions described in § 404.935(b).

    9. In § 404.950, revise paragraphs (c) and (d) to read as follows:
    § 404.950 Presenting evidence at a hearing before an administrative law judge.

    (c) Admissible evidence. Subject to the provisions of § 404.935, the administrative law judge may receive any evidence at the hearing that he or she believes is material to the issues, even though the evidence would not be admissible in court under the rules of evidence used by the court.

    (d) Subpoenas. (1) When it is reasonably necessary for the full presentation of a case, an administrative law judge or a member of the Appeals Council may, on his or her own initiative or at the request of a party, issue subpoenas for the appearance and testimony of witnesses and for the production of books, records, correspondence, papers, or other documents that are material to an issue at the hearing.

    (2) Parties to a hearing who wish to subpoena documents or witnesses must file a written request for the issuance of a subpoena with the administrative law judge or at one of our offices at least 10 business days before the hearing date, unless you show that your circumstances meet the conditions described in § 404.935(b). The written request must give the names of the witnesses or documents to be produced; describe the address or location of the witnesses or documents with sufficient detail to find them; state the important facts that the witness or document is expected to prove; and indicate why these facts could not be proven without issuing a subpoena.

    (3) We will pay the cost of issuing the subpoena.

    (4) We will pay subpoenaed witnesses the same fees and mileage they would receive if they had been subpoenaed by a Federal district court.

    10. Revise § 404.951 to read as follows:
    § 404.951 Official record.

    (a) Hearing recording. All hearings will be recorded. The hearing recording will be prepared as a typed copy of the proceedings if—

    (1) The case is sent to the Appeals Council without a decision or with a recommended decision by the administrative law judge;

    (2) You seek judicial review of your case by filing an action in a Federal district court within the stated time period, unless we request the court to remand the case; or

    (3) An administrative law judge or the Appeals Council asks for a written record of the proceedings.

    (b) Contents of the official record. All evidence upon which the administrative law judge relies for the decision must be contained in the record, either directly or by appropriate reference. The official record will include the applications, written statements, certificates, reports, affidavits, medical records, and other documents that were used in making the decision under review and any additional evidence or written statements that the administrative law judge admits into the record under §§ 404.929 and 404.935. All exhibits introduced as evidence must be marked for identification and incorporated into the record. The official record of your claim will contain all of the marked exhibits and a verbatim recording of all testimony offered at the hearing. It also will include any prior initial determinations or decisions on your claim.

    11. In § 404.968, revise the second sentence of paragraph (a) introductory text to read as follows:
    § 404.968 How to request Appeals Council review.

    (a) * * * You should submit any evidence you wish to have considered by the Appeals Council with your request for review, and the Appeals Council will consider the evidence in accordance with § 404.970. * * *

    12. Revise § 404.970 to read as follows:
    § 404.970 Cases the Appeals Council will review.

    (a) The Appeals Council will review a case if—

    (1) There appears to be an abuse of discretion by the administrative law judge;

    (2) There is an error of law;

    (3) The action, findings or conclusions of the administrative law judge are not supported by substantial evidence;

    (4) There is a broad policy or procedural issue that may affect the general public interest; or

    (5) Subject to paragraph (b) of this section, the Appeals Council receives additional evidence that is new, material, and relates to the period on or before the date of the hearing decision, and there is a reasonable probability that the additional evidence would change the outcome of the decision.

    (b) The Appeals Council will only consider additional evidence under paragraph (a)(5) of this section if you show good cause for not informing us about or submitting the evidence as described in § 404.935 because:

    (1) Our action misled you;

    (2) You had a physical, mental, educational, or linguistic limitation(s) that prevented you from informing us about or submitting the evidence earlier; or

    (3) Some other unusual, unexpected, or unavoidable circumstance beyond your control prevented you from informing us about or submitting the evidence earlier. Examples include, but are not limited to:

    (i) You were seriously ill, and your illness prevented you from contacting us in person, in writing, or through a friend, relative, or other person;

    (ii) There was a death or serious illness in your immediate family;

    (iii) Important records were destroyed or damaged by fire or other accidental cause;

    (iv) You actively and diligently sought evidence from a source and the evidence was not received or was received less than 5 business days prior to the hearing; or

    (v) You received a hearing level decision on the record and the Appeals Council reviewed your decision.

    (c) If you submit additional evidence that does not relate to the period on or before the date of the administrative law judge hearing decision as required in paragraph (a)(5) of this section, or the Appeals Council does not find you had good cause for missing the deadline to submit the evidence in §  404.935, the Appeals Council will send you a notice that explains why it did not accept the additional evidence and advises you of your right to file a new application. The notice will also advise you that if you file a new application within 6 months after the date of the Appeals Council's notice, your request for review will constitute a written statement indicating an intent to claim benefits under §  404.630. If you file a new application within 6 months of the Appeals Council's notice, we will use the date you requested Appeals Council review as the filing date for your new application.

    13. Revise § 404.976 to read as follows:
    § 404.976 Procedures before the Appeals Council on review.

    (a) Limitation of issues. The Appeals Council may limit the issues it considers if it notifies you and the other parties of the issues it will review.

    (b) Oral argument. You may request to appear before the Appeals Council to present oral argument. The Appeals Council will grant your request if it decides that your case raises an important question of law or policy or that oral argument would help to reach a proper decision. If your request to appear is granted, the Appeals Council will tell you the time and place of the oral argument at least 10 business days before the scheduled date. The Appeals Council will determine whether your appearance, or the appearance of any other person relevant to the proceeding, will be in person, by video teleconferencing, or by telephone.

    § 404.979 [Amended]
    14. Revise the first sentence of § 404.979 to read as follows:

    After it has reviewed all the evidence in the administrative law judge hearing record and any additional evidence received, subject to the limitations on Appeals Council consideration of additional evidence in § 404.970, the Appeals Council will make a decision or remand the case to an administrative law judge. * * *

    PART 405—[REMOVED AND RESERVED] 15. Under the authority of sections 205(a), 702(a)(5), and 1631(d)(1) of the Social Security Act, part 405 is removed and reserved. PART 416—SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND DISABLED Subpart N—Determinations, Administrative Review Process, and Reopening of Determinations and Decisions 16. The authority citation for subpart N of part 416 continues to read as follows: Authority:

    Secs. 702(a)(5), 1631, and 1633 of the Social Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b); sec. 202, Pub. L. 108-203, 118 Stat. 509 (42 U.S.C. 902 note).

    17. In § 416.1400, revise the second sentence of paragraph (b) to read as follows:
    § 416.1400 Introduction.

    (b) * * * Subject to certain timeframes at the hearing level (see § 416.1435) and the limitations on Appeals Council consideration of additional evidence (see § 416.1470), we will consider at each step of the review process any information you present as well as all the information in our records.* * *

    18. Revise the fifth and eighth sentences of § 416.1429 to read as follows:
    § 416.1429 Hearing before an administrative law judge-general.

    * * * You may submit new evidence (subject to the provisions of § 416.1435), examine the evidence used in making the determination or decision under review, and present and question witnesses. * * * If you waive your right to appear at the hearing, in person, by video teleconferencing, or by telephone, the administrative law judge will make a decision based on the preponderance of the evidence that is in the file and, subject to the provisions of § 416.1435, any new evidence that may have been submitted for consideration.* * *

    19. Revise § 416.1435 to read as follows:
    § 416.1435 Submitting written evidence to an administrative law judge.

    (a) When you submit your request for hearing, you should also submit information or evidence as required by § 416.912 or any summary of the evidence to the administrative law judge. Each party must make every effort to ensure that the administrative law judge receives all of the evidence and must inform us about or submit any written evidence, as required in § 416.912, no later than 5 business days before the date of the scheduled hearing. If you do not comply with this requirement, the administrative law judge may decline to consider or obtain the evidence unless the circumstances described in paragraph (b) of this section apply.

    (b) If you have evidence required under § 416.912 but you have missed the deadline described in paragraph (a) of this section, the administrative law judge will accept the evidence if he or she has not yet issued a decision and you did not inform us about or submit the evidence before the deadline because:

    (1) Our action misled you;

    (2) You had a physical, mental, educational, or linguistic limitation(s) that prevented you from informing us about or submitting the evidence earlier; or

    (3) Some other unusual, unexpected, or unavoidable circumstance beyond your control prevented you from informing us about or submitting the evidence earlier. Examples include, but are not limited to:

    (i) You were seriously ill, and your illness prevented you from contacting us in person, in writing, or through a friend, relative, or other person;

    (ii) There was a death or serious illness in your immediate family;

    (iii) Important records were destroyed or damaged by fire or other accidental cause; or

    (iv) You actively and diligently sought evidence from a source and the evidence was not received or was received less than 5 business days prior to the hearing.

    (c) Claims Not Based on an Application For Benefits. Notwithstanding the requirements in paragraphs (a)-(b) of this section, for claims that are not based on an application for benefits, the evidentiary requirement to inform us about or submit evidence no later than 5 business days before the date of the scheduled hearing will not apply if our other regulations allow you to submit evidence after the date of an administrative law judge decision.

    20. In § 416.1438, revise paragraphs (a) and (b) to read as follows:
    § 416.1438 Notice of a hearing before an administrative law judge.

    (a) Issuing the notice. After we set the time and place of the hearing, we will mail notice of the hearing to you at your last known address, or give the notice to you by personal service, unless you have indicated in writing that you do not wish to receive this notice. We will mail or serve the notice at least 75 days before the date of the hearing.

    (b) Notice information. The notice of hearing will tell you:

    (1) The specific issues to be decided in your case;

    (2) That you may designate a person to represent you during the proceedings;

    (3) How to request that we change the time or place of your hearing;

    (4) That your hearing may be dismissed if neither you nor the person you designate to act as your representative appears at your scheduled hearing without good reason under § 416.1457;

    (5) Whether your appearance or that of any other party or witness is scheduled to be made in person, by video teleconferencing, or by telephone. If we have scheduled you to appear at the hearing by video teleconferencing, the notice of hearing will tell you that the scheduled place for the hearing is a video teleconferencing site and explain what it means to appear at your hearing by video teleconferencing;

    (6) That you must make every effort to inform us about or submit all written evidence that is not already in the record no later than 5 business days before the date of the scheduled hearing, unless you show that your circumstances meet the conditions described in § 416.1435(b); and

    (7) Any other information about the scheduling and conduct of your hearing.

    21. Revise § 416.1439 to read as follows:
    § 416.1439 Objections to the issues.

    If you object to the issues to be decided at the hearing, you must notify the administrative law judge in writing at the earliest possible opportunity, but no later than 5 business days before the date set for the hearing, unless you show that your circumstances meet the conditions described in § 416.1435(b). You must state the reason(s) for your objection(s). The administrative law judge will make a decision on your objection(s) either at the hearing or in writing before the hearing.

    22. Revise § 416.1444 to read as follows:
    § 416.1444 Administrative law judge hearing procedures—general.

    A hearing is open to the parties and to other persons the administrative law judge considers necessary and proper. At the hearing, the administrative law judge looks fully into the issues, questions you and the other witnesses, and, subject to the provisions of §  416.1435: Accepts as evidence any documents that are material to the issues; may stop the hearing temporarily and continue it at a later date if he or she finds that there is material evidence missing at the hearing; and may reopen the hearing at any time before he or she mails a notice of the decision in order to receive new and material evidence. The administrative law judge may decide when the evidence will be presented and when the issues will be discussed.

    23. Revise § 416.1449 to read as follows:
    § 416.1449 Presenting written statements and oral arguments.

    You or a person you designate to act as your representative may appear before the administrative law judge to state your case, present a written summary of your case, or enter written statements about the facts and law material to your case in the record. If presenting written statements prior to hearing, you must provide a copy of your written statements for each party no later than 5 business days before the date set for the hearing, unless you show that your circumstances meet the conditions described in § 416.1435(b).

    24. In § 416.1450, revise paragraphs (c) and (d) to read as follows:
    § 416.1450 Presenting evidence at a hearing before an administrative law judge.

    (c) Admissible evidence. Subject to the provisions of § 416.1435, the administrative law judge may receive any evidence at the hearing that he or she believes is material to the issues, even though the evidence would not be admissible in court under the rules of evidence used by the court.

    (d) Subpoenas. (1) When it is reasonably necessary for the full presentation of a case, an administrative law judge or a member of the Appeals Council may, on his or her own initiative or at the request of a party, issue subpoenas for the appearance and testimony of witnesses and for the production of books, records, correspondence, papers, or other documents that are material to an issue at the hearing.

    (2) Parties to a hearing who wish to subpoena documents or witnesses must file a written request for the issuance of a subpoena with the administrative law judge or at one of our offices at least 10 business days before the hearing date, unless you show that your circumstances meet the conditions described in § 416.1435(b). The written request must give the names of the witnesses or documents to be produced; describe the address or location of the witnesses or documents with sufficient detail to find them; state the important facts that the witness or document is expected to prove; and indicate why these facts could not be proven without issuing a subpoena.

    (3) We will pay the cost of issuing the subpoena.

    (4) We will pay subpoenaed witnesses the same fees and mileage they would receive if they had been subpoenaed by a Federal district court.

    25. Revise § 416.1451 to read as follows:
    § 416.1451 Official record.

    (a) Hearing recording. All hearings will be recorded. The hearing recording will be prepared as a typed copy of the proceedings if—

    (1) The case is sent to the Appeals Council without a decision or with a recommended decision by the administrative law judge;

    (2) You seek judicial review of your case by filing an action in a Federal district court within the stated time period, unless we request the court to remand the case; or

    (3) An administrative law judge or the Appeals Council asks for a written record of the proceedings.

    (b) Contents of the official record. All evidence upon which the administrative law judge relies for the decision must be contained in the record, either directly or by appropriate reference. The official record will include the applications, written statements, certificates, reports, affidavits, medical records, and other documents that were used in making the decision under review and any additional evidence or written statements that the administrative law judge admits into the record under §§ 416.1429 and 416.1435. All exhibits introduced as evidence must be marked for identification and incorporated into the record. The official record of your claim will contain all of the marked exhibits and a verbatim recording of all testimony offered at the hearing. It also will include any prior initial determinations or decisions on your claim.

    26. In § 416.1468, revise the second sentence of paragraph (a) introductory text to read as follows:
    § 416.1468 How to request Appeals Council review.

    (a) * * * You should submit any evidence you wish to have considered by the Appeals Council with your request for review, and the Appeals Council will consider the evidence in accordance with § 416.1470. * * *

    27. Revise § 416.1470 to read as follows:
    § 416.1470 Cases the Appeals Council will review.

    (a) The Appeals Council will review a case if—

    (1) There appears to be an abuse of discretion by the administrative law judge;

    (2) There is an error of law;

    (3) The action, findings or conclusions of the administrative law judge are not supported by substantial evidence;

    (4) There is a broad policy or procedural issue that may affect the general public interest; or

    (5) Subject to paragraph (b) of this section, the Appeals Council receives additional evidence that is new, material, and relates to the period on or before the date of the hearing decision, and there is a reasonable probability that the additional evidence would change the outcome of the decision.

    (b) In reviewing decisions other than those based on an application for benefits, the Appeals Council will consider the evidence in the administrative law judge hearing record and any additional evidence it believes is material to an issue being considered. However, in reviewing decisions based on an application for benefits, the Appeals Council will only consider additional evidence under paragraph (a)(5) of this section if you show good cause for not informing us about or submitting the evidence as described in § 416.1435 because:

    (1) Our action misled you;

    (2) You had a physical, mental, educational, or linguistic limitation(s) that prevented you from informing us about or submitting the evidence earlier; or

    (3) Some other unusual, unexpected, or unavoidable circumstance beyond your control prevented you from informing us about or submitting the evidence earlier. Examples include, but are not limited to:

    (i) You were seriously ill, and your illness prevented you from contacting us in person, in writing, or through a friend, relative, or other person;

    (ii) There was a death or serious illness in your immediate family;

    (iii) Important records were destroyed or damaged by fire or other accidental cause;

    (iv) You actively and diligently sought evidence from a source and the evidence was not received or was received less than 5 business days prior to the hearing; or

    (v) You received a hearing level decision on the record and the Appeals Council reviewed your decision.

    (c) If you submit additional evidence that does not relate to the period on or before the date of the administrative law judge hearing decision as required in paragraph (a)(5) of this section, or the Appeals Council does not find you had good cause for missing the deadline to submit the evidence in §  416.1435, the Appeals Council will send you a notice that explains why it did not accept the additional evidence and advises you of your right to file a new application. The notice will also advise you that if you file a new application within 60 days after the date of the Appeals Council's notice, your request for review will constitute a written statement indicating an intent to claim benefits under §  416.340. If you file a new application within 60 days of the Appeals Council's notice, we will use the date you requested Appeals Council review as the filing date for your new application.

    28. Revise § 416.1476 to read as follows:
    § 416.1476 Procedures before the Appeals Council on review.

    (a) Limitation of issues. The Appeals Council may limit the issues it considers if it notifies you and the other parties of the issues it will review.

    (b) Oral argument. You may request to appear before the Appeals Council to present oral argument. The Appeals Council will grant your request if it decides that your case raises an important question of law or policy or that oral argument would help to reach a proper decision. If your request to appear is granted, the Appeals Council will tell you the time and place of the oral argument at least 10 business days before the scheduled date. The Appeals Council will determine whether your appearance, or the appearance of any other person relevant to the proceeding, will be in person, by video teleconferencing, or by telephone.

    § 416.1479 [Amended]
    29. Revise the first sentence of § 416.1479 to read as follows:

    After it has reviewed all the evidence in the administrative law judge hearing record and any additional evidence received, subject to the limitations on Appeals Council consideration of additional evidence in § 416.1470, the Appeals Council will make a decision or remand the case to an administrative law judge. * * *

    [FR Doc. 2016-30103 Filed 12-15-16; 8:45 am] BILLING CODE 4191-02-P
    DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 91 [Docket No. FR 5891-F-02] RIN 2506-AC41 Modernizing HUD's Consolidated Planning Process To Narrow the Digital Divide and Increase Resilience to Natural Hazards AGENCY:

    Office of the Assistant Secretary for Community Planning and Development, HUD.

    ACTION:

    Final rule.

    SUMMARY:

    HUD's Consolidated Plan is a planning mechanism designed to help States and local governments to assess their affordable housing and community development needs and to make data-driven, place-based investment decisions. The Consolidated Planning process serves as the framework for a community-wide dialogue to identify housing and community development priorities that align and focus funding from HUD's formula block grant programs. This rule amends HUD's Consolidated Plan regulations to require that jurisdictions consider two additional concepts in their planning efforts.

    The first concept is how to address the need for broadband access for low- and moderate-income residents in the communities they serve. Broadband is the common term used to refer to a high-speed, always-on connection to the Internet. Such connection is also referred to as high-speed broadband or high-speed Internet. Specifically, the rule requires that States and localities that submit a Consolidated Plan describe the broadband access in housing occupied by low- and moderate-income households. If low-income residents in the communities do not have such access, States and jurisdictions must consider providing broadband access to these residents in their decisions on how to invest HUD funds. The second concept added to the Consolidated Plan process requires jurisdictions to consider incorporating resilience to natural hazard risks, taking care to anticipate how risks will increase due to climate change, into development of the plan in order to begin addressing impacts of climate change on low- and moderate-income residents.

    DATES:

    Effective Date: January 17, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Lora Routt, Senior Advisor, Office of Community Planning and Development, Department of Housing and Urban Development, Office of Community Planning and Development, 451 7th Street SW., Suite 7204, Washington, DC 20410 at 202-402-4492 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Relay Service at 800-877-8339 (this is a toll-free number).

    SUPPLEMENTARY INFORMATION: I. Executive Summary A. Purpose of This Rule

    The purpose of this rule is to require States and local governments to evaluate the availability of broadband access and the vulnerability of housing occupied by low- and moderate income households to natural hazard risks, many of which may be increasing due to climate change, in their Consolidated Planning efforts. These evaluations are to be conducted using readily available data sources developed by Federal government agencies, other available data and analyses (including State, Tribal, and local hazard mitigation plans that have been approved by the Federal Emergency Management Agency (FEMA)), and data that State and local government grantees may have available to them. Where access to broadband Internet service is not currently available or is minimally available (such as in certain rural areas), States and local governments must consider ways to bring broadband Internet access to low- and moderate-income residents, including how HUD funds could be used to narrow the digital divide for these residents. Further, where low- and moderate-income communities are at risk of natural hazards, including those that are expected to increase due to climate change, States and local governments must consider ways to incorporate appropriate hazard mitigation and resilience into their community planning and development goals, codes, and standards, including the use of HUD funds to accomplish these objectives. These two planning considerations reflect emerging needs of communities in this changing world. Broadband provides access to a wide range of resources, services, and products, which assist not only individuals and, but also communities, in their efforts to improve their economic outlooks. Analysis of natural hazards, including the anticipated effects of climate change on those hazards, is important to help ensure that jurisdictions are aware of existing and developing vulnerabilities in the geographic areas that they serve that can threaten the health and safety of the populations they serve.

    B. Summary of Major Provisions of This Rule

    HUD's currently codified Consolidated Plan regulations require that local governments and States consult public and private agencies that provide assisted housing, health services, and social and fair housing services during preparation of the Consolidated Plan. Under these regulations, local governments and States are also required in their citizen participation plan to encourage the participation of local and regional institutions and businesses in the process of developing and implementing their Consolidated Plans. This rule requires States and local governments, in preparing their Consolidated Plan, to add to the list of public and private agencies and entities that they now must consult with for preparation of their plans, to consult with public and private organizations, including broadband internet service providers, organizations engaged in narrowing the digital divide (e.g., schools, digital literacy organizations), and agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies (see §§ 91.100 and 91.110). Jurisdictions must also encourage the participation of these entities in implementing relevant components of the plan (see §§ 91.105 and 91.115).

    The rule also requires each jurisdiction to describe broadband needs in housing occupied by low- and moderate-income households based on an analysis of data for its low- and moderate-income neighborhoods for which the source is cited in the jurisdiction's Consolidated Plan. These needs include the need for broadband wiring and for connection to the broadband service in the household units, and the need for increased competition by having more than one broadband Internet service provider serve the jurisdiction (see §§ 91.210 and 91.310). Possible sources of such data include the National Broadband Mapcreated by the National Telecommunications and Information Administration (NTIA) of the Department of Commerce. Grantees may also find broadband availability data in Federal Communications Commission (FCC) Form 477. As discussed later in this preamble, the regulatory text does not include recommended sources of data to avoid any confusion that these are not required sources, only recommended sources.

    The rule also requires that jurisdictions provide, as part of their required housing market analysis, an assessment of natural hazard risks to low- and moderate-income residents, including risks expected to increase due to climate change, based on an analysis of data, findings, and methods identified by the jurisdiction, for which a reputable source is cited in the jurisdiction's Consolidated Plan. Possible sources of such data include: (1) The most recent National Climate Assessment, (2) the Climate Resilience Toolkit, (3) the Community Resilience Planning Guide for Buildings and Infrastructure Systems prepared by the National Institute of Standards and Technology (NIST), and, (4) other climate risk-related data published by the Federal government or other State or local government climate risk related data, including FEMA-approved hazard mitigation plans which incorporate climate change data or analysis. For the same reasons discussed above, the regulatory text related to natural hazard risk analysis does not include the recommended sources of data. Prior to implementation of the new requirements established by this rule, HUD will provide additional resources to support grantees in the form of guides and trainings. Grantees may also request Technical Assistance through their HUD Field Office or directly at www.HUDExchange.info/get-assistance.

    C. Costs and Benefits of This Rule

    HUD's Consolidated Plan process, established by regulation in 1995, provides a comprehensive planning process for HUD programs administered by HUD's Office of Community Planning and Development, specifically the Community Development Block Grant (CDBG) program, the HOME Investment Partnerships (HOME) program, the Emergency Solutions Grants (ESG) program and the Housing with Opportunities for Persons With AIDS (HOPWA) program. Comprehensive community planning provides officials with an informative profile of their communities in terms of population, housing, economic base, community facilities, and transportation systems, and such information aids officials in their investment decisions. HUD's Consolidated Planning process assists State and local officials that are recipients of HUD funds under the above-listed programs in determining the housing and community development needs of their respective communities. Requiring Consolidated Plan jurisdictions to consider the broadband and natural hazard resilience needs of their communities helps to ensure a more complete profile of the needs of their communities. As discussed in this preamble, the importance of providing broadband access to all cannot be overstated. Broadband access is not only important for increasing opportunities for individuals' success, but also for the success of a community. Consideration of the impact of natural hazard risks, many of which are anticipated to increase due to climate change, in one's community, and how communities can help mitigate any such adverse impacts, is equally important as it will help to guide the best use of land and orderly and sustainable growth. In brief, the benefits of this rule are to promote a balanced planning process that more fully considers the housing, environmental, and economic needs of communities.

    The costs of the revised consultation and reporting requirements are not significant since the regulatory changes proposed by this rule merely build upon similar existing requirements for other elements covered by the Consolidated Planning process rather than mandating completely new procedures. Further, the required assessments are based on data readily available on the Internet, or which the Consolidated Plan jurisdiction may already have available to it, such as its own local data. Therefore, jurisdictions will not have to incur the expense and administrative burdens associated with collecting data. HUD anticipates providing grantees with data early in Federal Fiscal Year 2018. HUD will not require grantees to incorporate these new requirements into their Consolidated Plan process until HUD is able to make the data available to all grantees. To provide such time, the regulatory text provides that the new requirements apply to Consolidated Plans submitted on or after January 1, 2018.

    Moreover, this rule does not mandate that actions be taken to address broadband needs or climate change adaptation needs. HUD's Consolidated Plan process has long provided that jurisdictions are in the best position to decide how to expend their HUD funds. The additional analyses required by this rule may highlight areas where expenditure of funds would assist in opening up economic opportunities through increased broadband access or mitigate the impact of possible natural hazards, including those that may be exacerbated due to climate change. But HUD leaves it to jurisdictions to consider any appropriate methods to promote broadband access or protect against the adverse impacts of climate change, taking into account the other needs of their communities, and available funding, as identified through the Consolidated Planning process.

    II. Background A. Broadband Access

    On March 23, 2015, President Obama issued a Presidential Memorandum on “Expanding Broadband Deployment and Adoption by Addressing Regulatory Barriers and Encouraging Investment and Training.” In this memorandum, the President noted that access to high-speed broadband is no longer a luxury, but a necessity for American families, businesses, and consumers. The President further noted that the Federal government has an important role to play in developing coordinated policies to promote broadband deployment and adoption, including promoting best practices, breaking down regulatory barriers, and encouraging further investment.

    On July 15, 2015, HUD launched its Digital Opportunity Demonstration, known as “ConnectHome,” in which HUD provided a platform for collaboration among local governments, public housing agencies, Internet service providers, philanthropic foundations, nonprofit organizations and other relevant stakeholders to work together to produce local solutions for narrowing the digital divide in communities across the nation served by HUD. The demonstration, or pilot as it is also called, commenced with the participation of 28 communities. Through contributions made by the Internet service providers and other organizations participating in the pilot, these 28 communities will benefit from the ConnectHome collaboration by receiving, for the residents living in HUD public and assisted housing in these communities, broadband infrastructure, technical assistance, literacy training, and electronic devices that provide for accessing high-speed Internet.

    The importance of all Americans having access to the Internet cannot be overstated. As HUD stated in its announcement of the Digital Opportunity Demonstration, published in the Federal Register on April 3, 2015, at 80 FR 18248, “[k]nowledge is a pillar to achieving the American Dream—a catalyst for upward mobility as well as an investment that ensures each generation is as successful as the last.” 1 Many low-income Americans do not have broadband Internet at home, contributing to the estimated 66 million Americans who are without the most basic digital literacy skills. Without broadband access and connectivity and the skills to use Internet technology at home, children will miss out on the high-value educational, economic, and social impact that high-speed Internet provides. It is for these reasons that HUD is exploring ways, beyond ConnectHome, to narrow the digital divide for the low-income individuals and families served by HUD multifamily rental housing programs. This rule presents one such additional effort.

    1 See 80 FR 18248, at 18249.

    B. Natural Hazards Resilience

    On November 1, 2013, President Obama signed Executive Order 13653, on “Preparing the United States for the Impacts of Climate Change.” Executive Order 13653 was subsequently published in the Federal Register on November 6, 2013 (78 FR 66819). The Executive Order recognizes that the potential impacts of climate change—including an increase in prolonged periods of excessively high temperatures, more heavy precipitation, an increase in wildfires, more severe droughts, permafrost thawing, ocean acidification, and sea-level rise—are often most significant for communities that already face economic or health-related challenges. Research has bolstered the understanding of the concept of social vulnerability, which describes characteristics (age, gender, socioeconomic status, special needs, race, and ethnicity) of populations that influence their capacity to prepare for, respond to, and recover from hazards and disasters, including the sensitivity of a population to climate change impacts and how different people or groups are more or less vulnerable to those impacts. Social vulnerability and equity in the context of climate change are important because some populations may have less capacity to prepare for, respond to, and recover from climate-related hazards and effects. Executive Order 13653 asserts that managing these risks requires deliberate preparation, close cooperation, and coordinated planning by the Federal government, State, Tribal, and local governments, and stakeholders. Further, the Executive Order calls upon Federal agencies to identify opportunities to support and encourage smarter, more climate-resilient investments by States, local communities, and tribes, through grants and other programs, in the context of infrastructure development.

    Section 7 of Executive Order 13653 established the President's State, Local, and Tribal Leaders Task Force on Climate Change Resilience and Preparedness (Task Force). Co-chaired by the Chair of the White House Council on Environmental Quality and the Director of the White House Office of Intergovernmental Affairs, the Task Force consisted of 26 governors, mayors, county officials, and Tribal leaders from across the United States. Members brought first-hand experiences in building climate preparedness and resilience in their communities and conducted broad outreach to thousands of government agencies, trade associations, planning agencies, academic institutions, and other stakeholders, to inform their recommendations to the Administration.

    The President charged the Task Force with providing recommendations on how the Federal government can respond to the needs of communities nationwide that are dealing with the impacts of climate change by removing barriers to resilient investments, modernizing Federal grant and loan programs to better support local efforts, and developing the information and tools they need to prepare, among other measures. In November 2014, Task Force members presented their recommendations for the President at a White House meeting with Vice President Biden and other senior Administration officials. Among other actions, the Task Force called on HUD to consider strategies within existing grant programs to facilitate and encourage integrated hazard mitigation approaches that address climate-change related risks, land use, development codes and standards, and capital improvement planning. This final rule represents one step that HUD is taking to implement these recommendations.

    HUD's May 2016 Proposed Rule

    On May 18, 2016, at 81 FR 31192, HUD published a proposed rule that would require Consolidated Plan jurisdictions to consider broadband Internet access and the natural hazard resilience needs of their communities and to consider whether they should and can take actions to address these needs.

    HUD's Consolidated Planning process serves as the framework for a community-wide dialogue to identify housing and community development priorities that align and focus funding from the HUD formula block grant programs: The CDBG program, the HOME program, the ESG program, and the HOPWA program. HUD's regulations for the Consolidated Plan are codified at 24 CFR part 91 (entitled “Consolidated Submissions for Community Planning and Development Programs”). A Consolidated Plan, which may have a planning duration of between 3 and 5 years, is designed to help States and local governments to assess their affordable housing and community development needs, in the context of market conditions at the time of their planning, and to make data-driven, place-based decisions on how to expend HUD funds in their jurisdictions.

    In developing their Consolidated Plans, States and local governments are required to engage their communities, both in the process of developing and reviewing the proposed plan, and as partners and stakeholders in the implementation of the plan. By consulting and collaborating with other public and private entities, States and local governments can better align and coordinate community development programs with a range of other plans, programs, and resources to achieve greater impact. A jurisdiction's Consolidated Plan is carried out through annual Action Plans, which provide a concise summary of the actions, activities, and the specific Federal and non-federal resources that will be used each year to address the priority needs and specific goals identified by the Consolidated Plan. States and local governments report on accomplishments and progress toward Consolidated Plan goals in the Consolidated Annual Performance and Evaluation Report (CAPER).

    The regulatory amendments proposed by HUD's May 2016 rule would require States and local governments to consider broadband access and natural hazard resilience as part of their Consolidated Planning efforts. Where the required analysis demonstrates that broadband Internet support is not currently available or is minimally available, or the jurisdiction's community is at risk of natural hazards, the jurisdiction should consider ways of addressing those needs.

    The public comment period for HUD's May 18, 2016, proposed rule closed on July 18, 2016. HUD received 37 public comments on the proposed rule. The commenters included State and local governments, climate adaptation and environment organizations, public housing agencies (PHAs) and nonprofit organizations. The following Section III discusses the significant comments raised by the commenters and HUD's responses to the comments.

    III. Discussion of Public Comments Received on the May 16, 2016, Proposed Rule

    This section of the preamble presents a summary of the significant issues and questions raised by the commenters and HUD's responses to these comments. The majority of the commenters supported the inclusion of both assessments in the Consolidated Planning process, but as shown below in the discussion of public comments were concerned about administrative burden. In responding to the comments, HUD has strived to highlight that the burden is minimal. The only change that HUD makes in responses to public comments, as is more fully discussed below, is to remove from the regulatory text specific recommended broadband and risk hazard sources to consult in making the required assessments. There was confusion about whether or when consultation with these sources was required. They are recommended, not required sources. Removing these references from the regulatory text eliminates this confusion.

    A. General Comments

    Comment: Support for the rule. The majority of commenters supported the proposed rule. These commenters commended HUD on recognizing the importance of requiring jurisdictions to assess broadband access for low-and moderate-income households and to consider how to incorporate resilience to natural hazard risks in their planning efforts.

    HUD Response. HUD appreciates the support of the commenters and agrees that these changes to the Consolidated Planning process should aid jurisdictions in addressing two emerging needs of communities in this changing world.

    Comment: The rule is an unfunded mandate. Several commenters stated that the proposed rule represented an overreach of HUD's authority and that the changes were an unfunded mandate.

    HUD Response. The commenters are not correct that the two new assessments impose an unfunded mandate. As an initial matter, HUD notes that the rule's scope is limited to requiring consideration of the broadband and natural hazards resilience needs of low-income communities. The rule does not mandate that any actions be taken in response to the required assessments. Jurisdictions retain the discretion to consider the most appropriate methods to address their assessments, taking into account other needs identified as part of the Consolidated Planning process as well as financial and other resource constraints. Further, HUD notes that the Consolidated Planning process is required only to the extent jurisdictions voluntarily seek to participate in HUD's community planning and development programs. Accordingly, there is no mandate for jurisdictions choosing not to receive such funding. The concept of unfunded mandates excludes voluntarily-assumed requirements imposed as a condition for receipt of Federal assistance.

    Comment: The proposed regulatory changes are administratively and economically burdensome. Several commenters wrote that the proposed rule imposes an administrative burden, especially on smaller communities. The commenters wrote that the financial burden would unduly stretch already limited CDBG and HOME program funding. The commenters also objected that HUD underestimated the administrative burden of complying with the new requirements. Some of these commenters focused on the administrative burden associated with the expanded consultation requirements, which now include broadband internet service providers, organizations engaged in narrowing the digital divide, and agencies engaged in resilience planning. These commenters stated that HUD's estimates of the administrative burden failed to account for the person-hours required to locate, engage, evaluate, and compile recommendations from qualified public and private entities within either content area. The commenters wrote that HUD should refrain from pursuing the changes or make the two new assessments optional.

    HUD Response. As noted in the proposed rule, HUD has sought to minimize the costs and burdens imposed on communities by allowing the assessments to be completed using readily available online data sources. HUD further minimizes the burden imposed on jurisdictions by providing an electronic template for completing the Consolidated Plan. This template, first used in 2012, provides a uniform and flexible template that helps ensure the Consolidated Plan is complete per the regulations found in 24 CFR part 91. Many of the data tables within the Consolidated Plan template are pre-populated with the most up-to-date housing and economic data available, and HUD plans to input data for both broadband and resilience assessment requirements. While grantees will need to provide explanations relating their funding priorities to the pre-populated data, they do not need to incur the costs or time of searching for, entering, and compiling the data. HUD also notes that the rule does not require jurisdictions to use the pre-populated data; jurisdictions may opt to use other data of their choice.

    HUD anticipates providing grantees with data early in Federal Fiscal Year 2018. HUD will not require grantees to incorporate these new requirements into their Consolidated Plan process until HUD is able to make the data available to all grantees. To provide such time, the regulatory text provides that the new requirements apply to Consolidated Plans submitted on or after January 1, 2018.

    With respect to the consultation requirements, HUD notes the Consolidated Plan has always served as a planning document for the jurisdiction as a whole. Jurisdictions are already required to consult with public and private agencies, business and civic leaders, and units of local government. The inclusion of the newly specified entities does not substantively alter the cost or administration of the already required participatory process.

    Comment: The new proposed rule lacks necessary specificity of how the two new assessments are to be conducted. Several commenters wrote that the proposed rule lacked sufficient specificity regarding the required contents of the new assessments and the criteria HUD will use to evaluate the adequacy of the assessment. The commenters wrote that this lack of details would make it difficult for jurisdictions to comply with the new requirements. One of the commenters asked whether the data sources cited by the community would be subject to review by HUD. The commenters urged HUD to provide additional guidance to communities on how it plans to measure compliance with the rule.

    HUD Response: As it does on other components of the Consolidated Plan, HUD will provide technical assistance and training materials to assist jurisdictions in meeting the new requirements. However, HUD notes that the requirements of the new rule are not entirely unfamiliar, as the Consolidated Planning process already requires jurisdictions to identify non-housing community development needs that would aid communities in developing viable urban communities, providing a suitable living environment and expanding economic opportunities principally for low-income and moderate-income persons. (See 24 CFR 91.215(f).) With respect to data, as noted in response to an earlier comment, HUD plans to pre-populate data in the electronic Consolidated Plan template. Through the standardized template with prepopulated data tables at the jurisdictional level and providing the ability to map community needs, jurisdictions will be able to ascertain and satisfy HUD's needs assessment expectations. To ensure that jurisdictions have engaged in analysis regarding community broadband and natural hazard resilience needs, plans will be reviewed for compliance with the new requirements. Guidance will be developed for the field staff to support consistent implementation of this policy. In order to aid grantees, HUD will provide in its guidance best practices and examples for incorporating broadband and natural hazards into the Consolidated Plan.

    Comment: HUD should first establish eligible activities for the two new assessments, before requiring that such assessments be undertaken. A commenter wrote that the two new assessments do not directly address CDBG's objectives. The commenter stated that before any changes are made to the consultation and citizen participation regulations, HUD should update the eligible activities and guidance regarding these kinds of activities. The commenter stated that, for instance, income payments, including payments for utilities such as Internet, are not considered an eligible CDBG activity. The commenter stated that CDBG funding could be used to make utility payments, including Internet payments, to ensure low- and moderate-income families have access to the Internet. Another commenter asked whether CDBG funds can be used to assist in broadband infrastructure or otherwise connect housing assisted by HUD to broadband.

    HUD Response: One of the statutory objectives of the CDBG program is to “provid[e] . . . [a] suitable living environment,” which encompasses a range of related goals and activities such as improving the safety and livability of neighborhoods; increasing access to quality public and private facilities and services; and reducing the isolation of income groups within a community or geographical area through the spatial deconcentration of housing opportunities for persons of lower income, the revitalization of deteriorating or deteriorated neighborhoods, and the conservation of energy resources. The two new assessments required under this rule align with this objective. With respect to eligible activities, while HUD does not have regulatory authority to add new eligible activities to the CDBG program beyond those authorized in statute, the CDBG program already includes numerous eligible activities, such as rehabilitation, through which grantees can assist broadband connectivity and natural hazard resilience efforts directly. When determining their public facility, housing rehabilitation, economic development, and infrastructure needs, grantees may wish to consider high performing infrastructure to ameliorate/withstand natural hazards, as well as ways to use eligible activities to meet community broadband needs. HUD has provided guidance on using existing eligible activities for these purposes,2 and will also be providing additional technical assistance and guidance on how CDBG funds may be used to address both broadband and resilience needs in the community.

    2 Please see the Frequently Asked Questions (FAQs) for the CDBG, HOME, and Housing Trust Fund programs available at the following links: https://www.hudexchange.info/resource/4891/cdbg-broadband-infrastructure-faqs/ https://www.hudexchange.info/onecpd/assets/File/HOME-FAQs-Broadband.pdf https://www.hudexchange.info/resource/4420/htf-faqs/.

    Comment: HUD's regulations should be generally stated and guidance should provide the necessary specificity. A commenter wrote that as proposed, HUD requires very specific data sources to be included in the Consolidated Plan. The commenter stated that this is problematic because data sources often change or are renamed. The commenter stated that HUD's regulations should list general information that is required in the Consolidated Plan while HUD guidance and other materials that are regularly updated, such as the “Consolidated Plan in IDIS Desk Guide,” should provide recommended data sources. The commenter stated that this will allow HUD to update data sources easily in circumstances where sources change or new sources become available.

    HUD Response: HUD appreciates the suggestion made by the commenter, and has revised the rule accordingly. As recommended, the regulation no longer identifies specific recommended sources. These suggested sources of data will now be listed in guidance to facilitate updating as new data becomes available or data sources are re-named. Jurisdictions will still be able to use either the data identified by HUD and pre-populated in the electronic Consolidated Plan template or other data sources of the jurisdiction's choice, for which the source is cited in the jurisdiction's Consolidated Plan.

    Comment: The rule includes no mandate thereby providing no assurance goals will be met. A commenter wrote that despite HUD's recognition of the importance of access to broadband and the increasing risk of natural hazards, the proposed rule does not mandate jurisdictions take any action, or even formulate actions steps, to address these needs. The commenter wrote that while is it is often true that “jurisdictions are in the best position to decide how to expend their HUD funds,” requiring concrete plans of action instead of just data collection is the only real way to ensure HUD's stated goals are met.

    HUD Response: A fundamental principle of the Consolidated Planning process, as well as of HUD's community development formula programs (for which the Consolidated Plan is the submission vehicle) is that grantees have the flexibility and responsibility for developing their own programs and funding priorities, based on their own assessment of their needs. HUD does not mandate what objectives grantees should achieve or what activities grantees are to undertake with their formula funding. It will be up to the jurisdiction through its needs assessment process to determine whether to select activities related to these issues as a priority need. The grantee would identify the financial and organizational resources available to address its priority needs. In the Consolidated Planning process, the level of resources available will play a key role in determining strategies and goals. Once broadband or increasing resilience have been selected as a priority need, grantees would then develop a set of goals based on the availability of resources, and local organizational capacity.

    Comment: The new assessments are already made by agencies within each State tasked with such assessments. A commenter stated that new assessments should not be required of State housing agencies. The commenter stated that these assessments are already made by those State agencies charged with technology authority or charged with emergency management. The commenter stated that generally, for each State, these assessments are made through programs that are not part of the Consolidated Planning process.

    HUD Response: HUD agrees that jurisdictions often already have assessments undertaken by other agencies regarding both broadband access and natural hazard resiliency. HUD is encouraging through its Consolidated Planning process a collaborative consultation process. HUD also encourages jurisdictions to use these plans developed by other agencies in identifying community needs and priorities. The Consolidated Planning process provides the opportunity for jurisdictions to reference existing plans and HUD is not requiring a separate, distinct study to be undertaken. It is up to each jurisdiction to determine which agencies or departments will be responsible for developing its Consolidated Plan and for administering the HUD community development formula funding received through each block grant program. All other jurisdictions (including States) are encouraged to ensure collaboration among internal and external agencies and staff to take full advantage of relevant expertise. Ideally, State agencies would develop these plans in alignment with each other, not only to reduce duplication of work but also to ensure that Federal investments are more aligned throughout the State and in their communities.

    Comment: Consider requiring assessments for broadband adoption and increasing resilience to natural hazards beyond the context of housing needs. Several commenters wrote that HUD should consider requiring assessments in Consolidated Plans beyond just housing needs. The commenter stated that even though Consolidated Plans are focused on housing needs, communities would benefit if jurisdictions are required to at least analyze how funds could be used for broadband adoption and enhancing resilience to natural hazard risks for communities as a whole.

    HUD Response: The Consolidated Plan is not exclusively concerned with housing needs. HUD's Consolidated Plan regulations include both a housing needs assessment and a non-housing community development plan. Specifically, under 24 CFR 91.215 (for local governments) and 24 CFR 92.315 (for States), jurisdictions must provide a description of priority non-housing community development needs eligible for assistance under HUD's community development programs. In line with the goals of this rulemaking, HUD strongly encourages jurisdictions to consider implementing actions to support broadband access and adoption and increase resilience in their non-housing community development efforts, but such decisions on priorities are determined by grantees.

    Comment: These two new Consolidated Plan assessments require input by the residents of the community. A commenter stated that assessing broadband and natural hazards concerns of the community beyond the data points and institutional input required in the proposed rule is essential for local governments and States in assessing the true needs of the community. The commenter stated that without direct communication with the households that are affected by these issues, States and localities cannot properly assess the full needs of the communities they serve. The commenter urged HUD to require jurisdictions to create a public process where members of the community have opportunity to comment on Consolidated Plans, and that HUD should consider a community participation structure similar to the requirement under HUD's Affirmatively Furthering Fair Housing (AFFH) regulation.

    HUD Response: HUD's Consolidated Plan regulations already require jurisdictions to undertake a citizen participation and consultation process (see, subpart B of the Consolidated Plan regulations at 24 CFR part 91, entitled “Citizen Participation and Consultation”). The AFFH citizen participation process was modeled on the citizen participation and consultation process required by HUD's Consolidated Plan regulations. HUD does not believe that a separate citizen participation and consultation process is required for the two new assessments established by this rule, as was established under the AFFH rule. HUD's AFFH rule implemented a requirement, affirmatively furthering fair housing, under a separate statute, the Fair Housing Act. That is not the case here.

    Comment: Broadband access and natural hazard risk resilience should be included in the jurisdictions' Assessment of Fair Housing required by HUD's Affirmatively Furthering Fair Housing regulation. A commenter wrote that in addition to addressing concerns about broadband access and resilience to natural hazard risks in their Consolidated Plans, HUD should require jurisdictions to incorporate these assessments into their Assessment of Fair Housing required under HUD's AFFH rule. The commenter stated that HUD's AFFH rule aims to aide States and local governments “in taking a meaningful actions, in addition to combating discrimination, that overcome patterns of segregation and foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics.” The commenter stated that under the AFFH rule, jurisdictions are charged with taking meaningful actions that “transform racially and ethnically concentrated areas of poverty into areas of opportunity.”

    HUD Response: While HUD, in this rule, is not mandating inclusion of the broadband access and resilience assessments in the Assessment of Fair Housing required under HUD's AFFH rule, jurisdictions may voluntarily elect to include them in their assessment required under the AFFH rule. As noted, HUD encourages jurisdictions to ensure collaboration among State and local agencies and staff to take full advantage of relevant expertise among all agencies and employees, be they internal or external to the jurisdiction. The suggestion made by the commenter may be one possible way of achieving that goal.

    B. Specific Comments on Narrowing the Digital Divide

    Comment: The National Broadband Map and Form 477 do not provide current data and HUD should therefore allow use of State and local data. Several commenters objected to use of National Broadband Map and Form 477 data to determine broadband availability. A commenter questioned the accuracy of data quality and accuracy within the broadband services sector. Another commenter wrote that Federally collected data on broadband access and adoption is often of inconsistent quality, unverified, not released in a timely manner, and insufficient for the planning needs of many communities. Commenters stated that the National Broadband Map has not been updated or maintained and currently shows data from the fall of 2014, and this outdated resource could lead to confusion and inaccurate information. A commenter requested that HUD, in partnership with the Department of Commerce's National Telecommunications and Information Administration (NITA), pre-certify broadband coverage data and maps that communities could use.

    With respect to the Form 477, commenters wrote that the data has not been mapped and is difficult to access. To address these concerns, the commenters suggested that HUD allow Consolidated Plans to include data on broadband access collected directly through State and local broadband efforts. A commenter wrote that currently 37 States still have active broadband planning teams with data and resources that are likely more up-to-date than current federal data. Another commenter wrote that few communities have the ability and knowledge base to “consult with . . . broadband internet service providers” as would be required in proposed revisions to the consultation and citizen participation requirements. The commenter stated that HUD would need to provide substantial levels of policy and practical guidance to enable local staff to determine broadband “needs” for a specific subset of the overall population within each community.

    HUD Response: While HUD does not agree with the commenters' objections to use of the National Broadband Map and Form 477, it is sympathetic to the general concerns expressed regarding the need to ensure that data sources are accurate and up-to-date. As noted in response to an earlier comment, this final rule does not codify specific recommended data sources. These will now be listed in guidance to facilitate updating as new data becomes available or data sources are re-named. It was not HUD's intent to mandate use of the National Broadband Map or Form 477. While HUD plans to provide pre-populated data in the electronic Consolidated Plan template, jurisdictions are not required to use such data and may use alternative data. The template's default data can be replaced or complemented by other data identified by the jurisdiction, for which the source is cited in the jurisdiction's Consolidated Plan. Further, HUD is committed to aiding jurisdictions with meeting the new requirements contained in this rule, and will supplement the rule with guidance as may be needed. As it does on other components of the Consolidated Plan, HUD will provide technical assistance and training materials to assist jurisdictions in meeting these new requirements.

    Comment: The rule offers no suggested sources for States and communities to assess the extent to which the need for connection to the broadband service in the household units is being met. A commenter wrote that the data sources identified in the rule are not adequate to permit jurisdictions to assess the extent to which broadband services have actually penetrated the market of low-to-moderate income households in a given community. This commenter suggested two readily available federal sources for actual household connection data which should be suggested, but not required, by the rule. In contrast to commenters that submitted concerns about the data in the immediately preceding comment, the first source recommended by the commenter is FCC's Form 477 Census Tract Data on Internet Access Services, which the commenter stated provides a summary of reported connections for each tract and compares the total to the tract's total Census households. The commenter stated that this form, along with the FCC's national interactive color-coded map, make it reasonably easy to rank or map a state or community's Census tracts by household broadband penetration and have an easy first look at their tracts' penetration levels. The second source recommended by the commenter is the American Community Survey (ACS) data on household computer ownership and Internet access.

    HUD Response: HUD appreciates the suggestions of additional data sources that may be useful to jurisdictions in preparing the required broadband assessment. HUD notes that the Form 477 is already included as a suggested data source. As previously addressed in this preamble, jurisdictions may either use the data sources suggested by HUD or other data identified by the jurisdiction, for which the source is cited in the jurisdiction's Consolidated Plan.

    Comment: Do not ignore other causes of digital exclusion other than availability in the housing market analysis. A commenter stated that in creating a framework through its Consolidated Plan process for community dialogue leading to possible action toward greater digital access and inclusion, HUD should recognize that low rates of household Internet access among low- and moderate-income residents can be the result of many causes other than physical availability of service, including the following: Unaffordability of available Internet services to low-income residents; a lack of convenient opportunities for residents to gain digital literacy skills; a failure to communicate the value of available Internet services and tools; and other factors specific to communities, such as language, cultural barriers, etc.

    HUD Response: HUD appreciates the concerns raised by the commenter. The Consolidated Plan contains both a housing need assessment and a non-housing community plan development component. HUD encourages jurisdictions to look at their broadband and resiliency needs across all components of the Consolidated Planning process. The jurisdiction has the ability to include an infrastructure assessment as well as public services assessment as part of its non-housing community development plan. HUD is cognizant that the adoption of broadband internet is an equally critical component of closing the digital divide and is contingent on many factors other than the availability of internet service. This rule, however, is but one part of HUD's broader efforts to expand the access and use of broadband internet. HUD also notes that the jurisdictions are free to expand their broadband assessment to include the types of issues listed by the commenter, based on their identification of local needs and circumstances.

    Comment: Consultation requirements should include other identified stakeholders. Several commenters expressed support for the proposed rule requiring the consultation of broadband stakeholders in preparation for creating Consolidated Plans. The commenters suggested additional stakeholders that should be included in the consultation process. One commenter specifically recommended that State planning programs be identified as possible partners in the locations they are available. Another commenter suggested that HUD clarify that public-private initiatives or partnerships (like a local community technology planning team or task force, which might not have a formal legal identity or corporate status) will qualify as an “organization engaged in narrowing the digital divide.” The commenter stated that the needs of often-voiceless, low-income communities with low adoption rates will not always register with broadband providers, but allowing these public-private organizations to voice the needs of low-income communities can help establish a business case for improved service offerings and options. Yet another commenter suggested adding language to include “local social service and public agencies providing digital literacy, public internet access, or other broadband adoption programs.” The commenter stated that these may include, but are not limited to: Adult literacy and education providers; K-20 schools; youth program providers; libraries; and small business and workforce training program providers.

    HUD Response: The purpose of the Consolidated Planning process is to aid jurisdictions, as a whole, in identifying their housing and community development needs and funding priorities. The Consolidated Plan builds on a participatory process that includes citizens, organizations, businesses, and other stakeholders. In carrying out these already required consultations, HUD encourages jurisdictions to conduct the broadest possible outreach, including State and local agencies and other entities identified by the commenters.

    Comment: Require grantees to submit progress reports in closing the digital divide. A commenter recommended that HUD revise the language at the final rule stage to state that after submission and acceptance of the Consolidated Plan, communities are expected to develop a reasonable and achievable strategy for closing the digital divide. The commenter stated that this language should leave no doubt as to the expectation that progress will begin immediately. The commenter stated that HUD should mandate that communities provide regular progress reports as they take their first steps into closing the digital divide.

    HUD Response: Grantees are currently required to submit progress reports on the priority needs and goals they select during the Consolidated Planning process. Under HUD's Consolidated Plan regulations, within 90 days after the end of its program year, a grantee must submit a Consolidated Annual Performance and Evaluation Report (CAPER) to HUD. The primary purpose of the CAPER is to report on accomplishments of funded activities within the program year and to evaluate the grantee's progress in meeting one-year goals it has described in the Annual Action Plan and long-term goals it has described in the Consolidated Plan.

    Comment: Encourage jurisdictions to partner with successful ConnectHome communities. A commenter stated that to ease and facilitate the assessment of broadband needs as part of the Consolidated Planning process, HUD should recommend and/or establish connections between applicants and successful ConnectHome communities that have developed and implemented their own connection plans. The commenter stated that this additional resource would dramatically increase the information available to each community while further reducing administrative and financial costs as communities share best practices. Another commenter suggested that HUD document and widely share data and promising practices from the 28 ConnectHome pilot communities, and assess what strategies have been most (and least) successful in supporting broadband access and adoption. The commenter encouraged HUD to regularly undertake and make public an analysis of findings from broadband access and adoption strategies jurisdictions reported in their Consolidated Annual Performance and Evaluation Report or other relevant reporting processes. The commenter also requested that HUD establish a single-stop data center that contains links to all relevant resources.

    HUD Response: HUD agrees that ConnectHome communities could be a valuable resource for other jurisdictions. HUD encourages collaboration, where possible, between jurisdictions in developing and implementing their plans to expand access to broadband internet. As the commenter notes, such collaboration can be a cost-effective way to share successful strategies and best practices. HUD will seek ways to facilitate sharing of best practices of the ConnectHome communities. For example, HUD is developing playbook that provides suggestions and best practices for communities seeking to expand digital inclusion. The suggestions identified in the playbook are based on HUD's experience and expertise developed during implementation of the ConnectHome initiative.

    Comment: Examine how HUD programs may limit the ability of grantees to invest funds in broadband access and adoption. A commenter suggested that HUD assess how existing rules and legislation governing HUD programs may limit the ability of grantee governments to invest funds in broadband access and adoption. The commenter offered as an example of such limitation the “public services cap” on grantees' permissible use of CDGB grant funds. The commenter stated that any local investment of CDBG funds in digital literacy training, technical assistance or even consumer premises equipment to support household internet adoption is currently classified as a public service expenditure and limited by the cap, which means it competes for a fixed pool of dollars with all kinds of ongoing community needs such as emergency homeless shelters.

    HUD Response: As with all its programs and initiatives, HUD will, on an ongoing basis, review and assess the impact of legislative and regulatory requirements on program participants. Where appropriate or necessary to policy goals, HUD will seek changes through the appropriate vehicle, rulemaking, legislation or other policy action that may facilitate a change. However, HUD does not agree with the commenter that the CDBG program unduly limits activities to expand access and adoption of broadband internet. The CDBG regulations allow the use of grant funds for a wide range of eligible activities including public services, which is not the only activity a community can use to address its broadband needs. Grantees have the flexibility and responsibility for developing their own programs and funding priorities, based on their own assessment of their needs. Additionally, other funding associated with the Consolidated Plan, such as HOME and Housing Trust Fund funds, may be used for the actual costs of constructing or rehabilitating single family or multifamily housing, including the costs to wire the property for broadband internet, which could help address a community's broadband needs.

    C. Specific Comments on Increasing Resilience to Natural Hazards

    Comment: Include a definition of resilience. A commenter stated that resilience is a term that means many things to many people. The commenter recommended that a definition of resiliency be included in HUD's regulations in 24 CFR part 91.

    HUD Response: HUD will provide technical assistance and training materials to assist jurisdictions in meeting the new requirements. This will include guidance to communities on how to assess their resilience to natural hazard risk. As a guide, HUD points to the definition of the term “resilience” used by HUD for the National Disaster Resilience Competition, which is already familiar to HUD grantees and communities participating in HUD programs. Specifically, in that notice of funding availability, HUD defined resilience to mean “the ability to anticipate, prepare for, and adapt to changing conditions and withstand, respond to, and recover rapidly from disruptions.”

    Comment: For consistent evaluation of resilience, HUD should work with other Federal agencies to develop guidance and tools that support communities and practitioners. A commenter encouraged HUD to work with other Federal agencies to develop guidance and tools that support communities and practitioners, and noted that several tools already exist and were identified in the proposed rule. The commenter specifically noted as helpful tools the Integrated Rapid Visual Screening (IRVS) Tool, the Community Resilience Planning Guide, and Hazus MH FEMA. The commenter stated that to the extent practical, the resilience evaluations required within the Consolidated Plan should mirror requirements contained in other hazard identification and mitigation plans conducted at the State and local level. The commenter stated that this should include at a minimum the State Hazard Mitigation Plan required to receive certain funding from the Federal Emergency Management Agency (FEMA), the Threat and Hazard Identification and Risk Assessment (THIRA) process, and planning and assessment requirements associated with Department of Transportation, Economic Development Administration and other Federal programs. The commenter also stated that the rule should require consultation with additional community resources such as geological and meteorological agencies, energy and sustainability offices, and building code departments. Another commenter urged HUD to include academic institutions as resources that should be consulted. Yet another commenter stated that in addition to supporting communities' access to critical governmental resources for assessing resilience to natural hazards, HUD should convene a group of expert stakeholders from the non-governmental organization community to strategize how to implement effective resilience tactics, as well as hosting a broader clearinghouse of readily available online data sources—including those available in the private sector and nongovernmental organizations—to achieve resilience solutions.

    HUD Response: HUD notes that the final rule already provides jurisdictions with the flexibility to consult with community resources such as those identified by the commenter. HUD also strongly encourages jurisdictions to leverage and integrate existing assessments of climate and hazard related risks into their Consolidated Plan analysis where the jurisdiction deems appropriate. With regard to the suggestion that HUD work with other Federal agencies, HUD notes that it currently works with other agencies to develop guidance and tools that support communities and practitioners. For example, HUD conferred with various Federal agencies in the development of this rule. More recently, HUD has worked collaboratively with a group of expert stakeholders from non-governmental organizations to strategize about the implementation of effective resilience tactics to achieve resilience solutions through its National Disaster Resilience Competition (NDRC).

    Comment: Establish minimum investment requirements. A commenter stated that while the identification of hazards and opportunities to mitigate them is an important step to making communities more resilient, once such efforts are institutionalized, the commenter expressed hope that HUD will establish requirements that communities invest in a minimum level of mitigation before Federal investments are made within the community. The commenter stated that such requirements will enhance the community and assure limited federal funds are used responsibly.

    HUD Response: HUD agrees with the commenter that identification of hazards and opportunities to mitigate them is an important first step, and appreciates the suggestion for establishing minimum investment requirements. However, such a mandate runs contrary to the approach HUD has taken with its Consolidated Planning regulations.

    Comment: Expand the organizations with which jurisdictions should consult. A commenter stated that the proposed rule is a step in the right direction, but that to further this important work, jurisdictions should be required to consult not only with the list of proposed agencies, but also with a wide range of organizations working on adaption to the decline of cheap fossil fuel energy, the depletion of fresh water, access to fresh food, complex environmental crises like climate change and biodiversity loss, and the issues of social, economic and health equity. The commenter stated that such information is consistent with HUD's new AFFH Data and Mapping Tool and could be included as part of the assessment of fair housing. The commenter stated that limiting mandatory consultation to “agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies” is too narrow for a full evaluation of vulnerability to natural hazards and ensuring resilience of low- and moderate-income households.

    The commenter stated that a number of public and private organizations not listed in the proposed rule are immersed in activities that enhance community resilience. For example, organizations promoting home weatherization engage in energy conservation, help prepare communities for a decline in cheap energy, and contribute to efforts to improve neighborhood conditions; organizations that focus on public health are able to provide local data and findings on health inequity, such as asthma rates and food deserts; and community organizations, colleges/universities, and other non-profits are currently looking at and responding to the climate crisis. The commenter stated that without casting a broad net, planning efforts will be incomplete and continue the ill-suited forms of planning for the new realities our communities face. Another commenter stated that it was important for HUD grantees to consult with agencies responsible for economic development and housing in the private sector. The commenter stated that it is important to add this additional category because the current HUD proposal seems to only cover agencies responsible for “public land and water resources,” which would exclude the many low- and moderate-income facilities regulated and affected by local agencies responsible for economic development and housing in the private sector.

    HUD Response: The commenters offer very good suggestions on agencies with whom to consult with respect to resilience. However, HUD does not mandate consultation with these entities. As already noted in this preamble, the approach taken in the Consolidated Plan is for jurisdictions to determine their needs, decide which needs to fund, conduct outreach to residents in their communities, and consult with individuals and agencies that will aid them in good community planning. The citizen participation and consultation process provides the opportunity for a wide variety of stakeholders to participate the in the Consolidated Planning process. As mentioned previously, the Consolidated Plan includes a non-housing community development plan that provides opportunity for a jurisdiction to assess its neighborhood conditions, including economic needs, in its efforts to develop viable communities.

    Comment: Natural hazard risks should be assessed by the appropriate government agency, not the government's housing and/or economic development agency, and be done on a project-level basis. A commenter that is a government economic development agency stated that it is not the appropriate agency to assess natural hazard risks for low- and moderate-income households, and that there are other governmental organizations charged with assessing mitigating these risks. The commenter stated that it can consult with the governmental agency charged with assessing and mitigating risks and seek their input on Consolidated Planning, but that it would not be appropriate for the economic development agency to have a directive or management role in this effort. The commenter also stated it is more impactful for this type of review to take place at the project level. Once funded, each project goes through an environmental review process. Many hazards are assessed, ranging from hazardous waste and radiation to floodplain analysis. The commenter stated that if a project site is in the floodplain, it must go through a potentially lengthy and burdensome process to determine if they can move the project or mitigate the impact.

    HUD Response: HUD addressed a similar comment early on in this Section of the preamble that requested that HUD not mandate broadband or natural hazards risk resilience assessments by a housing and/or economic development agency when a State or local government has other agencies charged to address these matters. As noted by HUD in response to that earlier comment, HUD agrees that jurisdictions often already have assessments undertaken by other agencies regarding both broadband and resiliency. This final rule directs agencies to existing resources to guide them in these two areas. Through its Consolidated Planning process, HUD encourages a collaborative consultation process instead of duplication of efforts. Given that HUD also encourages jurisdictions to use other plans that identify community needs and priorities, the Consolidated Planning process provides the opportunity for jurisdictions to reference existing plans and is not requiring a separate, distinct study to be undertaken. It is up to each State or local government to determine which agencies or departments will be responsible for developing its Consolidated Plan and for administering the different HUD funding covered by HUD's Consolidated Plan regulations. All jurisdictions (including States) are certainly encouraged to ensure collaboration among internal and external agencies and staff to take full advantage of all relevant expertise.

    Comment: The National Climate Assessment and the Climate Resilience Toolkit are confusing. A commenter stated that the National Climate Assessment and the Climate Resilience Toolkit are very confusing. The commenter stated that it was hard to understand how a State could use this toolkit in a meaningful way in developing its Consolidated Plan. The commenter stated that it shares data from its State's Homeland Security and Emergency Management Department in its plans and then relies on site-specific environmental reviews once projects are funded. The commenter stated that these would seem to be better approaches to assessing natural hazard risks to low-and moderate households for States. In contrast to this comment, another commenter stated that the Climate Resilience Toolkit is useful for screening and planning purposes. This commenter also stated that while GIS tools that integrate topography, hydrology, and social science are readily available on the Internet, these tools are not likely to be commonly used by housing programs. The commenter suggested that HUD provide technical assistance in the form of webinars and workshops to train housing staff on the use of these tools, and stated that training programs are readily available through NOAA and EPA.

    Another commenter stated that many of the natural hazard resources named in HUD's proposed rule are not data sources, but instead are plans and toolkits with already-made strategies [§ 91.210(a)(5)(i), § 91.210(a)(5)(ii), and § 91.210(a)(5)(iii)]. The commenter stated that the housing market analysis section of the Consolidated Plan is intended to contain data with analysis that will inform the later sections which include strategies and goals. The commenter stated that because HUD is regulating the use of plans and strategies in this data section of the Consolidated Plan, HUD is taking away the grantee's efforts to create place-based strategies based on current data.

    HUD Response: By referring to resources, plans, and toolkits, HUD is encouraging jurisdictions to review what's been proposed and discussed, and see whether it fits into the Consolidated Planning efforts. HUD is developing guidance, resources, and tools to help grantees work with these sources. Further, as already noted in this section, HUD plans to provide pre-populated data in both CPD Maps and the eCon Planning Suite template. Jurisdictions may use alternative data in the Consolidated Planning process and are not required to use the default data provided by the system. Default data can be replaced or complemented by specifying a survey or administrative data source. If an alternative source is specified, the jurisdiction will be required to identify the source and provide basic information on how the data was collected. The jurisdiction also has the option of providing notes under each table in which alternate data is used to indicate what was changed or why the change was necessary. Because the public can view much of the default data in CPD Maps, these notes may be useful to avoid confusion during the citizen participation process.

    Comment: Expand approved sources of data to be made available to jurisdictions for use, and require use of local data. A commenter stated that jurisdictions should be required to both identify and include local data when describing vulnerabilities of housing occupied by low- and moderate-income households due to increased natural hazards. The commenter stated that, for example, local data regarding the quality of a jurisdiction's housing stock should be considered in the planning process, and similarly, geographic location of the low- and moderate-income households (which is available through HUD's AFFH Assessment Tool Map) should be addressed in planning with regard to vulnerabilities of housing.

    HUD Response: As noted earlier, jurisdictions are already able to use alternative data. While HUD plans to prepopulate data in both CPD Maps and the eCon Planning Suite template, jurisdictions may use alternative data in the Consolidated Planning process and are not required to use the default data provided by the system. If an alternative source is specified, the jurisdiction will be asked to identify the source and provide basic information on how the data was collected.

    Comment: Issue guidance on how to undertake the required analysis. A commenter strongly encouraged HUD to establish more specific guidance for jurisdictions on how to complete the required analysis. The commenter stated that such guidance should not only include a step-by-step process for assessing community vulnerability to climate change and natural hazard risks but also should facilitate the identification and incorporation of actions that build resilience to these risks in the Consolidated Planning process. The commenter stated that developing more detailed guidance also would reduce the burden placed on jurisdictions by providing greater clarity on how to conduct a robust resiliency analysis, and would enhance consistency among and improve confidence in resiliency analyses as well as facilitate the review and approval of Consolidated Plans by HUD.

    HUD Response: HUD plans to provide further guidance once the rule is implemented, but since the Consolidated Plan is completed through the e-Con Planning Suite template, the template provides a uniform and flexible template that helps ensure the Consolidated Plan is complete per the regulations found in 24 CFR part 91. Each screen in the template cites the specific section(s) of the regulations that the screen is designed to capture. Each screen includes a combination of prepopulated data tables and narrative sections that set a baseline for HUD's expectations for the amount of information required. HUD anticipates providing this same format for both broadband and resilience assessment requirements.

    Comment: Ensure that grantees take steps to reduce the risks of natural hazards. A commenter stated that HUD's proposed rule does not ensure that grantees will take steps to reduce these risks or disparities. The commenter stated that, as written, the proposed rule explicitly, “does not mandate that actions be taken to address . . . climate change adaptation needs” and requires nothing of grantees beyond gaining knowledge of climate change risks. The commenter stated that HUD's rule should ensure that grantees take reasonable and adequate steps to both assess climate change risks and develop and incorporate reasonable and effective climate change risk mitigation strategies into their Consolidated Plans and project designs. The commenter stated that without such strategies, the rule would continue to allow HUD to invest in community development projects that may not be resilient to the effects of climate change and could put communities at risk. This commenter also stated that to ensure some level of accountability HUD's final rule should state that if grantees invest HUD funds in community development projects that do not include designs and/or strategies to reduce identified climate risks, HUD could reduce funding to that grantee in the future.

    HUD Response: Through the Consolidated Planning process, jurisdictions will continue to have the flexibility to determine their own needs and priorities for distributing HUD funds. The rule provides for the incorporation of broadband and resilience to natural hazard risks into the existing needs assessment and market analysis required under the Consolidated Planning process. However, it is up to the jurisdiction through its needs assessment process to determine whether to select either of these issues as a priority need. The grantee would identify the financial and organizational resources available to address its priority needs. In the Consolidated Planning process, the level of resources available will play a key role in determining strategies and goals. Once broadband access or increasing resilience have been selected as a priority need, grantees would then develop a set of goals based on the availability of resources, and local organizational capacity. However, the statutory authority for the Consolidated Plan process and the formula funding programs remain the same. HUD has no authority to require that grantees carry out certain types of activities or to achieve specific objectives.

    Comment: Look at climate risk between disasters, not just risk post-disaster. A commenter stated that it is essential that jurisdictions look at climate risk between disasters, not just in a post-disaster context. The commenter stated that identifying vulnerabilities during calmer times gives the jurisdiction the opportunity to address those challenges before the next disaster. The commenter stated that HUD should be mindful that pre-disaster planning is a preferable process, as post-disaster—when communities are in crisis—is an incredibly difficult time to be strategic. In response to HUD's specific inquiry regarding post-disaster reviews, another commenter stated that it strongly believes that jurisdictions should be required to conduct reviews and revisions of their resilience analysis following any major disaster. The commenter stated that this post-disaster review would not only enable jurisdictions to determine if the disaster introduced new hazard risks, but would also serve an important function in forcing jurisdictions to face and reconcile weaknesses and oversights within their previous plans.

    HUD Response: HUD agrees that it is important to review needs not only in a post-disaster context but also between disasters. The inclusion of an assessment of resilience in the Consolidated Plan is not intended to apply to the post-disaster context, but rather is designed to help all grantees be better prepared if a disaster were to occur in the future. The Consolidated Plan is based on a community's strategic plan over the next 3-5 years. The use of climate resilience data will help a community identify its vulnerabilities and determine whether there are priorities that the jurisdiction can address, as well as develop preventive measures to address known issues in advance of a disaster occurring. HUD appreciates the commenter responding to its specific inquiry about post-disaster reviews. HUD is not mandating such review in this final rule but encourages jurisdictions to undertake these types of assessments.

    Comment: Ensure communities are aware of local hazard mitigation plans. A commenter stated that guiding communities to consider and integrate this information into their Consolidated Plans is an excellent move by HUD, assuring that risk reduction dovetails with a community's economic and social development goals. The commenter stated that its concern is that communities may not be aware of the existence of local hazard mitigation plans, and may unfortunately duplicate efforts that have already been expended on their behalf. The commenter stated that its hope is that in the guidance for the rule, HUD would direct communities to explore with local emergency managers and planners the existence of current local hard mitigation plans, consider the content of those plans (which often includes information about low-income areas and vulnerability), and then use the information to inform decisions made in the Consolidated Plans, referring to the mitigation plan documents for justification or further data. The commenter stated that in this way, there will be no duplication of effort, no confusion as to valid risk assessment data, and the integration of mitigation measures, policies and programs will be a seamless practice across a community's planning portfolio.

    HUD Response: HUD's rule addresses the commenter's concern by requiring jurisdictions to consult with State and local emergency managers (who are responsible for developing the State and local hazard mitigation plans).

    Comment: Coordinate and align with existing Federal, State and local natural hazard risk management plans. A commenter stated that while it understands HUD's intent to ensure that communities consider resilience to natural hazard risks as a part of the Consolidated Plan, the proposal goes about it in the wrong way. The commenter stated that instead of asking communities to undertake potentially new, unnecessary, and duplicative analysis, HUD should focus on encouraging coordination and alignment with the pre-existing Federal, State, and local plans that they already follow to comply with the various programs that focus on resilience and natural hazard planning. The commenter stated that it is concerned by the list of resources in the rule and cites to the “Impact of Climate Change and Population Growth on the National Flood Insurance Program Through 2100” as an example of such concern. The commenter expressed concerns that the implication that this study could be included as the basis of specific management decisions at a community level, since it would seem to run counter to the scope and objectives of the study. The commenter stated that the uncertainty that remains in accounting for mapping future conditions, such as risks due to changes caused by climate change, is the very reason that multiple segments of the National Flood Insurance Program (NFIP) continue to examine the issue and how it might best be addressed. The commenter stated that given that it is an ongoing topic currently being studied by issue area experts such as the Technical Mapping Advisory Council (TMAC), this is not something that individual communities should be expected to get out in front of. The commenter further stated that as the NFIP falls completely outside the jurisdiction and expertise of HUD, the potential unintended consequences may not be fully understood. The commenter stated that if HUD chooses to move forward with promulgation of this rulemaking and provide communities with a list of suggested resources for them to consider, HUD should concentrate on more practical planning resources which will still provide communities flexibility such as the Community Resilience Planning Guide for Buildings and Infrastructure Systems prepared by the National Institute of Standards and Technology (NIST)

    HUD Response: HUD agrees that it will continue to encourage coordination and alignment with the pre-existing Federal, State, and local plans that focus on resilience and natural hazard planning is a benefit to the jurisdiction.

    Comment: Require States and local jurisdictions to take action to improve natural hazard resilience to protect Federal taxpayer investments. A commenter expressed strong support for the rule but expressed disappointment that the rule does not require actions to be taken. The commenter stated that it believes that there should be a much stronger attempt to compel States and communities to take action to improve natural hazard resilience to protect federal taxpayer investments—not merely just require an assessment of it.

    HUD Response: HUD reiterates that the Consolidated Planning process provides States and local government the flexibility and responsibility to determine where HUD funding should be expended. Through the Consolidated Planning process, jurisdictions will continue to have the flexibility to determine their own needs and priorities for distributing funds covered by the Consolidated Plan process. It will be up to a jurisdiction through its needs assessment process to determine whether to select either of these issues as a priority need. HUD has no authority to require that grantees carry out certain types of activities or to achieve specific objectives.

    Comment: Ensure that jurisdictions comply with the Federal Flood Risk Management Standard (FFRMS). A commenter stated that HUD must ensure that jurisdictions funded by HUD comply with the FFRMS, established by Executive Order 13690 (E.O. 13690) and Executive Order 11988 (E.O. 11988). The commenter stated that the FFRMS not only reinforces the original intent of E.O. 11988—“to avoid to the extent possible the long and short-term adverse impacts associated with the occupancy and modification of floodplains and to avoid direct or indirect support of floodplain development wherever there is a practicable alternative,” but expands upon it by requiring the federal government to “take action, informed by the best-available and actionable [climate] science,” to improve the nation's resilience to flooding.

    The commenter stated that the importance of transitioning from an emphasis on flood protection to a broader focus on flood risk management cannot be overstated because floodwaters can never be completely controlled, nor the risks associated with flooding completely eliminated. This is especially true when the impacts of climate change are considered.

    HUD Response: HUD is addressing this issue through separate rulemaking.

    IV. This Final Rule

    As noted in Section III of this preamble, this final rule makes one change from the proposed rule. In response to public comment, HUD no longer identifies in the regulatory text specific recommended sources for Consolidated Plan jurisdictions to consult for both assessments. When included in the regulatory text, commenters thought these were required sources to consult, rather than recommended sources. HUD agrees with the commenters that such sources may change over time or their names may change, or new sources will be introduced. HUD agreed with the commenters that the better approach is to list these sources outside of the regulation, in guidance.

    Consultation and citizen participation requirements (§§  91.100, 91.105, 91.110, 91.115). HUD's currently codified Consolidated Plan regulations require that local governments and States consult public and private agencies that provide assisted housing, health services, and social and fair housing services during preparation of the Consolidated Plan. Under the currently codified regulations, local governments and States are also required, in their citizen participation plan, to encourage the participation of local and regional institutions and businesses in the process of developing and implementing their Consolidated Plans. This rule amends these requirements to specify that local governments and States must consult with public and private organizations, including broadband internet service providers, and other organizations engaged in narrowing the digital divide. Further, the citizen participation plan must encourage their participation in implementing any components of the plan designed to narrow the digital divide for low-income residents. The rule also requires local governments and States to consult with agencies whose primary responsibilities include the management of flood prone areas, public land, or water resources, and emergency management agencies in the process of developing the Consolidated Plan.

    Contents of Consolidated Plan (§§  91.5, 91.200, 9.200, 91.210, 91.300, 91.310). The rule makes several changes to these sections in subparts C and D of HUD's regulations 24 CFR part 91, which establish the required contents of the Consolidated Plan.

    First, the rule requires that, in describing their consultation efforts, local governments and States describe their consultations with public and private organizations, including broadband internet service providers, other organizations engaged in narrowing the digital divide, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies.

    Second, the jurisdiction must also describe broadband needs in housing occupied by low- and moderate-income households based on an analysis of data, identified by the jurisdiction, for its low- and moderate-income neighborhoods.

    Third, the rule requires the jurisdiction to provide an assessment of natural hazard risk to low- and moderate-income residents based on an analysis of data identified by the jurisdiction. Possible sources of such data include (1) the most recent National Climate Assessment, (2) the Climate Resilience Toolkit, (3) the Community Resilience Planning Guide for Buildings and Infrastructure Systems prepared by the National Institute of Standards and Technology (NIST), or (4) other climate risk-related data published by the Federal government or other State or local government climate risk related data, including FEMA-approved hazard mitigation plans which incorporate climate change. HUD encourages the use of other plans, including a jurisdiction's hazard mitigation plan, in identifying community needs and priorities.

    By undertaking these two analyses as part of their Consolidated Planning, HUD believes that jurisdictions become better informed of two emerging community needs in the world today: (1) The importance of broadband access, which opens up opportunity to a wide range of services, markets, jobs, educational, cultural and recreational opportunities; and (2) the importance of being cognizant and prepared for environmental and geographical conditions that may threaten the health and safety of communities. As noted earlier in this preamble, HUD is not mandating that jurisdictions take actions in either of these areas, but HUD believes that these are two areas that must be taken into consideration in a jurisdiction's planning for its expenditure of HUD funds.

    V. Findings and Certifications Regulatory Review—Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned. Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. This rule was determined to be a “significant regulatory action” as defined in section 3(f) of the Executive Order (although not an economically significant regulatory action, as provided under section 3(f)(1) of the Executive Order).

    As noted, the regulatory amendments are designed to assist Consolidated Plan jurisdictions in assessing two emerging needs of communities in this changing world. Specifically, the final rule directs States and local governments to consider broadband access and natural hazard resilience in their consolidated planning efforts by using readily available data sources. Where access to broadband Internet service is either not currently available or only minimally available, jurisdictions will be required to consider ways to bring broadband Internet access to low- and moderate-income residents, including how HUD funds could be used to narrow the digital divide for these residents. Further, where low- and moderate-income communities are at risk of natural hazards, including those that may be exacerbated due to climate change, States and local governments must consider ways to incorporate hazard mitigation and resilience into their community planning and development goals, including the use of HUD funds.

    Benefits and Costs of the Final Rule A. Benefits

    The Consolidated Planning process benefits jurisdictions by establishing the framework for a community-wide dialogue to identify housing and community development needs for 1,255 jurisdictions, including 1,205 localities and all 50 States. Rather than a piecemeal approach to planning based on differing program requirements, the Consolidated Plan enables a holistic approach to the assessment of affordable housing and community development needs and market conditions. HUD established the Consolidated Plan, through a 1994 final rule, for the explicit purpose of linking disparate program planning requirements, thereby ensuring “that the needs and resources of . . . [jurisdictions] are included in a comprehensive planning effort to revitalize distressed neighborhoods and help low-income residents locally.” 3 The Consolidated Plan replaced a dozen separate planning mechanisms with a unified approach enabling communities to make data-driven, place-based investment decisions.

    3 60 FR 1878 (January 5, 1994).

    New housing and community development needs have arisen in the 21 years since the Consolidated Plan was created. Two of the most pressing emerging needs facing communities in the twenty-first century are the digital divide and climate change. Despite the benefits described above of a comprehensive approach to planning and the allocation of scarce Federal dollars, jurisdictions are not currently required to consider either the digital divide or climate change resilience in development of their Consolidated Plans. Jurisdictions may therefore place a low priority on assessing, and using Federal dollars to address, these critical issues relative to other needs included in the Consolidated Plan. As a worst-case scenario, omitting these needs from the consolidated planning process could mean that communities elect to defer considering these needs.

    The direct benefits provided by the final rule are, therefore, to help ensure that Consolidated Plan jurisdictions consider broadband access and natural hazard resilience as part of their comprehensive assessment and planning efforts, including their determination of the most effective use of HUD grant funds.

    B. Costs

    The costs of the revised consultation and reporting requirements will not be substantial since the regulatory changes made by this final rule build upon similar existing requirements for other elements covered by the consolidated planning process rather than mandating completely new procedures.

    A complete Consolidated Plan that contains both a Strategic Plan and Annual Action Plan is submitted once every 3 to 5 years. An Annual Action Plan is submitted once a year. HUD data indicate that the cost of preparing the Strategic Plan for a locality is $5,236, and for a State is $14,382. The cost of preparing the Annual Action Plan is $1,904 for a locality and $6,392 for each State. HUD estimates that the increase in costs resulting from addressing the new elements under the new rule will be minimal. Specifically, HUD estimates that cost to a locality of preparing the Strategic Plan will increase to $5,406, while the cost to a State will increase to $14,552. This represents an increase of $170 per locality as well as per State. The cost of preparing the Annual Action Plan will also increase by the same amount, to $2,074 for a locality and $6,562 for a State. While these are not trivial amounts, they are not substantial when considered in proportion to HUD grant funding (for example, the average CDBG grant to entitlement communities in FY 2012 was approximately $1.7 million).4

    4 Eugene Boyd, Community Development Block Grants: Recent Funding History (Congressional Research Service, February 6, 2014), available online at: https://www.hsdl.org/?view&did=750383.

    The amounts of the increased costs are based on HUD's estimate of the increased number of hours it will take jurisdiction to complete the new assessments. The table below summarizes the cost of the increased burden hours across all jurisdiction that submit a Consolidated Plan.

    Consolidated plan tasks Number of respondents Increased burden hours Cost per hour 5 Completed consolidated plan Localities Strategic Plan Development 1205 5 34 $204,850 Action Plan Development 1205 5 34 204,850 States Strategic Plan Development 50 5 34 8,500 Action Plan Development 50 5 34 8,500 Total $426,700

    5 Assumes a blended hourly rate that is equivalent to a GS-12, Step 5 Federal Government Employee

    Further, and as noted elsewhere in this preamble, HUD has taken several actions to further mitigate the cost of the regulatory changes. Jurisdictions will be able to base the required assessments on data that are already readily available on the Internet, and provided to grantees via the eCon Planning Suite. Therefore, jurisdictions will not have to incur the expense and administrative burdens associated with collecting data. Moreover, the proposed rule does not mandate that actions be taken to address broadband needs or climate change needs. Consolidated plan jurisdictions are in the best position to decide how to expend their HUD funds. However, HUD believes that the additional analyses required by this proposed rule may highlight areas where expenditure of funds would assist in opening up economic opportunities through increased broadband access or mitigate the impact of possible natural hazard risks and climate change impacts. HUD leaves it to jurisdictions to consider any appropriate methods to promote broadband access or protect against the adverse impacts of climate change, taking into account the other needs of their communities, and available funding, as identified through the consolidated planning process.

    The docket file is available for public inspection in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the docket file by calling the Regulation Division at 202-402-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Relay Service at 800-877-8339.

    Paperwork Reduction Act

    The information collection requirements contained in this rule have been submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), and assigned an OMB control number 2506-0117.

    Impact on Small Entities

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.

    The rule will amend the Consolidated Plan regulations to require that States and local governments consider (1) broadband Internet service access for low- and moderate-income households to; and (2) the risk of potential natural hazards, including those that may be exacerbated due to climate change, to low- and moderate-income residents in their jurisdictions. As noted above under the heading “Regulatory Review” in the “Findings and Certifications” section of this preamble, HUD's analysis of the economic costs associated with the new regulatory requirements indicate that the final rule will not impose significant economic burdens on HUD grantees, irrespective of their size.

    The RFA defines small governmental jurisdictions as those with a population of less than 50,000 persons.6 As discussed above, the Consolidated Planning process establishes the framework for identifying housing and community development needs for 1,255 jurisdictions, including 1,205 localities and all 50 States. Although HUD does not have precise data indicating the number of small Consolidated Plan localities as defined by the RFA, data from the Decennial census indicates that there are 758 large incorporated places.7 This leaves an estimated 447 small Consolidated Planning jurisdictions. This number represents a minority of 37 percent of all jurisdictions. As noted above, HUD estimates that cost to a locality of preparing the Strategic Plan (which is submitted once every 3 to 5 years) will increase by $170 per locality. The cost of preparing the Annual Action Plan will also increase by the same amount. Assuming submission of the Strategic Plan on 3-year cycle, the total annual costs directly attributable to this rule is $270 per locality.8 The increased costs are minimal when considered in proportion to HUD grant funding. For example, and as noted above, the average CDBG grant to entitlement communities in FY 2012 was approximately $1.7 million).

    6 5 U.S.C. 601(5).

    7https://www.census.gov/popest/data/cities/totals/2015/.

    8 Diving the increased cost of preparing the Strategic Plan by three to arrive at an annual figure ($170/3 = $57), and adding to the $170 increased cost of preparing the Annual Action Plan. $57 + $170 = $270.

    Moreover, HUD has taken several measures to even further minimize the costs associated with complying with the rule. As discussed above, jurisdictions will have the option to complete the required assessments using data that has already been compiled and readily available on the Internet. Jurisdictions will, therefore, not have to incur the expense and administrative burdens associated with collecting and analyzing data. Further, the rule does not mandate that any actions be taken in response to the required assessments. Jurisdictions retain the discretion to consider the most appropriate methods to address their assessments, taking into account other needs identified as part of the Consolidated Planning process as well as financial and other resource constraints.

    This rule therefore, which only requires consideration of the broadband and natural hazards resilience needs of low-income communities, has a minimal cost impact on all grantees subject to the Consolidated Planning process, whether large or small, and will not have a significant economic impact on substantial number of small entities.

    Environmental Review

    This final rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern, or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, or establish, revise or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this final rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

    Executive Order 13132, Federalism

    Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule imposes either substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule would not have federalism implications and would not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive Order.

    Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments, and on the private sector. This rule would not impose any federal mandates on any State, local, or tribal governments, or on the private sector, within the meaning of the UMRA.

    List of Subjects in 24 CFR Part 91

    Aged, Grant programs—housing and community development, Homeless, Individuals with disabilities, Low- and moderate-income housing, Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, HUD amends 24 CFR part 91 as follows:

    PART 91—CONSOLIDATED SUBMISSIONS FOR COMMUNNITY PLANNING AND DEVELOPMENT PROGRAMS 1. The authority citation for part 91 continues to read as follows: Authority:

    42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388, 12701-12711, 12741-12756, and 12901-12912.

    Subpart A—General 2. In §  91.100, add two sentences to the end of paragraph (a)(1) to read as follows:
    §  91.100 Consultation; local governments.

    (a) * * *

    (1) * * * When preparing the consolidated plan, the jurisdiction shall also consult with public and private organizations. Commencing with consolidated plans submitted on or after January 1, 2018, such consultations shall include broadband internet service providers, organizations engaged in narrowing the digital divide, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies.

    3. In §  91.105, add two sentences at the end of paragraph (a)(2)(ii) to read as follows:
    §  91.105 Citizen participation plan; local governments.

    (a) * * *

    (2) * * *

    (ii) * * * The jurisdiction shall encourage the participation of public and private organizations. Commencing with consolidated plans submitted on or after January 1, 2018, such consultations shall include broadband internet service providers, organizations engaged in narrowing the digital divide, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies in the process of developing the consolidated plan.

    4. In § 91.110, add two sentences at the end of paragraph (a) introductory text to read as follows:
    § 91.110 Consultation; States.

    (a) * * * When preparing the consolidated plan, the State shall also consult with public and private organizations. Commencing with consolidated plans submitted on or after January 1, 2018, such consultations shall include broadband internet service providers, organizations engaged in narrowing the digital divide, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies.

    5. In § 91.115, add a sentence at the end of paragraph (a)(2)(ii) to read as follows:
    § 91.115 Citizen participation plan; States.

    (a) * * *

    (2) * * *

    (ii) * * * Commencing with consolidated plans submitted in or after January 1, 2018, the State shall also encourage the participation of public and private organizations, including broadband internet service providers, organizations engaged in narrowing the digital divide, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies in the process of developing the consolidated plan.

    Subpart C—Local Governments; Contents of Consolidated Plan 6. In § 91.200, redesignate paragraph (b)(3)(iv) as paragraph (b)(3)(vi), and add new paragraphs (b)(3)(iv) and (v) to read as follows:
    § 91.200 General.

    (b) * * *

    (3) * * *

    (iv) Commencing with consolidated plans submitted on or after January 1, 2018, public and private organizations, including broadband internet service providers and organizations engaged in narrowing the digital divide;

    (v) Commencing with consolidated plans submitted on or after January 1, 2018, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies; and

    7. Revise § 91.210(a) to read as follows:
    § 91.210 Housing market analysis.

    (a) General characteristics. (1) Based on information available to the jurisdiction, the plan must describe the significant characteristics of the jurisdiction's housing market, including the supply, demand, and condition and cost of housing and the housing stock available to serve persons with disabilities, and to serve other low-income persons with special needs, including persons with HIV/AIDS and their families.

    (2) Data on the housing market should include, to the extent information is available, an estimate of the number of vacant or abandoned buildings and whether units in these buildings are suitable for rehabilitation.

    (3) The jurisdiction must also identify and describe any areas within the jurisdiction with concentrations of racial/ethnic minorities and/or low-income families, stating how it defines the terms “area of low-income concentration” and “area of minority concentration” for this purpose. The locations and degree of these concentrations must be identified, either in a narrative or on one or more maps.

    (4) Commencing with consolidated plans submitted on or after January 1, 2018, the jurisdiction must also describe the broadband needs of housing occupied by low- and moderate-income households based on an analysis of data, identified by the jurisdiction, for its low- and moderate-income neighborhoods. These needs include the need for broadband wiring and for connection to the broadband service in the household units and the need for increased competition by having more than one broadband Internet service provider serve the jurisdiction.

    (5) Commencing with consolidated plans submitted on or after January 1, 2018, the jurisdiction must also describe the vulnerability of housing occupied by low- and moderate-income households to increased natural hazard risks associated with climate change based on an analysis of data, findings, and methods identified by the jurisdiction in its consolidated plan.

    Subpart D—State Governments; Contents of Consolidated Plan 8. In § 91.300, remove the word “and” following the semicolon at the end of paragraph (b)(3)(iii), redesignate paragraph (b)(3)(iv) as paragraph (b)(3)(vi), and add new paragraphs (b)(3)(iv) and (v) to read as follows:
    § 91.300 General.

    (b) * * *

    (3) * * *

    (iv) Commencing with consolidated plans submitted on or after January 1, 2018, public and private organizations, including broadband internet service providers and organizations engaged in narrowing the digital divide;

    (v) Commencing with consolidated plans submitted on or after January 1, 2018, agencies whose primary responsibilities include the management of flood prone areas, public land or water resources, and emergency management agencies; and

    9. Revise §  91.310(a) to read as follows:
    §  91.310 Housing market analysis.

    (a) General characteristics. (1) Based on data available to the State, the plan must describe the significant characteristics of the State's housing markets (including such aspects as the supply, demand, and condition and cost of housing).

    (2) Commencing with consolidated plans submitted on or after January 1, 2018, the State must describe the broadband needs of housing in the State based on an analysis of data identified by the State. These needs include the need for broadband wiring and for connection to the broadband service in the household units, the need for increased competition by having more than one broadband Internet service provider serve the jurisdiction.

    (3) Commencing with consolidated plans submitted on or after January 1, 2018, the State must also describe the vulnerability of housing occupied by low- and moderate-income households to increased natural hazard risks due to climate change based on an analysis of data, findings, and methods identified by the State in its consolidated plan.

    Dated: December 14, 2016. Harriet Tregoning, Principal Deputy Assistant Secretary for Community Planning and Development. Nani A. Coloretti, Deputy Secretary.
    [FR Doc. 2016-30421 Filed 12-15-16; 8:45 am] BILLING CODE 4210-67-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9803] RIN 1545-BL87 Treatment of Certain Transfers of Property to Foreign Corporations AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Final regulations.

    SUMMARY:

    This document contains final regulations relating to certain transfers of property by United States persons to foreign corporations. The final regulations affect United States persons that transfer certain property, including foreign goodwill and going concern value, to foreign corporations in nonrecognition transactions described in section 367 of the Internal Revenue Code (Code). The regulations also combine certain sections of the existing regulations under section 367(a) into a single section. This document also withdraws certain temporary regulations.

    DATES:

    Effective date: These regulations are effective on December 16, 2016.

    Applicability date: For dates of applicability, see §§ 1.367(a)-1(g)(5), 1.367(a)-2(k), 1.367(a)-4(b), and 1.367(a)-6(j); 1.367(d)-1(j); and 1.6038B-1(g)(7).

    FOR FURTHER INFORMATION CONTACT:

    Ryan A. Bowen, (202) 317-6937 (not a toll-free number).

    SUPPLEMENTARY INFORMATION:

    Paperwork Reduction Act

    The collections of information contained in the regulations have been submitted for review and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-0026.

    The collections of information are in § 1.6038B-1(c)(4) and (d)(1). The collections of information are mandatory. The likely respondents are domestic corporations. Burdens associated with these requirements will be reflected in the burden for Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Estimates for completing the Form 926 can be located in the form instructions.

    An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number.

    Books and records relating to a collection of information must be retained as long as their contents might become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

    Background

    This document contains final regulations issued under sections 367 and 6038B of the Code. Temporary regulations were published on May 16, 1986 (TD 8087, 51 FR 17936) (the 1986 temporary regulations). Proposed regulations under these sections were published on September 16, 2015 (80 FR 55568) (the proposed regulations). Written comments to the proposed regulations were received, and a public hearing was held on February 8, 2016. All comments are available at www.regulations.gov or upon request.

    The proposed regulations generally provided five substantive changes from the 1986 temporary regulations: (1) Eliminating the favorable treatment for foreign goodwill and going concern value by narrowing the scope of the active trade or business exception under section 367(a)(3) (ATB exception) and eliminating the exception under § 1.367(d)-1T(b) that provides that foreign goodwill and going concern value is not subject to section 367(d); (2) allowing taxpayers to apply section 367(d) to certain property that otherwise would be subject to section 367(a); (3) removing the twenty-year limitation on useful life for purposes of section 367(d) under § 1.367(d)-1T(c)(3); (4) removing the exception under § 1.367(a)-5T(d)(2) that permits certain property denominated in foreign currency to qualify for the ATB exception; and (5) changing the valuation rules under § 1.367(a)-1T to better coordinate the regulations under sections 367 and 482 (including temporary regulations under section 482 issued with the proposed regulations (see § 1.482-1T(f)(2)(i), TD 9738, 80 FR 55538).

    Specifically with regard to the ATB exception, the proposed regulations revised the categories of property that are eligible for the ATB exception so that foreign goodwill and going concern value cannot qualify for the exception. Under the 1986 temporary regulations, all property was eligible for the ATB exception, subject only to five narrowly tailored exceptions. In addition to limiting the scope of the ATB exception, the proposed regulations also implemented changes to the ATB exception that were intended to consolidate various provisions and update the 1986 temporary regulations in response to subsequent changes to the Code.

    The proposed regulations did not resolve the extent to which property, including foreign goodwill and going concern value, that is not explicitly enumerated in section 936(h)(3)(B)(i) through (v) (enumerated section 936 intangibles) is described in section 936(h)(3)(B) and therefore subject to section 367(d) or instead is subject to section 367(a) and not eligible for the ATB exception. All property that is described in section 936(h)(3)(B) is referred to at times in this preamble as “section 936 intangibles.” Nonetheless, the proposed regulations permitted taxpayers to apply section 367(d) to such property. Under this rule, a taxpayer that has historically taken the position that goodwill and going concern value is not described in section 936(h)(3)(B) could apply section 367(d) to such property.

    These regulations generally finalize the proposed regulations, as well as portions of the 1986 temporary regulations, as amended by this Treasury decision. Although minor wording changes have been made to certain aspects of those portions of the 1986 temporary regulations, the final regulations are not intended to be interpreted as making substantive changes to those regulations. Further explanation of the proposed regulations can be found in the Explanation of Provisions section of the preamble to the proposed regulations. That Explanation of Provisions section is hereby incorporated as appropriate into this preamble.

    Summary of Comments and Explanation of Revisions

    Nineteen sets of comments were received in response to the proposed regulations, and three speakers presented at the public hearing. In drafting the final regulations, the Treasury Department and the IRS carefully considered all of the comments received.

    This section of the preamble is comprised of five parts that discuss, in turn, the comments received with respect to (i) the elimination of the favorable treatment of transfers of foreign goodwill and going concern value, (ii) the useful life of property for purposes of applying section 367(d), (iii) the applicability date of the final regulations, (iv) the qualification of property denominated in foreign currency for the ATB exception, and (v) other issues.

    I. Foreign Goodwill and Going Concern Value A. Overview

    The Treasury Department and the IRS received a variety of comments in response to the proposed elimination of the favorable treatment of transfers of foreign goodwill and going concern value provided by the 1986 temporary regulations. Two comments supported the treatment of foreign goodwill and going concern value under the proposed regulations. One comment asserted that allowing intangible property to be transferred outbound in a tax-free manner is inconsistent with the policies of section 367. Other comments acknowledged the concerns about tax avoidance described in the preamble to the proposed regulations, but requested specific exceptions for transfers of foreign goodwill and going concern value in situations that the comments asserted were not abusive. Other comments disagreed more fundamentally with the approach taken and stated that the Treasury Department and the IRS should withdraw the proposed regulations entirely. Many of these comments asserted that eliminating the favorable treatment of transfers of foreign goodwill and going concern value would be an invalid exercise of regulatory authority under section 367.

    Overall, the comments indicated widely divergent understandings of the nature of foreign goodwill and going concern value. Accordingly, the comments also widely differed in their proffered justifications for an exception for foreign goodwill and going concern value and in the recommended contours of an appropriate exception. The variance in the comments regarding these fundamental issues highlights the difficulty of permitting some form of favorable treatment for foreign goodwill and going concern value while preventing tax avoidance.

    As described in greater detail in Part I.B of this Summary of Comments and Explanation of Revisions, and consistent with the proposed regulations, the final regulations eliminate the favorable treatment of foreign goodwill and going concern value contained in the 1986 temporary regulations. The Treasury Department and the IRS have determined that this change is necessary to carry out the tax policy embodied in section 367 in a fair, impartial, and reasonable manner, taking into account the intent of Congress, the realities of relevant transactions, the need for the IRS to administer the rules and monitor compliance, and the overall integrity of the federal tax system. In particular, the final regulations are consistent with the policy and intent of the statute, which does not reference foreign goodwill or going concern value, and with Congress' expectation that the Secretary would exercise the regulatory authority under section 367 to require gain recognition when property is transferred offshore under circumstances that present a potential for tax avoidance.

    B. Interpretation of Section 367 1. Summary of Comments Challenging Authority

    The Treasury Department and the IRS received numerous comments addressing the proposed regulations' treatment of foreign goodwill and going concern value. One comment asserted that the ATB exception must apply to transfers of foreign goodwill and going concern value, because (i) foreign goodwill and going concern value is not a section 936(h)(3)(B) intangible, and so is subject to section 367(a) rather than section 367(d), and (ii) the legislative history indicates that Congress expected that the transfer of such value should be tax-free. The comment further asserted that, because goodwill and going concern value is inextricably linked to the conduct of an active trade or business, the ATB exception necessarily encompasses such transfers. Other comments asserted that finalizing the proposed regulations would represent an unreasonable exercise of regulatory authority because the proposed regulations eliminated the favorable treatment of all transfers of purported foreign goodwill and going concern value, rather than just those transfers that the Treasury Department and the IRS determine are abusive.

    Several comments asserted that the proposed regulations are inconsistent with Congressional intent and cited statements from the legislative history to section 367, such as the following:

    The committee does not anticipate that the transfer of goodwill or going concern value developed by a foreign branch to a newly organized foreign corporation will result in abuse of the U.S. tax system. . . . The committee contemplates that the transfer of goodwill or going concern value developed by a foreign branch will be treated under [the exception for transfers of property for use in the active conduct of a foreign trade or business] rather than a separate rule applicable to intangibles.

    H.R. Rep. No. 98-432, pt. 2, at 1317-19 (1984).

    Comments also asserted that it is inappropriate to use regulatory authority under section 367 to address transfer pricing concerns under section 482.

    2. Response

    The Treasury Department and the IRS do not agree with the foregoing comments. Section 367 generally provides for income recognition on transfers of property to a foreign corporation in certain transactions that otherwise would qualify for nonrecognition. While section 367(a)(3)(A) includes a broad exception to this general rule for property used in the active conduct of a trade or business outside of the United States, grants of rulemaking authority in section 367(a)(3)(A) and (B) authorize the Secretary to exercise administrative discretion in determining the property to which nonrecognition treatment applies under the ATB exception. Moreover, section 367(d) reflects a clear policy that income generally should be recognized with respect to transfers of section 936 intangibles. The 1984 legislative history to section 367 explains that Congress intended for the Secretary to use his “regulatory authority to provide for recognition in cases of transfers involving the potential of tax avoidance.” S. Rep. No. 98-169, at 364 (1984) (emphasis added). The Treasury Department and the IRS have determined that the proposed regulations and these final regulations are consistent with that intention and the authority granted to the Secretary under section 367, based on the fact that the statute does not refer to foreign goodwill and going concern value and the determination that, as described in the preamble to the proposed regulations, the favorable treatment of foreign goodwill and going concern value contravenes the policy that income generally should be recognized with respect to transfers of section 936 intangibles. The remainder of this section discusses subsequent changes to the regulatory, statutory, and market context in which the 1984 legislative history was drafted, in order to reconcile the statements in the 1984 legislative history expressing the expectation that an exception for foreign goodwill and going concern value would not result in abuse with the IRS's contrary experience administering the statute during the intervening years.

    a. The 1980s and Early 1990s

    The Treasury Department and the IRS considered the 1984 legislative history to section 367 in issuing the 1986 temporary regulations. The 1986 temporary regulations gave effect to the statements in the legislative history indicating that Congress anticipated that the transfer of goodwill and going concern value developed by a foreign branch to a newly organized foreign corporation generally would not result in abuse of the U.S. tax system, and, on that basis, that such transfers would benefit from nonrecognition treatment. As a result, the 1986 temporary regulations provide nonrecognition treatment for foreign goodwill and concern value. The 1986 temporary regulations did not provide a conceptual definition of foreign goodwill and going concern value but, in effect, provided a rule for valuing it by describing foreign goodwill and going concern value as the residual value of a business operation conducted outside of the United States after all other tangible and intangible assets have been identified and valued. § 1.367(a)-1T(d)(5)(iii).

    The Treasury Department and the IRS also took into account the 1984 legislative history in issuing the proposed regulations and these final regulations. In doing so, the Treasury Department and the IRS also considered that, in amending section 367 in 1984, Congress did not choose to statutorily mandate any particular treatment of foreign goodwill and going concern value and instead delegated broad authority to the Secretary to promulgate regulations under section 367 to carry out its purposes in this complex area. The Treasury Department and the IRS further considered that the legal and factual context in which the 1984 legislative history was drafted has changed significantly over the last 32 years.

    Before 1993, goodwill and going concern value was not amortizable. As a result, in 1984, much of the case law and policy debate regarding goodwill and going concern value involved sales of business operations at arm's length between unrelated parties, where the taxpayer attempted to minimize the value of goodwill in order to maximize the value of amortizable intangibles. See, for example, Newark Morning Ledger Co. v. United States, 507 U.S. 546 (1993). In 1989, the General Accounting Office analyzed data with respect to unresolved tax cases involving purchased intangibles and found that, presumably in order to minimize the amount of unamortizable goodwill, taxpayers had identified 175 different types of customer-based intangibles that were distinct from goodwill. See General Accounting Office, Report to the Joint Committee on Taxation: Issues and Policy Proposals Regarding Tax Treatment of Intangible Assets, at 3 (Aug. 1991).

    b. Statutory and Regulatory Changes

    In 1993, Congress addressed these valuation disputes between taxpayers and the IRS by enacting section 197, which, similar to the approach taken by the proposed regulations, did not directly address the underlying disagreement about the relative size of goodwill but substantially reduced the stakes of the disagreement. That is, by generally providing for the amortization of goodwill over 15 years, the enactment of section 197 generally eliminated the incentive that existed in 1984, when Congress enacted section 367(d) in its present form, for taxpayers to argue that goodwill has relatively minor value.

    Other law changes since 1984 have increased the relevance of section 367(d) and the incentive for taxpayers to overstate the value attributable to goodwill and going concern value. Before 1997, amounts received under section 367(d) were treated as ordinary income from U.S. sources. In 1997, Congress amended section 367(d)(2)(C) to provide that amounts received under section 367(d) are treated as ordinary income that is sourced in the same manner as a royalty, and thus potentially as from sources outside the United States. Taxpayer Relief Act of 1997, Public Law 105-34, 111 Stat. 788. The 1997 amendments increased the relevance of section 367(d) and the exception for foreign goodwill and going concern value because, before 1997, the consequences under the foreign tax credit limitation of the treatment of section 367(d) deemed royalties as U.S. source income represented a substantial disincentive for taxpayers to structure transactions in a way that would be subject to section 367(d).

    Additionally, the so-called “check-the-box” regulations of § 301.7701-3, published December 18, 1996 (TD 8697, 61 FR 66584), and Congress's enactment in 2006 of the subpart F “look-thru” rule in section 954(c)(6) (Tax Increase Prevention and Reconciliation Act of 2005, Public Law 109-222, 120 Stat. 345), increased the potential benefit to taxpayers from transferring high-value intangibles offshore by reducing obstacles to redeploying cash earned in overseas operations among foreign affiliates without incurring U.S. tax. Both of these changes also facilitate, in certain circumstances, the ability of foreign subsidiaries to license transferred intangibles to affiliates without incurring subpart F income.

    Finally, on January 5, 2009, the Treasury Department and the IRS issued temporary regulations under section 482 (TD 9441, 74 FR 340) related to cost sharing arrangements (subsequently finalized at TD 9568, 76 FR 80082 (Dec. 22, 2011)). The 2009 cost sharing regulations, in particular the supplemental guidance in § 1.482-7T(g) on transfer pricing methods applicable in determining the arm's length price for a platform contribution transaction or PCT (so-called “buy-in payments”), were intended, in part, to address inappropriate income shifting from intangible transfers under the prior cost sharing regulations. Although the prior cost sharing regulations did not provide any favorable treatment for foreign goodwill and going concern value, in the experience of the IRS, taxpayers took positions under those regulations that allowed a domestic cost sharing participant to transfer intangibles to a foreign cost sharing participant for development under a cost sharing arrangement without fully compensating the domestic cost sharing participant for the value of the transferred intangibles. It is also the experience of the IRS that the 2009 cost sharing regulations limited taxpayers' ability to use PCTs in cost sharing arrangements to shift high value intangibles offshore without appropriate compensation, thereby increasing the relative appeal of transferring intangibles in a transaction subject to section 367. Thus, taxpayers began using transactions subject to section 367 to transfer intangibles intended for development under a cost sharing arrangement rather than as part of a PCT.

    c. Changing Markets for Intangibles

    Moreover, since Congress enacted section 367(d) in its current form in 1984, the relative importance of intangibles in the economy and in the profitability of business has increased greatly. According to a joint report issued by the Economic and Statistics Administration and the U.S. Patent and Trademark Office, “IP use permeates all aspects of the economy with increasing intensity and extends to all parts of the U.S.” Justin Antonipillai, Economics and Statistics Administration, & Michelle K. Lee, U.S. Patent and Trademark Office, Intellectual Property and the U.S. Economy, at p.30 (2016). This growing importance is reflected in the significant increase in the portion of business values attributable to intangible assets in the years since 1984, with one study indicating that intangibles accounted for only 32 percent of the market value of the S&P 500 in 1985, but accounted for 84 percent by 2015. Annual Study of Intangible Asset Market Value from Ocean Tomo, LLC (Mar. 4, 2015, 12:00 a.m.), http://www.oceantomo.com/2015/03/04/2015-intangible-asset-market-value-study/. Growth in the share of business values attributable to section 936 intangibles during this period, together with the statutory and regulatory changes discussed in the preceding paragraphs, have increased the incentives for taxpayers to transfer such valuable intangibles to related offshore affiliates in transactions subject to section 367(d) and to misattribute intangible value from enumerated section 936 intangibles to foreign goodwill and going concern value in the context of such transactions.

    d. The Potential for Abuse

    Since 1984, taxpayers have reversed their positions regarding the significance of goodwill and going concern value in response to the enactment of sections 197 and 367(d), and now commonly assert that such value constitutes a large percentage—even the vast majority—of an enterprise's value. The IRS's experience administering section 367(d) has, once again, highlighted the abuse potential that arises from the need to distinguish value attributable to nominally distinct intangibles that are used together in a single trade or business. Specifically, the uncertainty inherent in distinguishing between value attributable to goodwill and going concern value and value attributable to other intangible property makes any exception to income recognition for the outbound transfer of goodwill and going concern value unduly difficult to administer and prone to tax avoidance. Of course, any rule that provides for the tax-free transfer of one type of property, while the transfer of other types of property remains taxable, provides an incentive to improperly allocate value away from the taxable property and onto the tax-free property. This problem is acute, however, in cases involving the offshore reorganization of entire business divisions that include high-value, interrelated intangibles, because goodwill and going concern value are particularly difficult to distinguish (perhaps are even indistinguishable) from the enumerated section 936 intangibles. See, for example, International Multifoods Corp. v. Commissioner, 108 T.C. 25, 42 (1997) (noting that it “is well established that trademarks embody goodwill”). See also Joint Committee on Taxation, Present Law and Background Related to Possible Income Shifting and Transfer Pricing, (JCX-37-10) July 20, 2010, at 110 (noting that unique intangible property is difficult to value because it is rarely, if ever, transferred to third parties).

    e. Legislative Intent and the Broad Grant of Authority To Limit Potential Abuses

    These statutory, regulatory, and market developments since Congress amended section 367(d) in 1984, as well as the experience of the IRS in administering section 367 over that period, inform the manner in which the Treasury Department and the IRS seek to give effect to the intent of Congress in this complex area of law. As a starting point, the Treasury Department and the IRS observe that the statutory grants of authority in section 367(a) and (d), coupled with the absence of any specific statutory protection for transfers of goodwill and going concern value, form the basis for the broad authority of the Treasury Department and the IRS to design the appropriate parameters for the taxation of outbound transfers. The 1984 legislative history expressed an expectation that outbound transfers of foreign goodwill and going concern value would not lead to abuse of the U.S. tax system and, on the basis of that expectation, anticipated that the Secretary would exercise the regulatory authority under section 367 in a manner that would allow taxpayers to transfer foreign goodwill and going concern value outbound without current U.S. tax. The legislative history also explains that Congress expected the Secretary to use the “regulatory authority to provide for recognition in cases of transfers involving the potential of tax avoidance.” Accordingly, the administrative discretion to determine the contours of nonrecognition treatment must be exercised in light of the income recognition objectives of the statute and informed by the IRS's experience in administering the exception.

    The Treasury Department and the IRS have determined that the premise of the expectation noted in the legislative history that an exception to recognition treatment would apply to foreign goodwill and going concern value—namely, that outbound transfers of foreign goodwill and going concern value would not lead to abuse—is inconsistent with the experience of the IRS in administering section 367(d), and consequently no longer supports such an exception. Rather, based on the IRS's experience over the past three decades, the Treasury Department and the IRS have determined that the favorable treatment of foreign goodwill and going concern value has interfered with the application of the general rule in section 367(d) that requires income recognition upon the outbound transfer of section 936 intangibles due to the inherent difficulty of distinguishing value attributable to goodwill and going concern value from value attributable to enumerated section 936 intangibles, coupled with taxpayer efforts to maximize the value allocated to goodwill and going concern value.

    The Treasury Department and the IRS also observe that the 1984 legislative history explains that the 1984 amendments to section 367(d) were made in response to challenges the IRS faced in administering the prior regime. That regime required a taxpayer to clear its purpose for transferring property offshore with the IRS. See H.R. Rep. 98-432, pt. 2, at 1315. The 1984 reworking of section 367 was intended to promote administrability by making the analysis of outbound transfers more objective. Other passages from the legislative history show that the general purpose of the amendments to section 367 was to close “serious loopholes,” and that the 1984 revisions were intended to strengthen the application of that section. Id.

    Accordingly, the Treasury Department and the IRS do not view the legislative history as mandating an exception for transfers of goodwill and going concern value developed by a foreign branch, or as indicating that Congress anticipated, or would have condoned, the extent of the claims regarding foreign goodwill and going concern value that the IRS has in fact encountered. To the contrary, the Treasury Department and the IRS have concluded that the statutory purpose of the income recognition provisions in section 367(d) is incompatible with the favorable treatment of foreign goodwill and going concern value reflected in the 1986 temporary regulations. In particular, taking into account the statutory, regulatory, and market developments since 1984 and the experience of the IRS in administering section 367(d) under the 1986 temporary regulations, the Treasury Department and the IRS have determined that, at this juncture, the approach most consistent with the intent of Congress in 1984, including the directive to use regulatory authority “to provide for recognition in cases of transfers involving the potential of tax avoidance,” is to remove the favorable treatment for foreign goodwill and going concern value in the 1986 temporary regulations.

    The Treasury Department and the IRS also disagree with the notion expressed in comments that the proposed regulations inappropriately attempt to solve section 482 transfer pricing problems under the authority of section 367. Congress made clear in adding the commensurate with income language to both sections 367(d) and 482 in 1986 that the provisions are closely related, and it is within the authority of the Treasury Department and the IRS to consider valuation concerns in administering section 367. Section 1231(e)(1) and (2) of the Tax Reform Act of 1986, Public Law 99-514, 100 Stat. 2085, 2562-3.

    For these reasons, the Treasury Department and the IRS disagree with comments asserting that the Treasury Department and the IRS lack the authority to eliminate the favorable treatment that applied to foreign goodwill and going concern value under the 1986 temporary regulations.

    C. Other Comments Suggesting That Some Favorable Treatment for Transfers of Foreign Goodwill and Going Concern Value Be Maintained

    Several comments generally favored retaining both the nonrecognition treatment for foreign goodwill and going concern value and its current measurement as the residual value of a foreign business operation. Other comments, however, acknowledged the problems associated with the residual valuation approach but supported an exception determined on some other basis. Some of these comments included suggestions for other ways to define goodwill and going concern value and for determining the amount that should qualify for nonrecognition. The Treasury Department and the IRS have determined that none of the comments provided a sufficiently administrable approach that would reliably ensure that section 367 applies with respect to the full value of all section 936 intangibles.

    1. Local Pressure To Incorporate; Industry-Based Exception

    The proposed regulations specifically requested comments on a potential exception that would apply to situations where there is limited potential for abuse. As an example, the comment solicitation posited the incorporation, in response to regulatory pressure or compulsion, of a financial services business that previously had operated as a branch in another country. The Treasury Department and the IRS received several comments in response to this solicitation.

    Several comments suggested that the final regulations provide an exception that would continue to permit favorable treatment of transfers of foreign goodwill and going concern value that occur as a result of the incorporation of a branch in a country that exerts regulatory pressure (either implicit or explicit) upon the U.S. transferor to conduct its operations in that country in corporate form. According to these comments, the incorporation of a branch in these circumstances is not motivated by tax considerations but rather occurs in order to comply with local law or regulations.

    The regulations under section 367 provide that certain property is deemed to be transferred for use in the active conduct of a trade or business outside of the United States when the transfer is either legally required by the local foreign government as a necessary condition of doing business or is compelled by a genuine threat of immediate expropriation by the local foreign government. Section 367 and the regulations thereunder do not, however, provide exceptions to the requirement to recognize income or gain when assets that are not eligible for the ATB exception, such as section 936 intangibles and assets described in section 367(a)(3)(B), are transferred in this circumstance. Accordingly, the policy of section 367 and the regulations thereunder is not to expand on the types of assets that are eligible for the ATB exception in this circumstance. Moreover, the mere fact that a taxpayer is compelled or pressured to incorporate its branch does not mean that the taxpayer has any less incentive to reduce the tax consequences of such incorporation by adopting the aggressive valuation positions that the proposed regulations were intended to prevent. Therefore, the final regulations do not provide a special exception to continue the favorable treatment of foreign goodwill and going concern value in this circumstance. Notably, some taxpayers that are pressured to incorporate branch operations in these circumstances can avoid being subject to section 367 by incorporating the branch using an eligible entity described in § 301.7701-2 that could elect to be treated as a disregarded entity for U.S. federal income tax purposes.

    Several comments recommended an exception for transfers of foreign goodwill and going concern value by taxpayers in certain industries, such as banking and finance, life insurance, and industries that primarily provide services to third parties, asserting that such businesses do not possess the types of highly valuable intangibles about which they believe the Treasury Department and the IRS are concerned. The comments did not provide any basis, however, for the Treasury Department and the IRS to conclude that taxpayers in particular industries consistently lack valuable intangibles of the kind listed in section 936(h)(3)(B), even though the prevalence of specific types of intangibles may differ across industries. Additionally, the ability and incentive to allocate value away from other intangibles, such as trademarks, and toward goodwill or going concern value is not limited to particular industries. As a general matter, the Treasury Department and the IRS attempt, to the extent possible, to avoid issuing guidance based on industry classifications that are not clearly and closely tied to specific tax policy concerns. Accordingly, the final regulations do not provide any industry-specific exceptions.

    Based on these comments, the Treasury Department and the IRS considered whether it would be possible to provide an exception for tax-free transfers of foreign goodwill and going concern value developed by a foreign branch that did not possess or otherwise benefit from the use of any highly valuable enumerated section 936 intangibles. If the absence of such highly valuable intangibles could be reliably determined, the concerns regarding the potential to attribute value away from such intangibles and toward goodwill and going concern value would be mitigated. However, such an exception would require the development and administration of standards to determine whether any enumerated section 936 intangible was highly valuable, an exercise that would be as difficult (and in many circumstance would be no different) than the exercise of distinguishing value attributable to foreign goodwill and going concern value from value attributable to other intangibles transferred together with it. Such an exception also would require a careful examination of the particular facts of a transferor's assets and business as a threshold matter to confirm that valuable enumerated section 936 intangibles are not made available for the benefit of the transferee foreign corporation, either through a separate but related transfer to the foreign corporation or through a service provided to the foreign corporation using such intangibles. Accordingly, the Treasury Department and the IRS did not adopt this potential exception in these final regulations.

    2. Foreign Branch Exception

    Several comments suggested maintaining the favorable treatment of foreign goodwill and going concern value in situations in which section 367 applies to the incorporation of a long-standing foreign branch or a branch that conducts an active foreign business operation. The Treasury Department and the IRS acknowledge that conditioning favorable treatment for foreign goodwill and going concern value on the presence of a robust foreign branch would increase the likelihood that the business at issue has substantive foreign operations. However, in situations where the exception would continue to apply, the requirement of a robust foreign branch would not address the potential for tax avoidance that motivated the proposed regulations when value must be allocated between foreign goodwill and going concern value, on the one hand, and enumerated section 936 intangibles, on the other hand. Thus, the final regulations do not adopt the comments suggesting an exception for goodwill and going concern value developed by a foreign branch that is subsequently incorporated because, when applicable, such an exception would not address the administrative difficulties in identifying and separately valuing the property that is and is not eligible for the exception, and therefore would be insufficient to prevent the potential for tax avoidance.

    3. New Rules for Valuing Foreign Goodwill and Going Concern Value

    Other comments suggested that the regulations provide new rules for determining foreign goodwill and going concern value, such that an exception for such transfers could be provided that would be less susceptible to the abuses described in the preamble to the proposed regulations. That is, the comments suggested determining goodwill and going concern value using an approach that differs from that in existing § 1.367(a)-1T(d)(5)(iii), which treats it as the residual after other intangibles are valued.

    Several of these comments suggested determining foreign goodwill and going concern value by classifying intangibles as routine and non-routine and permitting value attributable to routine intangibles to be transferred tax-free under an exception. One comment asserted that goodwill is relatively easy to value as compared to certain enumerated section 936 intangibles but did not explain why or how goodwill is more easily valued or how to reliably allocate value between goodwill and enumerated section 936 intangibles. Another comment asserted that goodwill can be valued based on the premise that it is the kind of asset that enables an existing business to produce “routine” or “normal” operating profits or cash flow during the period that a new business would be assembling its assets and workforce and attracting a customer base, but the comment did not explain how to determine “routine” or “normal” operating profits.

    Another comment recommended determining foreign goodwill and going concern value using a formulaic approach based on sales and general and administrative expenses, asserting that routine expenses for operational costs and compensation are closely associated with the business activities that give rise to goodwill and going concern value. The comment did not provide any support for this premise. As a general matter, cost-based methods (in comparison with market-based and income-based methods) are not a reliable means of valuing intangible property because the value of intangible property does not necessarily bear any predictable relationship to the costs of developing the property. The comment suggesting a cost-based approach did not demonstrate that determining goodwill and going concern value in the section 367(d) context is a situation where costs are a reliable measure of value (regardless of whether goodwill and going concern value are section 936(h)(3)(B) intangibles). Accordingly, the Treasury Department and the IRS have determined that a rule that determined foreign goodwill and going concern value based on certain expenses would be inappropriate.

    Another comment proposed, for branches incorporated in a jurisdiction with which the United States has an income tax treaty in effect, using the earnings before interest, taxes, depreciation, and amortization of the branch as reported to foreign tax authorities as reliable data on which to base a valuation. An exception based on information reported to a foreign country's tax authority, which may be based on that jurisdiction's generally accepted accounting standards, does not address the concerns expressed by the Treasury Department and the IRS in the preamble to the proposed regulations. Most significantly, the comment does not explain how this information would be useful in determining the value of foreign goodwill and going concern value or distinguishing value attributable to enumerated section 936 intangibles from that of other property, nor have the Treasury Department and the IRS been able to identify how it would be useful. Accordingly, this recommendation has not been adopted.

    In summary, none of the proposed approaches for more directly valuing foreign goodwill and going concern value offer a principled and administrable basis for allocating value between foreign goodwill and going concern value that would be subject to an exception and other intangibles that would not. The Treasury Department and the IRS therefore concluded that the proposed approaches would not provide a meaningful improvement over the residual value approach in the 1986 temporary regulations as a conceptual or administrative matter.

    4. Formulaic Caps on Foreign Goodwill and Going Concern Value

    Several comments suggested that the favorable treatment for transfers of foreign goodwill and going concern value could be maintained while addressing the concerns that prompted the issuance of the proposed regulations by capping the amount that can qualify for the exception, either on a non-rebuttable basis or in the absence of a ruling. For example, one comment suggested that the excepted amount should not exceed 25 percent of the branch's net enterprise value, unless a ruling is obtained from the IRS. The comment asserted that 25 percent represents a modest portion of a branch's value that is likely to be attributable to branch goodwill and going concern value. Another comment suggested that the excepted amount should not exceed 50 percent of the total value of the assets transferred to the foreign corporation. Although such formulaic caps would limit the potential tax avoidance from improperly attributing value from enumerated section 936 intangibles to foreign goodwill and going concern value that is eligible for an exception, the amount excepted under such an approach would still potentially reflect value properly attributable to enumerated section 936 intangibles. That is, with respect to amounts claimed below the cap, a formulaic cap would not relieve the IRS of the need to distinguish foreign goodwill and going concern value from enumerated section 936 intangibles, a key challenge that motivated the approach of the proposed regulations. Moreover, the Treasury Department and the IRS have determined that the discretionary ruling practice proposed by one comment would require an onerous commitment of IRS resources (which the comment acknowledged are constrained), and, without detailed procedures for both identifying and valuing foreign goodwill and going concern value, would simply accelerate the disputes that occur under the 1986 temporary regulations. As a result, the final regulations do not adopt the recommendations to use a formulaic cap to limit the amount of foreign goodwill and going concern value.

    5. Professional Services Exception

    One comment stated that U.S. citizens may conduct professional services outside the United States as sole practitioners, or in partnership with other practitioners, and observed that the incorporation of such a business would entail a section 351 contribution subject to section 367 (assuming the transferee entity was classified as a corporation for U.S. federal income tax purposes). According to the comment, because any goodwill in such a scenario would relate to foreign customers and a foreign business or professional license, there could be no abuse warranting taxation under section 367.

    The Treasury Department and the IRS do not agree that the outbound transfer of value developed in such cases will necessarily not result in abuse of the U.S. tax system. The potential for abuse in a transfer subject to section 367 arises not just from the possibility that value associated with U.S. customers would be denominated as foreign goodwill, but also from the fundamental difficulty in reliably distinguishing value attributable to enumerated section 936 intangibles from value attributable to other intangibles, an issue that is no different in the professional services context. Therefore, the final regulations do not adopt this comment.

    6. Joint Venture Exception

    One comment proposed maintaining the favorable treatment of foreign goodwill and going concern value for transfers to joint venture companies, particularly cases in which the U.S. transferor is going into business with one or more unrelated foreign parties (third parties) and in which the U.S. transferor's interest in the joint venture is equal to or less than 50 percent. According to the comment, the U.S. transferor in this situation has a financial incentive to segregate its intangibles contributed to the joint venture from its other property. The presence of a third party, however, would not necessarily reduce the U.S. transferor's incentive to attribute value to foreign goodwill and going concern value, rather than to enumerated section 936 intangibles, in order to minimize the tax consequences of the transfer, since such a distinction may be irrelevant to the third party. Accordingly, the final regulations do not adopt this proposal.

    D. Classifying Foreign Goodwill and Going Concern Value as Subject to Section 367(a) or (d)

    Several comments requested that the Treasury Department and the IRS address whether goodwill and going concern value should be characterized as a section 936(h)(3)(B) intangible, and thus subject to section 367(d), or instead as property subject to section 367(a). Comments also requested that the regulations provide certainty to taxpayers that have taken the position that goodwill and going concern value is not described in section 936(h)(3)(B) by providing that such taxpayers will be permitted to treat goodwill and going concern value as property subject to section 367(a) rather than section 367(d).

    As discussed in the preamble to the proposed regulations, the Treasury Department and the IRS acknowledge that taxpayers have taken different positions regarding the scope of section 936(h)(3)(B) and that the issue is more significant following the elimination of the favorable treatment for foreign goodwill and going concern value. Any enumerated section 936 intangible, and any item similar to such specifically enumerated intangibles, is subject to the regime provided by section 367(d). The Treasury Department and the IRS have determined that it would be inconsistent with the policy underlying section 367(d) to permit intangible property that is described in section 936(h)(3)(B) to be subject to section 367(a). Accordingly, the Treasury Department and the IRS have determined that it is appropriate to retain the approach provided in the proposed regulations, which allows taxpayers to apply section 367(d) to certain property that otherwise would be taxed under section 367(a) but which continues to require taxpayers to apply section 367(d) to all property described in section 936(h)(3)(B). Because the identification of items that are neither explicitly listed in section 936(h)(3)(B)(i) through (v) nor explicitly listed as potentially qualifying for the ATB exception generally will require a case-by-case functional and factual analysis, the final regulations do not address the characterization of such items as similar items (within the meaning of section 936(h)(3)(B)(vi)) or as something else. In general, potential rules under section 367 for identifying and valuing transferred property are beyond the scope of these final regulations.

    II. Useful Life

    The proposed regulations eliminated the 20-year limitation on useful life for intangible property subject to section 367(d) that was included in § 1.367(d)-1T(c)(3), because of concerns that the limitation results in less than all of the income attributable to transferred intangible property being taken into account by the U.S. transferor. In the preamble to the proposed regulations, the Treasury Department and the IRS solicited comments on how to simplify the administration of section 367(d) inclusions for property with a very long useful life in the absence of the 20-year limitation. In response to this comment solicitation, several comments requested that the final regulations restore the 20-year limitation on useful life because it promotes administrability for both taxpayers and the IRS.

    After considering the comments received, the Treasury Department and the IRS agree that a 20-year limitation on inclusions may promote administrability for both taxpayers and the IRS in cases where the useful life of the transferred property is indefinite or is reasonably anticipated to exceed twenty years. Accordingly, in such cases, the final regulations provide that taxpayers may, in the year of transfer, choose to take into account section 367(d) inclusions only during the 20-year period beginning with the first year in which the U.S. transferor takes into account income pursuant to section 367(d). However, the Treasury Department and the IRS have determined that this optional limitation should not affect the present value of all amounts included by the taxpayer under section 367(d). Accordingly, the final regulations specifically require a taxpayer that chooses to limit section 367(d) inclusions to a 20-year period to include, during that period, amounts that reasonably reflect amounts that, in the absence of the limitation, would be required to be included over the useful life of the transferred property following the end of the 20-year period. This requirement is consistent with the requirement in section 367(d) to include amounts that are commensurate with the income attributable to the transferred intangible during its full useful life, without limitation. The requirement of the final regulations that inclusions during the limited 20-year period begin in the first year in which in which the U.S. transferor takes into account income pursuant to section 367(d) reflects the possibility of delays between the year the intangible property is transferred and the first year in which exploitation of the transferred property results in taxable income being earned by the transferee and included under section 367(d) by the transferor.

    One comment also suggested that the IRS be precluded from making commensurate-with-income adjustments for taxable years beginning more than 20 years after the outbound transfer. In response to this comment, the final regulations provide that, if a taxpayer chooses to limit inclusions under section 367(d) to a 20-year period, no adjustments will be made for taxable years beginning after the conclusion of the 20-year period. Thus, after the statute of limitations expires for taxable years during the 20-year period, a taxpayer will have no further section 367(d) inclusions as a result of the Commissioner's examination of taxable years that begin after the end of the 20-year period. However, consistent with the commensurate-with-income principle, for purposes of determining whether income inclusions during the 20-year period are commensurate with the income attributable to the transferred property, and whether adjustments should be made for taxable years during that period while the statute of limitations for such taxable years is open, the Commissioner may take into account information with respect to taxable years after that period, such as the income attributable to the transferred property during those later years.

    The final regulations revise the definition of useful life to provide that useful life includes the entire period during which exploitation of the transferred intangible property is reasonably anticipated to affect the determination of taxable income, in order to appropriately account for the fact that exploitation of intangible property can result in both revenue increases and cost decreases. A comment asserted that including use in subsequently developed intangibles within the useful life of the transferred intangible property would be too difficult to administer and was not consistent with the arm's length standard. The Treasury Department and the IRS disagree with this comment. The value of many types of intangible property is derived not only from use of the intangible property in its present form, but also from its use in further development of the next generation of that intangible and other property. For example, if a software developer were to sell all of its copyright rights in its software to an unrelated party, and the copyright rights are expected to derive value both from the exclusive right to use the current generation computer code to make and sell current generation software products and from the exclusive right to use the current generation code in the development of other versions of the software, which will then be used to make and sell future generation software products, the software developer would expect to be compensated for the latter right. That is, if the software has value in developing a future generation of products, the software developer would not ignore the value of the use of the software in future research and development and hand over those rights free of charge, and an uncontrolled purchaser would be willing to compensate the developer to obtain such rights.

    III. Applicability Date

    Several comments requested that the final regulations apply to transfers occurring after their date of publication, and not relate back to the date the proposed regulations were issued. These comments asserted that the proposed regulations change long-standing law in a way that would prejudice taxpayers that had arranged their business operations based on the 1986 temporary regulations. Others speculated that the final regulations might deviate from the proposed regulations to such an extent that substantial confusion would result for taxpayers attempting to determine their tax results in the interim period before the final regulations were published. Finally, one comment asserted that an applicability date relating back to the proposed regulations would violate the Administrative Procedure Act (APA), specifically 5 U.S.C. 553, which provides that the effective date of certain final regulations must be at least 30 days after their date of publication.

    After considering these comments, the Treasury Department and the IRS have determined that the proposed applicability date, under which the final regulations would apply to transfers occurring on or after September 14, 2015, should be retained. The proposed regulations were issued to curtail the potential for abuse that exists under the 1986 temporary regulations from treating value that should be attributed to enumerated section 936 intangibles instead as exempt foreign goodwill or going concern value. The proposed effective date was intended to prevent taxpayers from using the time while the proposed regulations were pending to accelerate transfers subject to section 367 in order to take abusive positions under the 1986 temporary regulations before the finalization of the proposed regulations.

    The Treasury Department and the IRS have statutory authority to issue regulations applicable at least as of the date the proposed regulations were filed with the Federal Register. The pre-1996 version of section 7805(b)—which governs regulations related to statutory provisions enacted before July 30, 1996, such as section 367—provides express retroactive rulemaking authority by stating that the Secretary may prescribe the extent, if any, to which any ruling or regulation shall be applied without retroactive effect. Section 7805(b) (1995). Because section 7805(b) is the more specific statute, it controls over the general notice requirements of 5 U.S.C. 553. See, for example, Redhouse v. Commissioner, 728 F.2d 1249, 1253 (9th Cir. 1984); Wing v. Commissioner, 81 T.C. 17, 28-30 & n.17 (1983).

    Finally, the Treasury Department and the IRS disagree with the comment that differences between the proposed and final regulations may create confusion. The final regulations are a logical outgrowth of the proposed regulations in light of the comments received and their consideration by the Treasury Department and the IRS. In particular, the final regulations do not differ from the proposed regulations with respect to the elimination of the favorable treatment for transfers of foreign goodwill and going concern value. Furthermore, a transfer of property that is subject to recognition treatment under section 367 under the final regulations would also have been subject to such treatment under section 367 under the proposed regulations.

    For these reasons, the final regulations generally apply to transfers occurring on or after September 14, 2015, the date the proposed regulations were filed with the Federal Register, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-2 that are filed on or after September 14, 2015.

    IV. Qualification of Property Denominated in Foreign Currency for the ATB Exception

    Although section 367(a)(3)(B)(iii) provides that the ATB exception does not apply, and therefore that section 367(a)(1) applies, to foreign currency or other property denominated in foreign currency, current § 1.367(a)-5T(d)(2) generally provides that section 367(a)(1) nonetheless does not apply to certain transfers of property denominated in the currency of the country in which the transferee foreign corporation is organized. The proposed regulations eliminated this regulatory exception from the general rule in section 367(a)(3)(B)(iii) that turns off the ATB exception for such property. One comment recommended clarifying the regulations under section 367(a) by adopting the language and concepts reflected in the changes to the foreign currency rules in subpart J that were made after the publication of the 1986 temporary regulations. In response to this comment, § 1.367(a)-2(c)(3) of the final regulations, which corresponds to existing § 1.367(a)-5T(d)(2), reflects amendments that increase consistency with the rules in sections 987 and 988. In particular, the terms “foreign currency” and “property denominated in foreign currency” are no longer used. Rather, proposed § 1.367(a)-2(c)(3) is revised to refer to nonfunctional currency and other property that gives rise to a section 988 transaction of the taxpayer described in section 988(c)(1)(B), or that would give rise to such a section 988 transaction if it were acquired, accrued, or entered into directly by the taxpayer. The Treasury Department and the IRS consider that these modifications do not substantially change the scope of property subject to the rule at § 1.367(a)-5T(d)(2).

    V. Other Issues

    Other comments suggested that regulations address many outstanding issues in the context of section 367 that were not addressed in the proposed regulations. These suggestions include guidance to address the following topics: (i) The valuation of intangibles subject to section 367(d) and the forms that deemed payments should take, including guidance providing parity with the section 482 form-of-payment rules; (ii) whether a receivable is created upon an audit-related adjustment; (iii) the tax basis consequences under section 367(d), including how section 367(d) applies to intangibles subject to the section 197 anti-churning rules; (iv) coordination of the general rules and disposition rules in section 367(d); (v) issues raised in connection with Notice 2012-39 (2012-31 IRB 95); (vi) the definition of “property” for purposes of section 367; and (vii) the subsequent transfer rules under the ATB exception.

    The Treasury Department and the IRS generally agree that additional guidance under section 367(a) and (d) is desirable and would benefit both taxpayers and the government. However, these issues are beyond the scope of this project. For example, while the Treasury Department and the IRS are aware that there is uncertainty regarding the application of the subsequent transfer rules to transactions involving hybrid partnerships, the Treasury Department and the IRS have determined that transactions involving partnerships merit a more holistic consideration and that this regulation package is not the appropriate vehicle to address the issue. Consequently, the regulations finalize the subsequent transfer rules in § 1.367(a)-2T(c) (located in § 1.367(a)-2(g) of these final regulations), but the Treasury Department and the IRS expect those rules will be amended after a more detailed consideration of transactions involving partnerships.

    Special Analyses

    Certain IRS regulations, including these, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It is hereby certified that the collection of information contained in these regulations will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required. This certification is based on the fact that the regulations under section 367(a) and (d) simplify existing regulations, and the regulations under section 6038B make relatively minor changes to existing information reporting requirements. Moreover, these regulations primarily will affect large domestic corporations filing consolidated returns. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking that preceded this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. No comments were received.

    Drafting Information

    The principal author of these regulations is Ryan Bowen, Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development.

    List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

    Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

    PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding an entry in numerical order to read as follows: Authority:

    26 U.S.C. 7805 * * *

    Section 1.367(d)-1 also issued under 26 U.S.C. 367(d). * * *

    Par. 2. Section 1.367(a)-0 is added to read as follows:
    § 1.367(a)-0 Table of contents.

    This section lists the paragraphs contained in §§ 1.367(a)-1 through 1.367(a)-8.

    § 1.367(a)-1 Transfers to foreign corporations subject to section 367(a): In general.

    (a) Scope.

    (b) General rules.

    (1) Foreign corporation not considered a corporation for purposes of certain transfers.

    (2) Cases in which foreign corporate status is not disregarded.

    (3) Determination of value.

    (4) In general.

    (5) Treatment of certain property as subject to section 367(d).

    (c) [Reserved].

    (d) Definitions.

    (1) United States person.

    (2) Foreign corporation.

    (3) Transfer.

    (4) Property.

    (5) Intangible property.

    (6) Operating intangibles.

    (e) Close of taxable year in certain section 368(a)(1)(F) reorganizations.

    (f) Exchanges under sections 354(a) and 361(a) in certain section 368(a)(1)(F) reorganizations.

    (1) Rule.

    (2) Rule applies regardless of whether a continuance under applicable law.

    (g) Effective/applicability dates.

    § 1.367(a)-2 Exceptions for transfers of property for use in the active conduct of a trade or business.

    (a) Scope and general rule.

    (1) Scope.

    (2) General rule.

    (b) Eligible property.

    (c) Exception for certain property.

    (1) Inventory.

    (2) Installment obligations, etc.

    (3) Nonfunctional currency, etc.

    (4) Certain leased tangible property.

    (d) Active conduct of a trade or business outside the United States.

    (1) In general.

    (2) Trade or business.

    (3) Active conduct.

    (4) Outside of the United States.

    (5) Use in the trade or business.

    (6) Active leasing and licensing.

    (e) Special rules for certain property to be leased.

    (1) Leasing business of the foreign corporation.

    (2) De minimis leasing by the foreign corporation.

    (3) Aircraft and vessels leased in foreign commerce.

    (f) Special rules for oil and gas working interests.

    (1) In general.

    (2) Active use of working interest.

    (3) Start-up operations.

    (4) Other applicable rules.

    (g) Property retransferred by the foreign corporation.

    (1) General rule.

    (2) Exception.

    (h) Compulsory transfers of property.

    (i) [Reserved].

    (j) Failure to comply with reporting requirements of section 6038B.

    (1) Failure to comply.

    (2) Relief for certain failures to comply that are not willful.

    (k) Effective/applicability dates.

    (1) In general.

    (2) Foreign currency exception.

    § 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.

    (a) In general.

    (1) Overview.

    (2) Exceptions for certain exchanges of stock or securities.

    (3) Cross-references.

    (b) Transfers of stock or securities of foreign corporations.

    (1) General rule.

    (2) Certain transfers subject to sections 367(a) and (b).

    (c) Transfers of stock or securities of domestic corporations.

    (1) General rule.

    (2) Ownership presumption.

    (3) Active trade or business test.

    (4) Special rules.

    (5) Definitions.

    (6) Reporting requirements of U.S. target company.

    (7) Ownership statements.

    (8) Certain transfers in connection with performance of services.

    (9) Private letter ruling option.

    (10) Examples.

    (11) Effective date.

    (d) Indirect stock transfers in certain nonrecognition transfers.

    (1) In general.

    (2) Special rules for indirect transfers.

    (3) Examples.

    (e) [Reserved].

    (f) Failure to file statements.

    (1) Failure to file.

    (2) Relief for certain failures to file that are not willful.

    (g) Effective/applicability dates.

    (1) Rules of applicability.

    (2) Election.

    (h) Former 10-year gain recognition agreements.

    (i) [Reserved].

    (j) Transition rules regarding certain transfers of domestic or foreign stock or securities after December 16, 1987, and prior to July 20, 1998.

    (1) Scope.

    (2) Transfers of domestic or foreign stock or securities: Additional substantive rules.

    (k) [Reserved].

    § 1.367(a)-4 Special rule applicable to U.S. depreciated property.

    (a) Depreciated property used in the United States.

    (1) In general.

    (2) U.S. depreciated property.

    (3) Property used within and without the United States.

    (b) Effective/applicability dates.

    § 1.367(a)-5 [Reserved]. § 1.367(a)-6 Transfer of foreign branch with previously deducted losses.

    (a) through (b)(1) [Reserved].

    (2) No active conduct exception.

    (c)(1) [Reserved].

    (2) Gain limitation.

    (3) [Reserved].

    (4) Transfers of certain intangible property.

    (d) through (i) [Reserved].

    (j) Effective/applicability dates.

    § 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).

    (a) Scope and purpose.

    (b) General rule.

    (1) Nonrecognition exchanges enumerated in section 367(a)(1).

    (2) Nonrecognition exchanges not enumerated in section 367(a)(1).

    (c) Elective exception.

    (1) Control.

    (2) Gain recognition.

    (3) Basis adjustments required for control group members.

    (4) Agreement to amend or file a U.S. income tax return.

    (5) Election and reporting requirements.

    (d) Section 361 exchange followed by successive distributions to which section 355 applies.

    (e) Other rules.

    (1) Section 367(a) property with respect to which gain is recognized.

    (2) Relief for certain failures to comply that are not willful.

    (3) Anti-abuse rule.

    (4) Certain income inclusions under § 1.367(b)-4.

    (5) Certain gain under § 1.367(a)-6.

    (f) Definitions.

    (g) Examples.

    (h) Applicable cross-references.

    (i) [Reserved].

    (j) Effective/applicability dates.

    (1) In general.

    (2) Section 367(d) property.

    § 1.367(a)-8 Gain recognition agreement requirements.

    (a) Scope.

    (b) Definitions and special rules.

    (1) Definitions.

    (2) Special rules.

    (c) Gain recognition agreement.

    (1) Terms of agreement.

    (2) Content of gain recognition agreement.

    (3) Description of transferred stock or securities and other information.

    (4) Basis adjustments for gain recognized.

    (5) Terms and conditions of a new gain recognition agreement.

    (6) Cross-reference.

    (d) Filing requirements.

    (1) General rule.

    (2) Special requirements.

    (3) Common parent as agent for U.S. transferor.

    (e) Signatory.

    (1) General rule.

    (2) Signature requirement.

    (f) Extension of period of limitations on assessments of tax.

    (1) General rule.

    (2) New gain recognition agreement.

    (g) Annual certification.

    (h) Use of security.

    (i) [Reserved].

    (j) Triggering events.

    (1) Disposition of transferred stock or securities.

    (2) Disposition of substantially all of the assets of the transferred corporation.

    (3) Disposition of certain partnership interests.

    (4) Disposition of stock of the transferee foreign corporation.

    (5) Deconsolidation.

    (6) Consolidation.

    (7) Death of an individual; trust or estate ceases to exist.

    (8) Failure to comply.

    (9) Gain recognition agreement filed in connection with indirect stock transfers and certain triangular asset reorganizations.

    (10) Gain recognition agreement filed pursuant to paragraph (k)(14) of this section.

    (k) Triggering event exceptions.

    (1) Transfers of stock of the transferee foreign corporation to a corporation or partnership.

    (2) Complete liquidation of U.S. transferor under sections 332 and 337.

    (3) Transfers of transferred stock or securities to a corporation or partnership.

    (4) Transfers of substantially all of the assets of the transferred corporation.

    (5) Recapitalizations and section 1036 exchanges.

    (6) Certain asset reorganizations.

    (7) Certain triangular reorganizations.

    (8) Complete liquidation of transferred corporation.

    (9) Death of U.S. transferor.

    (10) Deconsolidation.

    (11) Consolidation.

    (12) Intercompany transactions.

    (13) Deemed asset sales pursuant to section 338(g) elections.

    (14) Other dispositions or events.

    (l) [Reserved].

    (m) Receipt of boot in nonrecognition transactions.

    (1) Dispositions of transferred stock or securities.

    (2) Dispositions of assets of transferred corporation.

    (n) Special rules for distributions with respect to stock.

    (1) Certain dividend equivalent redemptions treated as dispositions.

    (2) Gain recognized under section 301(c)(3).

    (o) Dispositions or other events that terminate or reduce the amount of gain subject to the gain recognition agreement.

    (1) Taxable disposition of stock of the transferee foreign corporation.

    (2) Gain recognized in connection with certain nonrecognition transactions.

    (3) Gain recognized under section 301(c)(3).

    (4) Dispositions of substantially all of the assets of a domestic transferred corporation.

    (5) Certain distributions or transfers of transferred stock or securities to U.S. persons.

    (6) Dispositions or other event following certain intercompany transactions.

    (7) Expropriations under foreign law.

    (p) Relief for certain failures to file or failures to comply that are not willful.

    (1) In general.

    (2) Procedures for establishing that a failure to file or failure to comply was not willful.

    (3) Examples.

    (q) Examples.

    (1) Presumed facts and references.

    (2) Examples.

    (r) Effective/applicability date.

    (1) General rule.

    (2) Applicability to transfers occurring before March 13, 2009.

    (3) Applicability to requests for relief submitted before November 19, 2014.

    Par. 3. Section 1.367(a)-1 is revised to read as follows:
    § 1.367(a)-1 Transfers to foreign corporations subject to section 367(a): In general.

    (a) Scope. Section 367(a)(1) provides the general rule concerning certain transfers of property by a United States person (referred to at times in this section as the “U.S. person” or “U.S. transferor”) to a foreign corporation. Paragraph (b) of this section provides general rules explaining the effect of section 367(a)(1). Paragraph (c) of this section describes transfers of property that are described in section 367(a)(1). Paragraph (d) of this section provides definitions that apply for purposes of sections 367(a) and (d) and the regulations thereunder. Paragraphs (e) and (f) of this section provide rules that apply to certain reorganizations described in section 368(a)(1)(F). Paragraph (g) of this section provides dates of applicability. For rules concerning the reporting requirements under section 6038B for certain transfers of property to a foreign corporation, see § 1.6038B-1.

    (b) General rules—(1) Foreign corporation not considered a corporation for purposes of certain transfers. If a U.S. person transfers property to a foreign corporation in connection with an exchange described in section 351, 354, 356, or 361, then, pursuant to section 367(a)(1), the foreign corporation will not be considered to be a corporation for purposes of determining the extent to which gain is recognized on the transfer. Section 367(a)(1) denies nonrecognition treatment only to transfers of items of property on which gain is realized. Thus, the amount of gain recognized because of section 367(a)(1) is unaffected by the transfer of items of property on which loss is realized (but not recognized).

    (2) Cases in which foreign corporate status is not disregarded. For circumstances in which section 367(a)(1) does not apply to a U.S. transferor's transfer of property to a foreign corporation, and thus the foreign corporation is considered to be a corporation, see §§ 1.367(a)-2, 1.367(a)-3, and 1.367(a)-7.

    (3) Determination of value. In cases in which a U.S. transferor's transfer of property to a foreign corporation constitutes a controlled transaction as defined in § 1.482-1(i)(8), the value of the property transferred is determined in accordance with section 482 and the regulations thereunder.

    (4) Character, source, and adjustments—(i) In general. If a U.S. person is required to recognize gain under section 367 upon a transfer of property to a foreign corporation, then—

    (A) The character and source of such gain are determined as if the property had been disposed of in a taxable exchange with the transferee foreign corporation (unless otherwise provided by regulation); and

    (B) Appropriate adjustments to earnings and profits, basis, and other affected items will be made according to otherwise applicable rules, taking into account the gain recognized under section 367(a)(1). For purposes of applying section 362, the foreign corporation's basis in the property received is increased by the amount of gain recognized by the U.S. transferor under section 367(a) and the regulations issued pursuant to that section. To the extent the regulations provide that the U.S. transferor recognizes gain with respect to a particular item of property, the foreign corporation increases its basis in that item of property by the amount of such gain recognized. For example, §§ 1.367(a)-2, 1.367(a)-3, and 1.367(a)-4 provide that gain is recognized with respect to particular items of property. To the extent the regulations do not provide that gain recognized by the U.S. transferor is with respect to a particular item of property, such gain is treated as recognized with respect to items of property subject to section 367(a) in proportion to the U.S. transferor's gain realized in such property, after taking into account gain recognized with respect to particular items of property transferred under any other provision of section 367(a). For example, § 1.367(a)-6 provides that branch losses must be recaptured by the recognition of gain realized on the transfer but does not associate the gain with particular items of property. See also § 1.367(a)-1(c)(3) for rules concerning transfers by partnerships or of partnership interests.

    (C) The transfer will not be recharacterized for U.S. Federal tax purposes solely because the U.S. person recognizes gain in connection with the transfer under section 367(a)(1). For example, if a U.S. person transfers appreciated stock or securities to a foreign corporation in an exchange described in section 351, the transfer is not recharacterized as other than an exchange described in section 351 solely because the U.S. person recognizes gain in the transfer under section 367(a)(1).

    (ii) Example. The rules of this paragraph (b)(4) are illustrated by the following example.

    Example.

    Domestic corporation DC transfers inventory with a fair market value of $1 million and adjusted basis of $800,000 to foreign corporation FC in exchange for stock of FC that is described in section 351(a). Title passes within the United States. Pursuant to section 367(a), DC is required to recognize gain of $200,000 upon the transfer. Under the rule of this paragraph (b)(4), the gain is treated as ordinary income (sections 1201 and 1221) from sources within the United States (section 861) arising from a taxable exchange with FC. Appropriate adjustments to earnings and profits, basis, etc., will be made as if the transfer were subject to section 351. Thus, for example, DC's basis in the FC stock received, and FC's basis in the transferred inventory, will each be increased by the $200,000 gain recognized by DC, pursuant to sections 358(a)(1) and 362(a), respectively.

    (5) Treatment of certain property as subject to section 367(d). A U.S. transferor may apply section 367(d) and § 1.367(d)-1, rather than section 367(a) and the regulations thereunder, to a transfer of property to a foreign corporation that otherwise would be subject to section 367(a), provided that the property is not eligible property, as defined in § 1.367(a)-2(b) but determined without regard to § 1.367(a)-2(c). A U.S. transferor and any other U.S. transferor that is related (within the meaning of section 267(b) or 707(b)(1)) to the U.S. transferor must consistently apply this paragraph (b)(5) to all property described in this paragraph (b)(5) that is transferred to one or more foreign corporations pursuant to a plan. A U.S. transferor applies the provisions of this paragraph (b)(5) in the form and manner set forth in § 1.6038B-1(d)(1)(iv) and (v).

    (c)(1) through (c)(3)(i) reserved. For further guidance, see § 1.367(a)-1T(c)(1) through (c)(3)(i).

    (ii) Transfer of partnership interest treated as transfer of proportionate share of assets—(A) In general. If a U.S. person transfers an interest as a partner in a partnership (whether foreign or domestic) in an exchange described in section 367(a)(1), then that person is treated as having transferred a proportionate share of the property of the partnership in an exchange described in section 367(a)(1). Accordingly, the applicability of the exception to section 367(a)(1) provided in § 1.367(a)-2 is determined with reference to the property of the partnership rather than the partnership interest itself. A U.S. person's proportionate share of partnership property is determined under the rules and principles of sections 701 through 761 and the regulations thereunder.

    (c)(3)(i)(A) Example through (7) reserved. For further guidance, see § 1.367(a)-1T(c)(3)(i)(A) Example through (7).

    (d) Definitions. The following definitions apply for purposes of sections 367(a) and (d) and the regulations thereunder.

    (1) United States person. The term “United States person” includes those persons described in section 7701(a)(30). The term includes a citizen or resident of the United States, a domestic partnership, a domestic corporation, and any estate or trust other than a foreign estate or trust. (For definitions of these terms, see section 7701 and the regulations thereunder.) For purposes of this section, an individual with respect to whom an election has been made under section 6013(g) or (h) is considered to be a resident of the United States while such election is in effect. A nonresident alien or a foreign corporation will not be considered a United States person because of its actual or deemed conduct of a trade or business within the United States during a taxable year.

    (2) Foreign corporation. The term “foreign corporation” has the meaning set forth in section 7701(a)(3) and (5) and § 301.7701-5.

    (3) Transfer. For purposes of section 367 and regulations thereunder, the term “transfer” means any transaction that constitutes a transfer for purposes of section 332, 351, 354, 355, 356, or 361, as applicable. A person's entering into a cost sharing arrangement under § 1.482-7 or acquiring rights to intangible property under such an arrangement shall not be considered a transfer of property described in section 367(a)(1). See § 1.6038B-1T(b)(4) for the date on which the transfer is considered to be made.

    (4) Property. For purposes of section 367 and the regulations thereunder, the term “property” means any item that constitutes property for purposes of section 351, 354, 355, 356, or 361, as applicable.

    (5) Intangible property. The term “intangible property” means either property described in section 936(h)(3)(B) or property to which a U.S. person applies section 367(d) pursuant to paragraph (b)(5) of this section, but does not include property described in section 1221(a)(3) or a working interest in oil and gas property.

    (6) Operating intangibles. An operating intangible is any property described in section 936(h)(3)(B) of a type not ordinarily licensed or otherwise transferred in transactions between unrelated parties for consideration contingent upon the licensee's or transferee's use of the property. Examples of operating intangibles may include long-term purchase or supply contracts, surveys, studies, and customer lists.

    (f) Exchanges under sections 354(a) and 361(a) in certain section 368(a)(1)(F) reorganizations—(1) Rule. In every reorganization under section 368(a)(1)(F), where the transferor corporation is a domestic corporation, and the acquiring corporation is a foreign corporation, there is considered to exist—

    (i) A transfer of assets by the transferor corporation to the acquiring corporation under section 361(a) in exchange for stock (or stock and securities) of the acquiring corporation and the assumption by the acquiring corporation of the transferor corporation's liabilities;

    (ii) A distribution of the stock (or stock and securities) of the acquiring corporation by the transferor corporation to the shareholders (or shareholders and security holders) of the transferor corporation; and

    (iii) An exchange by the transferor corporation's shareholders (or shareholders and security holders) of their stock (or stock and securities) of the transferor corporation for stock (or stock and securities) of the acquiring corporation under section 354(a).

    (2) Rule applies regardless of whether a continuance under applicable law. For purposes of paragraph (f)(1) of this section, it shall be immaterial that the applicable foreign or domestic law treats the acquiring corporation as a continuance of the transferor corporation.

    (g) Effective/applicability dates. (1) through (3) [Reserved]. For further guidance, see § 1.367(a)-1T(g)(1) through (3).

    (4) The rules in paragraphs (b)(4)(i)(B) and (b)(4)(i)(C) of this section apply to transfers occurring on or after April 18, 2013. For guidance with respect to paragraph (b)(4)(i)(B) of this section before April 18, 2013, see 26 CFR part 1 revised as of April 1, 2012. The rules in paragraph (e) of this section apply to transactions occurring on or after March 31, 1987. The rules in paragraph (f) of this section apply to transactions occurring on or after January 1, 1985.

    (5) Paragraphs (a), (b)(1) through (b)(4)(i)(B), (b)(4)(ii) through (b)(5), (c)(3)(ii)(A), (d) introductory text through (d)(2), (d)(4) through (d)(6) of this section apply to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see §§ 1.367(a)-1 and 1.367(a)-1T as contained in 26 CFR part 1 revised as of April 1, 2016.

    § 1.367(a)-1T [Amended]
    Par. 4. Section 1.367(a)-1T is amended by removing and reserving paragraphs (a), (b)(1), (b)(2), (b)(3), (b)(4)(i)(A), (b)(4)(ii), (c)(3)(ii)(A), (d) introductory text, (d)(1), (d)(2), (d)(4), and (d)(5), and adding and reserving new paragraphs (b)(5) and (d)(6). Par. 5. Section 1.367(a)-2 is revised to read as follows:
    § 1.367(a)-2 Exceptions for transfers of property for use in the active conduct of a trade or business.

    (a) Scope and general rule—(1) Scope. Paragraph (a)(2) of this section provides the general exception to section 367(a)(1) for certain property transferred for use in the active conduct of a trade or business. Paragraph (b) of this section describes property that is eligible for the exception provided in paragraph (a)(2) of this section. Paragraph (c) of this section describes property that is not eligible for the exception provided in paragraph (a)(2) of this section. Paragraph (d) of this section provides general rules, and paragraphs (e) through (h) of this section provide special rules, for determining whether property is used in the active conduct of a trade or business outside of the United States. Paragraph (i) of this section is reserved. Paragraph (j) of this section provides relief for certain failures to comply with the reporting requirements under paragraph (a)(2)(iii) of this section that are not willful. Paragraph (k) of this section provides dates of applicability. The rules of this section do not apply to a transfer of stock or securities in an exchange subject to § 1.367(a)-3.

    (2) General rule. Except as otherwise provided in §§ 1.367(a)-4, 1.367(a)-6, and 1.367(a)-7, section 367(a)(1) does not apply to property transferred by a United States person (U.S. transferor) to a foreign corporation if—

    (i) The property constitutes eligible property;

    (ii) The property is transferred for use by the foreign corporation in the active conduct of a trade or business outside of the United States, as determined under paragraph (d), (e), (f), (g), or (h) of this section, as applicable; and

    (iii) The U.S. transferor complies with the reporting requirements of section 6038B and the regulations thereunder.

    (b) Eligible property. Except as provided in paragraph (c) of this section, eligible property means—

    (1) Tangible property;

    (2) A working interest in oil and gas property; and

    (3) A financial asset. For purposes of this section, a financial asset is—

    (i) A cash equivalent;

    (ii) A security within the meaning of section 475(c)(2), without regard to the last sentence of section 475(c)(2) (referencing section 1256) and without regard to section 475(c)(4), but excluding an interest in a partnership;

    (iii) A commodities position described in section 475(e)(2)(B), 475(e)(2)(C), or 475(e)(2)(D); and

    (iv) A notional principal contract described in § 1.446-3(c)(1).

    (c) Exception for certain property. Notwithstanding paragraph (b) of this section, property described in paragraph (c)(1), (2), (3), or (4) of this section does not constitute eligible property.

    (1) Inventory. Stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business (including raw materials and supplies, partially completed goods, and finished products).

    (2) Installment obligations, etc. Installment obligations, accounts receivable, or similar property, but only to the extent that the principal amount of any such obligation has not previously been included by the taxpayer in its taxable income.

    (3) Nonfunctional currency, etc.—(i) In general. Property that gives rise to a section 988 transaction of the taxpayer described in section 988(c)(1)(A) through (C), without regard to section 988(c)(1)(D) and (E), or that would give rise to such a section 988 transaction if it were acquired, accrued, entered into, or disposed of directly by the taxpayer.

    (ii) Limitation of gain required to be recognized. If section 367(a)(1) applies to a transfer of property described in paragraph (c)(3)(i) of this section, then the gain required to be recognized is limited to the gain realized as part of the same transaction upon the transfer of property described in paragraph (c)(3)(i) of this section, less any loss realized as part of the same transaction upon the transfer of property described in paragraph (c)(3)(i) of this section. This limitation applies in lieu of the rule in § 1.367(a)-1(b)(1). No loss is recognized with respect to property described in this paragraph (c)(3).

    (4) Certain leased tangible property. Tangible property with respect to which the transferor is a lessor at the time of the transfer, unless either the foreign corporation is the lessee at the time of the transfer or the foreign corporation will lease the property to third persons.

    (d) Active conduct of a trade or business outside the United States—(1) In general. Except as provided in paragraphs (e), (f), (g), and (h) of this section, to determine whether property is transferred for use by the foreign corporation in the active conduct of a trade or business outside of the United States, four factual determinations must be made:

    (i) What is the trade or business of the foreign corporation (see paragraph (d)(2) of this section);

    (ii) Do the activities of the foreign corporation constitute the active conduct of that trade or business (see paragraph (d)(3) of this section);

    (iii) Is the trade or business conducted outside of the United States (see paragraph (d)(4) of this section); and

    (iv) Is the transferred property used or held for use in the trade or business (see paragraph (d)(5) of this section)?

    (2) Trade or business. Whether the activities of the foreign corporation constitute a trade or business is determined based on all the facts and circumstances. In general, a trade or business is a specific unified group of activities that constitute (or could constitute) an independent economic enterprise carried on for profit. For example, the activities of a foreign selling subsidiary could constitute a trade or business if they could be independently carried on for profit, even though the subsidiary acts exclusively on behalf of, and has operations fully integrated with, its parent corporation. To constitute a trade or business, a group of activities must ordinarily include every operation which forms a part of, or a step in, a process by which an enterprise may earn income or profit. In this regard, one or more of such activities may be carried on by independent contractors under the direct control of the foreign corporation. (However, see paragraph (d)(3) of this section.) The group of activities must ordinarily include the collection of income and the payment of expenses. If the activities of the foreign corporation do not constitute a trade or business, then the exception provided by this section does not apply, regardless of the level of activities carried on by the corporation. The following activities are not considered to constitute by themselves a trade or business for purposes of this section:

    (i) Any activity giving rise to expenses that would be deductible only under section 212 if the activities were carried on by an individual; or

    (ii) The holding for one's own account of investments in stock, securities, land, or other property, including casual sales thereof.

    (3) Active conduct. Whether a trade or business is actively conducted by the foreign corporation is determined based on all the facts and circumstances. In general, a corporation actively conducts a trade or business only if the officers and employees of the corporation carry out substantial managerial and operational activities. A corporation may be engaged in the active conduct of a trade or business even though incidental activities of the trade or business are carried out on behalf of the corporation by independent contractors. In determining whether the officers and employees of the corporation carry out substantial managerial and operational activities, however, the activities of independent contractors are disregarded. On the other hand, the officers and employees of the corporation are considered to include the officers and employees of related entities who are made available to and supervised on a day-to-day basis by, and whose salaries are paid by (or reimbursed to the lending related entity by), the foreign corporation. See paragraph (d)(6) of this section for the standard that applies to determine whether a trade or business that produces rents or royalties is actively conducted. The rule of this paragraph (d)(3) is illustrated by the following example.

    Example.

    X, a domestic corporation, and Y, a foreign corporation not related to X, transfer property to Z, a newly formed foreign corporation organized for the purpose of combining the research activities of X and Y. Z contracts all of its operational and research activities to Y for an arm's-length fee. Z's activities do not constitute the active conduct of a trade or business.

    (4) Outside of the United States. Whether the foreign corporation conducts a trade or business outside of the United States is determined based on all the facts and circumstances. Generally, the primary managerial and operational activities of the trade or business must be conducted outside the United States and immediately after the transfer the transferred assets must be located outside the United States. Thus, the exception provided by this section would not apply to the transfer of the assets of a domestic business to a foreign corporation if the domestic business continued to operate in the United States after the transfer. In such a case, the primary operational activities of the business would continue to be conducted in the United States. Moreover, the transferred assets would be located in the United States. However, it is not necessary that every item of property transferred be used outside of the United States. As long as the primary managerial and operational activities of the trade or business are conducted outside of the United States and substantially all of the transferred assets are located outside the United States, incidental items of transferred property located in the United States may be considered to have been transferred for use in the active conduct of a trade or business outside of the United States.

    (5) Use in the trade or business. Whether property is used or held for use by the foreign corporation in a trade or business is determined based on all the facts and circumstances. In general, property is used or held for use in the foreign corporation's trade or business if it is—

    (i) Held for the principal purpose of promoting the present conduct of the trade or business;

    (ii) Acquired and held in the ordinary course of the trade or business; or

    (iii) Otherwise held in a direct relationship to the trade or business. Property is considered held in a direct relationship to a trade or business if it is held to meet the present needs of that trade or business and not its anticipated future needs. Thus, property will not be considered to be held in a direct relationship to a trade or business if it is held for the purpose of providing for future diversification into a new trade or business, future expansion of trade or business activities, future plant replacement, or future business contingencies.

    (6) Active leasing and licensing. For purposes of paragraph (d)(3) of this section, whether a trade or business that produces rents or royalties is actively conducted is determined under the principles of section 954(c)(2)(A) and the regulations thereunder, but without regard to whether the rents or royalties are received from an unrelated party. See §§ 1.954-2(c) and (d).

    (e) Special rules for certain property to be leased—(1) Leasing business of the foreign corporation. Except as otherwise provided in this paragraph (e), tangible property that will be leased to another person by the foreign corporation will be considered to be transferred for use by the foreign corporation in an active trade or business outside the United States only if—

    (i) The foreign corporation's leasing of the property constitutes the active conduct of a leasing business, as determined under paragraph (d)(6) of this section;

    (ii) The lessee of the property is not expected to, and does not, use the property in the United States; and

    (iii) The foreign corporation has a need for substantial investment in assets of the type transferred.

    (2) De minimis leasing by the foreign corporation. Tangible property that will be leased to another person by the foreign corporation but that does not satisfy the conditions of paragraph (e)(1) of this section will, nevertheless, be considered to be transferred for use in the active conduct of a trade or business if either—

    (i) The property transferred will be used by the foreign corporation in the active conduct of a trade or business but will be leased during occasional brief periods when the property would otherwise be idle, such as an airplane leased during periods of excess capacity; or

    (ii) The property transferred is real property located outside the United States and—

    (A) The property will be used primarily in the active conduct of a trade or business of the foreign corporation; and

    (B) Not more than ten percent of the square footage of the property will be leased to others.

    (3) Aircraft and vessels leased in foreign commerce. For purposes of satisfying paragraph (e)(1) of this section, an aircraft or vessel, including component parts such as an engine leased separately from the aircraft or vessel, that will be leased to another person by the foreign corporation will be considered to be transferred for use in the active conduct of a trade or business if—

    (i) The employees of the foreign corporation perform substantial managerial and operational activities of leasing aircraft or vessels outside the United States; and

    (ii) The leased property is predominantly used outside the United States, as determined under § 1.954-2(c)(2)(v).

    (f) Special rules for oil and gas working interests—(1) In general. A working interest in oil and gas property will be considered to be transferred for use in the active conduct of a trade or business if—

    (i) The transfer satisfies the conditions of paragraph (f)(2) or (f)(3) of this section;

    (ii) At the time of the transfer, the foreign corporation has no intention to farm out or otherwise transfer any part of the transferred working interest; and

    (iii) During the first three years after the transfer there are no farmouts or other transfers of any part of the transferred working interest as a result of which the foreign corporation retains less than a 50-percent share of the transferred working interest.

    (2) Active use of working interest. A working interest in oil and gas property that satisfies the conditions in paragraphs (f)(1)(ii) and (iii) of this section will be considered to be transferred for use in the active conduct of a trade or business if—

    (i) The U.S. transferor is regularly and substantially engaged in exploration for and extraction of minerals, either directly or through working interests in joint ventures, other than by reason of the property that is transferred;

    (ii) The terms of the working interest transferred were actively negotiated among the joint venturers;

    (iii) The working interest transferred constitutes at least a five percent working interest;

    (iv) Before and at the time of the transfer, through its own employees or officers, the U.S. transferor was regularly and actively engaged in—

    (A) Operating the working interest, or

    (B) Analyzing technical data relating to the activities of the venture;

    (v) Before and at the time of the transfer, through its own employees or officers, the U.S. transferor was regularly and actively involved in decision making with respect to the operations of the venture, including decisions relating to exploration, development, production, and marketing; and

    (vi) After the transfer, the foreign corporation will for the foreseeable future satisfy the requirements of subparagraphs (iv) and (v) of this paragraph (f)(2).

    (3) Start-up operations. A working interest in oil and gas property that satisfies the conditions in paragraphs (f)(1)(ii) and (iii) of this section but that does not satisfy all the requirements of paragraph (f)(2) of this section will, nevertheless, be considered to be transferred for use in the active conduct of a trade or business if—

    (i) The working interest was acquired by the U.S. transferor immediately before the transfer and for the specific purpose of transferring it to the foreign corporation;

    (ii) The requirements of paragraphs (f)(2)(ii) and (iii) of this section are satisfied; and

    (iii) The foreign corporation will for the foreseeable future satisfy the requirements of paragraph (f)(2)(iv) and (v) of this section.

    (4) Other applicable rules. A working interest in oil and gas property that is not described in paragraph (f)(1) of this section may nonetheless qualify for the exception to section 367(a)(1) contained in this section depending upon the facts and circumstances.

    (g) Property retransferred by the foreign corporation—(1) General rule. Property will not be considered to be transferred for use in the active conduct of a trade or business outside of the United States if—

    (i) At the time of the transfer, it is reasonable to believe that, in the reasonably foreseeable future, the foreign corporation will sell or otherwise dispose of any material portion of the property other than in the ordinary course of business; or

    (ii) Except as provided in paragraph (g)(2) of this section, the foreign corporation receives the property in an exchange described in section 367(a)(1), and, as part of the same transaction, transfers the property to another person. For purposes of the preceding sentence, a subsequent transfer within six months of the initial transfer will be considered to be part of the same transaction, and a subsequent transfer more than six months after the initial transfer may be considered to be part of the same transaction under step-transaction principles.

    (2) Exception. Notwithstanding paragraph (g)(1) of this section, the active conduct exception provided by this section shall apply to the initial transfer if—

    (i) The initial transfer is followed by one or more subsequent transfers described in section 351 or 721; and

    (ii) Each subsequent transferee is either a partnership in which the preceding transferor is a general partner or a corporation in which the preceding transferor owns common stock; and

    (iii) The ultimate transferee uses the property in the active conduct of a trade or business outside the United States.

    (h) Compulsory transfers of property. Property is presumed to be transferred for use in the active conduct of a trade or business outside of the United States, if—

    (1) The property was previously in use in the country in which the foreign corporation is organized; and

    (2) The transfer is either:

    (i) Legally required by the foreign government as a necessary condition of doing business; or

    (ii) Compelled by a genuine threat of immediate expropriation by the foreign government.

    (i) [Reserved].

    (j) Failure to comply with reporting requirements of section 6038B—(1) Failure to comply. For purposes of the exception to the application of section 367(a)(1) provided in paragraph (a)(2) of this section, a failure to comply with the reporting requirements of section 6038B and the regulations thereunder (failure to comply) has the meaning set forth in § 1.6038B-1(f)(2).

    (2) Relief for certain failures to comply that are not willful—(i) In general. A failure to comply described in paragraph (j)(1) of this section will be deemed not to have occurred for purposes of satisfying the requirements of this section if the taxpayer demonstrates that the failure was not willful using the procedure set forth in this paragraph (j)(2). For this purpose, willful is to be interpreted consistent with the meaning of that term in the context of other civil penalties, which would include a failure due to gross negligence, reckless disregard, or willful neglect. Whether a failure to comply was a willful failure will be determined by the Director of Field Operations, Cross Border Activities Practice Area, Large Business & International (or any successor to the roles and responsibilities of such position, as appropriate) (Director) based on all the facts and circumstances. The taxpayer must submit a request for relief and an explanation as provided in paragraph (j)(2)(ii)(A) of this section. Although a taxpayer whose failure to comply is determined not to be willful will not be subject to gain recognition under this section, the taxpayer will be subject to a penalty under section 6038B if the taxpayer fails to demonstrate that the failure was due to reasonable cause and not willful neglect. See § 1.6038B-1(b)(1) and (f). The determination of whether the failure to comply was willful under this section has no effect on any request for relief made under § 1.6038B-1(f).

    (ii) Procedures for establishing that a failure to comply was not willful—(A) Time and manner of submission. A taxpayer's statement that the failure to comply was not willful will be considered only if, promptly after the taxpayer becomes aware of the failure, an amended return is filed for the taxable year to which the failure relates that includes the information that should have been included with the original return for such taxable year or that otherwise complies with the rules of this section, and that includes a written statement explaining the reasons for the failure to comply. The amended return must be filed with the Internal Revenue Service at the location where the taxpayer filed its original return. The taxpayer may submit a request for relief from the penalty under section 6038B as part of the same submission. See § 1.6038B-1(f).

    (B) Notice requirement. In addition to the requirements of paragraph (j)(2)(ii)(A) of this section, the taxpayer must comply with the notice requirements of this paragraph (j)(2)(ii)(B). If any taxable year of the taxpayer is under examination when the amended return is filed, a copy of the amended return and any information required to be included with such return must be delivered to the Internal Revenue Service personnel conducting the examination. If no taxable year of the taxpayer is under examination when the amended return is filed, a copy of the amended return and any information required to be included with such return must be delivered to the Director.

    (3) For illustrations of the application of the willfulness standard of this paragraph (j), see the examples in § 1.367(a)-8(p)(3).

    (4) Paragraph (j) applies to requests for relief submitted on or after November 19, 2014.

    (k) Effective/applicability dates—(1) In general. Except as provided in paragraphs (j)(4) and (k)(2) of this section, the rules of this section apply to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see §§ 1.367(a)-2, -2T, -4, -4T, -5, and -5T as contained in 26 CFR part 1 revised as of April 1, 2016.

    (2) Foreign currency exception. Notwithstanding paragraph (c)(3)(i) of this section, § 1.367(a)-5T(d)(2) as contained in 26 CFR part 1 revised as of April 1, 2016, applies to transfers of property denominated in a foreign currency occurring before December 16, 2016, other than transfers occurring before that date resulting from entity classification elections made under § 301.7701-3 that are filed on or after that date.

    § 1.367(a)-2T [Removed]
    Par. 6. Section 1.367(a)-2T is removed.
    § 1.367(a)-3 [Amended]
    Par. 7. For each section listed in the following the table, remove the language in the “Remove” column and add in its place the language in the “Add” column. Section Remove Add § 1.367(a)-3(a)(3), first sentence § 1.367(a)-1T(c) § 1.367(a)-1(c). § 1.367(a)-3(c)(3)(i)(A) § 1.367(a)-2T(b)(2) and (3) § 1.367(a)-2(d)(2), (3), and (4). § 1.367(a)-3(c)(3)(ii)(B), last sentence § 1.367(a)-2T(b)(2) and (3) § 1.367(a)-2(d)(2) and (3). § 1.367(a)-3(c)(4)(i), last sentence § 1.367(a)-1T(c)(3) § 1.367(a)-1(c)(3). § 1.367(a)-3(c)(5)(iv), first sentence § 1.367(a)-1T(d)(1) § 1.367(a)-1(d)(1). § 1.367(a)-3(d)(3) Example 7A(ii), penultimate sentence § 1.367(a)-2T(a)(2) § 1.367(a)-2(a)(2)(iii). § 1.367(a)-3(d)(3) Example 13(i), penultimate sentence § 1.367(a)-2T(c)(2) § 1.367(a)-2(g)(2). Par. 8. Section 1.367(a)-4 is revised to read as follows:
    § 1.367(a)-4 Special rule applicable to U.S. depreciated property.

    (a) Depreciated property used in the United States—(1) In general. A U.S. person that transfers U.S. depreciated property (as defined in paragraph (a)(2) of this section) to a foreign corporation in an exchange described in section 367(a)(1), must include in its gross income for the taxable year in which the transfer occurs ordinary income equal to the gain realized that would have been includible in the transferor's gross income as ordinary income under section 617(d)(1), 1245(a), 1250(a), 1252(a), 1254(a), or 1255(a), whichever is applicable, if at the time of the transfer the U.S. person had sold the property at its fair market value. Recapture of depreciation under this paragraph (a) is required regardless of whether the exception to section 367(a)(1) provided by § 1.367(a)-2(a)(2) applies to the transfer of the U.S. depreciated property. However, the transfer of the U.S. depreciated property may qualify for the exception with respect to realized gain that is not included in ordinary income pursuant to this paragraph (a).

    (2) U.S. depreciated property. U.S. depreciated property subject to the rules of this paragraph (a) is any property that—

    (i) Is either mining property (as defined in section 617(f)(2)), section 1245 property (as defined in section 1245(a)(3)), section 1250 property (as defined in section 1250(c)), farm land (as defined in section 1252(a)(2)), section 1254 property (as defined in section 1254(a)(3)), or section 126 property (as defined in section 1255(a)(2)); and

    (ii) Has been used in the United States or has been described in section 168(g)(4) before its transfer.

    (3) Property used within and without the United States. (i) If U.S. depreciated property has been used partly within and partly without the United States, then the amount required to be included in ordinary income pursuant to this paragraph (a) is reduced to an amount determined in accordance with the following formula:

    ER16DE16.037

    (ii) For purposes of the fraction in paragraph (a)(3)(i) of this section, the “full recapture amount” is the amount that would otherwise be included in the transferor's income under paragraph (a)(1) of this section. “U.S. use” is the number of months that the property either was used within the United States or has been described in section 168(g)(4), and was subject to depreciation by the transferor or a related person. “Total use” is the total number of months that the property was used (or available for use), and subject to depreciation, by the transferor or a related person. For purposes of this paragraph (a)(3), property is not considered to have been in use outside of the United States during any period in which such property was, for purposes of section 168, treated as property not used predominantly outside the United States pursuant to section 168(g)(4). For purposes of this paragraph (a)(3), the term “related person” has the meaning set forth in § 1.367(d)-1(h).

    (b) Effective/applicability dates. The rules of this section apply to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see §§ 1.367(a)-4 and 1.367(a)-4T as contained in 26 CFR part 1 revised as of April 1, 2016.

    § 1.367(a)-4T [Removed]
    Par. 9. § 1.367(a)-4T is removed.
    § 1.367(a)-5 [Removed and Reserved]
    Par. 10. Section 1.367(a)-5 is removed and reserved.
    § 1.367(a)-5T [Removed]
    Par. 11. § 1.367(a)-5T is removed. Par. 12. Section 1.367(a)-6 is revised to read as follows:
    § 1.367(a)-6 Transfer of foreign branch with previously deducted losses.

    (a) through (b)(1) [Reserved]. For further guidance, see § 1.367(a)-6T(a) through (b)(1).

    (b)(2) No active conduct exception. The rules of this paragraph (b) apply regardless of whether any of the assets of the foreign branch satisfy the active trade or business exception of § 1.367(a)-2(a)(2).

    (c)(1) [Reserved]. For further guidance, see § 1.367(a)-6T(c)(1).

    (2) Gain limitation. The gain required to be recognized under paragraph (b)(1) of this section will not exceed the aggregate amount of gain realized on the transfer of all branch assets (without regard to the transfer of any assets on which loss is realized but not recognized).

    (3) [Reserved].

    (4) Transfers of certain intangible property. Gain realized on the transfer of intangible property (computed with reference to the fair market value of the intangible property as of the date of the transfer) that is an asset of a foreign branch is taken into account in computing the limitation on loss recapture under paragraph (c)(2) of this section. For rules relating to the crediting of gain recognized under this section against income deemed to arise by operation of section 367(d), see § 1.367(d)-1(g)(3).

    (d) through (i) [Reserved]. For further guidance, see § 1.367(a)-6T(d) through (i).

    (j) Effective/applicability dates. The rules of this section apply to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see § 1.367(a)-6T as contained in 26 CFR part 1 revised as of April 1, 2016.

    § 1.367(a)-6T [Amended]
    Par. 13. Section 1.367(a)-6T is amended by 1. Removing and reserving paragraphs (b)(2), (c)(2), and (c)(4). 2. Adding and reserving paragraph (j). Par. 14. Section 1.367(a)-7 is amended by: 1. Revising paragraph (f)(11). 2. Redesignating paragraph (j) as (j)(1) and revising the first sentence, and adding paragraph (j)(2).

    The revision and addition read as follows:

    § 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).

    (f) * * *

    (11) Section 367(d) property is intangible property as defined in § 1.367(a)-1(d)(5).

    (j) Effective/applicability dates—(1) In general. Except for paragraph (e)(2) of this section, and as provided in paragraph (j)(2) of this section, this section applies to transfers occurring on or after April 18, 2013. * * *

    (2) Section 367(d) property. The definition provided in paragraph (f)(11) of this section applies to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see § 1.367(a)-7 as contained in 26 CFR part 1 revised as of April 1, 2016.

    § 1.367(a)-7 [Amended]
    Par. 15. For each section listed in the following table, remove the language in the “Remove” column and add in its place the language in the “Add” column. Section Remove Add § 1.367(a)-7(a), sixth sentence § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(c), second sentence § 1.367(a)-2T § 1.367(a)-2. § 1.367(a)-7(c), second sentence § 1.367(a)-4T, 1.367(a)-5T § 1.367(a)-4. § 1.367(a)-7(c), second sentence § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(c)(2)(i)(B) § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(c)(2)(ii)(A)(2) § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(e)(1), third sentence § 1.367(a)-2T § 1.367(a)-2. § 1.367(a)-7(e)(1), third sentence § 1.367(a)-4T, 1.367(a)-5T § 1.367(a)-4. § 1.367(a)-7(e)(1), third sentence § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(e)(1), last sentence § 1.367(a)-1T(b)(4) and § 1.367(a)-1(b)(4)(i)(B) § 1.367(a)-1(b)(4). § 1.367(a)-7(e)(2)(i), third sentence Director of Field Operations International, Large Business & International Director of Field Operations, Cross Border Activities Practice Area of Large Business & International. § 1.367(a)-7(e)(4)(ii), first and second sentences § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(e)(5), heading § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(e)(5)(i), first sentence § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(e)(5)(ii), first sentence § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(f)(4)(ii) § 1.367(a)-6T § 1.367(a)-6. § 1.367(a)-7(g), last sentence § 1.367(a)-2T § 1.367(a)-2. § 1.367(a)-7(g), Example 1 (ii)(A), last sentence § 1.367(a)-2T § 1.367(a)-2. § 1.367(a)-7(g), Example 2 (ii)(A), last sentence § 1.367(a)-2T § 1.367(a)-2. § 1.367(a)-7(h), first sentence § 1.367(a)-1(b)(4)(i)(B) and § 1.367(a)-1T(b)(4) § 1.367(a)-1(b)(4).
    § 1.367(a)-8 [Amended]
    Par. 16. For each section listed in the following table, remove the language in the “Remove” column and add in its place the language in the “Add” column. Section Remove Add § 1.367(a)-8(b)(1)(xvii), first sentence § 1.367(a)-1T(d)(1) § 1.367(a)-1(d)(1). § 1.367(a)-8(b)(1)(xvii), second sentence § 1.367(a)-1T(c)(3)(i) § 1.367(a)-1(c)(3)(i). § 1.367(a)-8(c)(3)(viii) § 1.367(a)-1T(c)(3)(i) § 1.367(a)-1(c)(3)(i). § 1.367(a)-8(c)(3)(viii) § 1.367(a)-1T(c)(3)(ii) § 1.367(a)-1(c)(3)(ii). § 1.367(a)-8(c)(4)(iv), second sentence § 1.367(a)-1T(b)(4) § 1.367(a)-1(b)(4). § 1.367(a)-8(j)(3) § 1.367(a)-1T(c)(3)(ii) § 1.367(a)-1(c)(3)(ii). § 1.367(a)-8(j)(8), second sentence Director of Field Operations International, Large Business & International Director of Field Operations, Cross Border Activities Practice Area of Large Business & International. Par. 17. Section 1.367(d)-1 is added to read as follows:
    § 1.367(d)-1 Transfers of intangible property to foreign corporations.

    (a) [Reserved]. For further guidance, see § 1.367(d)-1T(a).

    (b) Property subject to section 367(d). Section 367(d) and the rules of this section apply to the transfer of intangible property, as defined in § 1.367(a)-1(d)(5), by a U.S. person to a foreign corporation in an exchange described in section 351 or 361. See section 367(a) and the regulations thereunder for the rules that apply to the transfer of any property other than intangible property.

    (c)(1) through (2) [Reserved]. For further guidance, see § 1.367(d)-1T(c)(1) and (2).

    (3) Useful life—(i) In general. For purposes of determining the period of inclusions for deemed payments under § 1.367(d)-1T(c)(1), the useful life of intangible property is the entire period during which exploitation of the intangible property is reasonably anticipated to affect the determination of taxable income, as of the time of transfer. Exploitation of intangible property includes any direct or indirect use or transfer of the intangible property, including use without further development, use in the further development of the intangible property itself (and any exploitation of the further developed intangible property), and use in the development of other intangible property (and any exploitation of the other developed intangible property).

    (ii) Procedure to limit inclusions to 20 years. In cases where the useful life of the transferred property is indefinite or is reasonably anticipated to exceed twenty years, taxpayers may, in lieu of including amounts during the entire useful life of the intangible property, choose in the year of transfer to increase annual inclusions during the 20-year period beginning with the first year in which the U.S. transferor takes into account income pursuant to section 367(d), to reflect amounts that, but for this paragraph (c)(3)(ii), would have been required to be included following the end of the 20-year period. See § 1.6038B-1(d)(1)(iv) for guidance on reporting this choice of method. If the taxpayer applies this method during the 20-year period, no adjustments will be made for taxable years beginning after the conclusion of the 20-year period. However, for purposes of determining whether amounts included during the 20-year period are commensurate with the income attributable to the transferred intangible property, the Commissioner may take into account information with respect to taxable years after that period, such as the income attributable to the transferred property during those later years. The application of this paragraph (c)(3)(ii) must be reflected in a statement (titled “Application of 20-Year Inclusion Period to Section 367(d) Transfers”) attached to a timely filed original federal income tax return (including extensions) for the year of the transfer. An increase to the deemed payment rate made pursuant to this paragraph (c)(3)(ii) will be irrevocable, and a failure to timely file the statement under this paragraph (c)(3)(ii) may not be remedied.

    (iii) Example.

    Property subject to section 367(d) is transferred from USP, a domestic corporation, to FA, a foreign corporation wholly owned by USP. The useful life of the transferred property, inclusive of derivative works, at the time of transfer is indefinite but is reasonably anticipated to exceed 20 years. In the first five years following the transfer, sales related to the property are expected to be $100x, $130x, $160x, $180x and $187.2x, respectively. Thereafter, for the remainder of the property's useful life, sales are expected to grow by four percent annually. In the first five years following the transfer, operating profits attributable to the property are expected to be $5x, $8x, $11x, $12.5x, and $13x, respectively. Thereafter, for the remainder of the property's useful life, operating profits are expected to grow by four percent annually. It is determined that the appropriate discount rate for sales and operating profits is 10 percent. The present value of operating profits through the property's indefinite useful life is $185x. The present value of sales through the property's indefinite useful life is $2698x. Accordingly, the sales based royalty rate during the property's useful life is 6.8 percent ($185x/$2698x). The taxpayer may choose to take income inclusions into account over a 20-year period. The present value of sales through the 20-year period is $1787x. Accordingly, the sales based royalty rate under the 20-year option is increased to 10.3 percent ($185x/$1787x).

    (c)(4) through (g)(2) (introductory text) [Reserved]. For further guidance, see § 1.367(d)-1T(c)(4) through (g)(2) (introductory text).

    (g)(2)(i) The intangible property transferred constitutes an operating intangible, as defined in § 1.367(a)-1(d)(6).

    (g)(2)(ii) through (iii)(D) [Reserved]. For further guidance, see § 1.367(d)-1T(g)(2)(ii) through (iii)(D).

    (E) The transferred intangible property will be used in the active conduct of a trade or business outside of the United States within the meaning of § 1.367(a)-2 and will not be used in connection with the manufacture or sale of products in or for use or consumption in the United States.

    (g)(2)(iii) undesignated concluding paragraph [Reserved]. For further guidance, see § 1.367(d)-1T(g)(2)(iii) undesignated concluding paragraph.

    (3) Intangible property transferred from branch with previously deducted losses. (i) If income is required to be recognized under section 904(f)(3) and the regulations thereunder or under § 1.367(a)-6 upon the transfer of intangible property of a foreign branch that had previously deducted losses, then the income recognized under those sections with respect to that property is credited against amounts that would otherwise be required to be recognized with respect to that same property under paragraphs (c) through (f) of this section in either the current or future taxable years. The amount recognized under section 904(f)(3) or § 1.367(a)-6 with respect to the transferred intangible property is determined in accordance with the following formula:

    ER16DE16.038

    (ii) For purposes of the formula in paragraph (g)(3)(i) of this section, the “loss recapture income” is the total amount required to be recognized by the U.S. transferor pursuant to section 904(f)(3) or § 1.367(a)-6. The “gain from intangible property” is the total amount of gain realized by the U.S. transferor pursuant to section 904(f)(3) and § 1.367(a)-6 upon the transfer of items of property that are subject to section 367(d). “Gain from intangible property” does not include gain realized with respect to intangible property by reason of an election under paragraph (g)(2) of this section. The “gain from all branch assets” is the total amount of gain realized by the transferor upon the transfer of items of property of the branch for which gain is realized.

    (g)(4) through (i) [Reserved]. For further guidance, see § 1.367(d)-1T(g)(4) through (i).

    (j) Effective/applicability dates. This section applies to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see § 1.367(d)-1T as contained in 26 CFR part 1 revised as of April 1, 2016.

    § 1.367(d)-1T [Amended]
    Par. 18. Section 1.367(d)-1T is amended by removing and reserving paragraphs (b), (c)(3), and (g)(2)(i), (g)(2)(iii)(E), and (g)(3). Par. 19. Section 1.367(e)-2 is amended by 1. Revising paragraph (b)(3)(iii). 2. Revising paragraph (e)(4)(ii)(B).

    The revisions read as follows.

    § 1.367(e)-2 Distributions described in section 367(e)(2).

    (b) * * *

    (3) * * *

    (iii) Other rules. For other rules that may apply, see sections 381, 897, 1248, and § 1.482-1(f)(2)(i)(C).

    (e) * * *

    (4) * * *

    (ii) * * *

    (B) The period of limitations on assessment of tax for the taxable year in which gain is required to be reported will be extended until the close of the third full taxable year ending after the date on which the domestic liquidating corporation, foreign distributee corporation, or foreign liquidating corporation, as applicable, furnishes to the Director of Field Operations, Cross Border Activities Practice Area of Large Business & International (or any successor to the roles and responsibilities of such position, as appropriate) (Director) the information that should have been provided under this section.

    § 1.884-5 [Amended]
    Par. 20. Section 1.884-5 is amended in paragraph (e)(3)(ii)(A) by removing the citation “§ 1.367(a)-2T(b)(5),” and adding the citation “§ 1.367(a)-2(d)(5)” in its place.
    § 1.1248-8 [Amended]
    Par. 21. Section 1.1248-8 is amended in paragraph (b)(2)(iv)(B)(1)(ii) by removing the citation “§§ 1.367(a)-6T,” and adding the citation “§ 1.367(a)-6” in its place.
    § 1.1248(f)-2 [Amended]
    Par. 22. Section 1.1248(f)-2 is amended in the last sentence of paragraph (e) by removing the citation “§ 1.367(a)-2T,” and adding the citation “§ 1.367(a)-2” in its place. Par. 23. Section 1.6038B-1 is amended by: 1. Removing the citation “§ 1.367(a)-1T(c),” in the fourth sentence of paragraph (b)(1)(i) and adding the citation “§ 1.367(a)-1(c)” in its place. 2. Revising paragraphs (c)(1) through (5) and (d). 3. Revising the first sentence of paragraph (g)(1). 4. Adding paragraph (g)(7).

    The additions and revision read as follows:

    § 1.6038B-1 Reporting of certain transfers to foreign corporations.

    (c) * * *

    (1) through (4) introductory text [Reserved]. For further guidance, see § 1.6038B-1T(c)(1) through (4) introductory text.

    (i) Active business property. Describe any transferred property that qualifies under § 1.367(a)-2(a)(2). Provide here a general description of the business conducted (or to be conducted) by the transferee, including the location of the business, the number of its employees, the nature of the business, and copies of the most recently prepared balance sheet and profit and loss statement. Property listed within this category may be identified by general type. For example, upon the transfer of the assets of a manufacturing operation, a reasonable description of the property to be used in the business might include the categories of office equipment and supplies, computers and related equipment, motor vehicles, and several major categories of manufacturing equipment. However, any property that is includible in both paragraphs (c)(4)(i) and (iii) of this section (property subject to depreciation recapture under § 1.367(a)-4(a)) must be identified in the manner required in paragraph (c)(4)(iii) of this section. If property is considered to be transferred for use in the active conduct of a trade or business under a special rule in paragraph (e), (f), or (g) of § 1.367(a)-2, specify the applicable rule and provide information supporting the application of the rule.

    (ii) Stock or securities. Describe any transferred stock or securities, including the class or type, amount, and characteristics of the transferred stock or securities, as well as the name, address, place of incorporation, and general description of the corporation issuing the stock or securities.

    (iii) Depreciated property. Describe any property that is subject to depreciation recapture under § 1.367(a)-4(a). Property within this category must be separately identified to the same extent as was required for purposes of the previously claimed depreciation deduction. Specify with respect to each such asset the relevant recapture provision, the number of months that such property was in use within the United States, the total number of months the property was in use, the fair market value of the property, a schedule of the depreciation deduction taken with respect to the property, and a calculation of the amount of depreciation required to be recaptured.

    (iv) Property not transferred for use in the active conduct of a trade or business. Describe any property that is eligible property, as defined in § 1.367(a)-2(b) taking into account the application of § 1.367(a)-2(c), that was transferred to the foreign corporation but not for use in the active conduct of a trade or business outside the United States (and was therefore not listed under paragraph (c)(4)(i) of this section).

    (v) Property transferred under compulsion. If property qualifies for the exception of § 1.367(a)-2(a)(2) under the rules of paragraph (h) of that section, provide information supporting the claimed application of such exception.

    (vi) Certain ineligible property. Describe any property that is described in § 1.367(a)-2(c) and that therefore cannot qualify under § 1.367(a)-2(a)(2) regardless of its use in the active conduct of a trade or business outside of the United States. The description must be divided into the relevant categories, as follows:

    (A) Inventory, etc. Property described in § 1.367(a)-2(c)(1);

    (B) Installment obligations, etc. Property described in § 1.367(a)-2(c)(2);

    (C) Foreign currency, etc. Property described in § 1.367(a)-2(c)(3); and

    (D) Leased property. Property described in § 1.367(a)-2(c)(4).

    (vii) Other property that is ineligible property. Describe any property, other than property described in § 1.367(a)-2(c), that cannot qualify under § 1.367(a)-2(a)(2) regardless of its use in the active conduct of a trade or business outside of the United States and that is not subject to the rules of section 367(d) under § 1.367(a)-1(b)(5) (treatment of certain property as subject to section 367(d)). Each item of property must be separately identified.

    (viii) [Reserved]. For further guidance, see § 1.6038B-1T(c)(4)(viii).

    (5) Transfer of foreign branch with previously deducted losses. If the property transferred is property of a foreign branch with previously deducted losses subject to §§ 1.367(a)-6 and -6T, provide the following information:

    (i) through (iv) [Reserved]. For further information, see § 1.6038B-1T(c)(5)(i) through (iv).

    (d)(1) through (1)(iii) [Reserved]. For further guidance, see § 1.6038B-1T(d)(1) through (1)(iii).

    (iv) Intangible property transferred. Provide a description of the intangible property transferred, including its adjusted basis. Generally, each item of intangible property must be separately identified, including intangible property described in § 1.367(d)-1(g)(2)(i). Identify all property that is subject to the rules of section 367(d) under § 1.367(a)-1(b)(5) (treatment of certain property as subject to section 367(d)). Describe any property for which the income required to be taken into account under section 367(d) and the regulations thereunder will be recognized over a 20-year period pursuant to § 1.367(d)-1(c)(3)(ii). Estimate the anticipated income or cost reductions attributable to the intangible property's use beyond the 20-year period.

    (v)-(vi) [Reserved]. For further guidance, see § 1.6038B-1T(d)(1)(v) through (1)(vi).

    (vii) Coordination with loss rules. List any intangible property subject to section 367(d) the transfer of which also gives rise to the recognition of gain under section 904(f)(3) or §§ 1.367(a)-6 or -6T. Provide a calculation of the gain required to be recognized with respect to such property, in accordance with the provisions of § 1.367(d)-1(g)(3).

    (d)(1)(viii) through (d)(2) [Reserved]. For further guidance, see § 1.6038B-1T(d)(1)(viii) through (d)(2).

    (g) Effective/applicability dates. (1) This section applies to transfers occurring on or after July 20, 1998, except as provided in paragraphs (g)(2) through (g)(7) of this section, and except for transfers of cash made in tax years beginning on or before February 5, 1999 (which are not required to be reported under section 6038B), and transfers described in paragraph (e) of this section (which applies to transfers that are subject to §§ 1.367(e)-1(f) and 1.367(e)-2(e)). * * *

    (7) Paragraphs (c)(4)(i) through (vii), (c)(5), and (d)(1)(iv) and (vii) of this section apply to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For guidance with respect to paragraphs (c)(4), (c)(5), and (d)(1) of this section before this section is applicable, see §§ 1.6038B-1 and 1.6038B-1T as contained in 26 CFR part 1 revised as of April 1, 2016.

    § 1.6038B-1T [Amended]
    Par. 24. Section 1.6038B-1T is amended by removing and reserving paragraphs (c)(4)(i) through (c)(5) introductory text, and (d)(1)(iv) and (vii). John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: November 23, 2016. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy).
    [FR Doc. 2016-29791 Filed 12-15-16; 8:45 am] BILLING CODE 4830-01-P
    PENSION BENEFIT GUARANTY CORPORATION 29 CFR Part 4022 Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Paying Benefits AGENCY:

    Pension Benefit Guaranty Corporation.

    ACTION:

    Final rule.

    SUMMARY:

    This final rule amends the Pension Benefit Guaranty Corporation's regulation on Benefits Payable in Terminated Single-Employer Plans to prescribe interest assumptions under the regulation for valuation dates in January 2017. The interest assumptions are used for paying benefits under terminating single-employer plans covered by the pension insurance system administered by PBGC. As discussed below, PBGC will publish a separate final rule document dealing with interest assumptions under its regulation on Allocation of Assets in Single-Employer Plans for the first quarter of 2017.

    DATES:

    Effective January 1, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Deborah C. Murphy ([email protected]), Assistant General Counsel for Regulatory Affairs, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005, 202-326-4400 ext. 3451. (TTY/TDD users may call the Federal relay service toll-free at 1-800-877-8339 and ask to be connected to 202-326-4400 ext. 3451.)

    SUPPLEMENTARY INFORMATION:

    PBGC's regulation on Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022) prescribes actuarial assumptions—including interest assumptions—for paying plan benefits under terminating single-employer plans covered by title IV of the Employee Retirement Income Security Act of 1974. The interest assumptions in the regulation are also published on PBGC's Web site (http://www.pbgc.gov).

    PBGC uses the interest assumptions in Appendix B to Part 4022 to determine whether a benefit is payable as a lump sum and to determine the amount to pay. Appendix C to Part 4022 contains interest assumptions for private-sector pension practitioners to refer to if they wish to use lump-sum interest rates determined using PBGC's historical methodology. Currently, the rates in Appendices B and C of the benefit payment regulation are the same.

    The interest assumptions are intended to reflect current conditions in the financial and annuity markets. Assumptions under the benefit payments regulation are updated monthly. This final rule updates the benefit payments interest assumptions for January 2017.1

    1 Appendix B to PBGC's regulation on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) prescribes interest assumptions for valuing benefits under terminating covered single-employer plans for purposes of allocation of assets under ERISA section 4044. Those assumptions are updated quarterly.

    PBGC normally updates the assumptions under the benefit payments regulation for January at the same time as PBGC updates assumptions for the first quarter of the year under its regulation on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) in a single rulemaking document. Because of delays in obtaining data used in setting assumptions under Part 4044 for the first quarter of 2017, PBGC is publishing two separate rulemaking documents to update the benefit payments regulation for January 2017 and the allocation regulation for the first quarter of 2017.

    The January 2017 interest assumptions under the benefit payments regulation will be 1.25 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for December 2016, these interest assumptions represent an increase in the immediate rate of 0.50 percent and are otherwise unchanged.

    PBGC has determined that notice and public comment on this amendment are impracticable and contrary to the public interest. This finding is based on the need to determine and issue new interest assumptions promptly so that the assumptions can reflect current market conditions as accurately as possible.

    Because of the need to provide immediate guidance for the payment of benefits under plans with valuation dates during January 2017, PBGC finds that good cause exists for making the assumptions set forth in this amendment effective less than 30 days after publication.

    PBGC has determined that this action is not a “significant regulatory action” under the criteria set forth in Executive Order 12866.

    Because no general notice of proposed rulemaking is required for this amendment, the Regulatory Flexibility Act of 1980 does not apply. See 5 U.S.C. 601(2).

    List of Subjects in 29 CFR Part 4022

    Employee benefit plans, Pension insurance, Pensions, Reporting and recordkeeping requirements.

    In consideration of the foregoing, 29 CFR part 4022 is amended as follows:

    PART 4022—BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS 1. The authority citation for part 4022 continues to read as follows: Authority:

    29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and 1344.

    2. In appendix B to part 4022, Rate Set 279, as set forth below, is added to the table. Appendix B to Part 4022—Lump Sum Interest Rates for PBGC Payments Rate set For plans with a valuation date On or after Before Immediate
  • annuity rate
  • (percent)
  • Deferred annuities
  • (percent)
  • i 1 i 2 i 3 n 1 n 2
    *         *         *         *         *         *         * 279 1-1-17 2-1-17 1.25 4.00 4.00 4.00 7 8
    3. In appendix C to part 4022, Rate Set 279, as set forth below, is added to the table. Appendix C to Part 4022—Lump Sum Interest Rates for Private-Sector Payments Rate set For plans with a valuation date On or after Before Immediate
  • annuity rate
  • (percent)
  • Deferred annuities
  • (percent)
  • i 1 i 2 i 3 n 1 n 2
    *         *         *         *         *         *         * 279 1-1-17 2-1-17 1.25 4.00 4.00 4.00 7 8
    Deborah Chase Murphy, Assistant General Counsel for Regulatory Affairs, Pension Benefit Guaranty Corporation.
    [FR Doc. 2016-30098 Filed 12-15-16; 8:45 am] BILLING CODE 7709-02-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R04-OAR-2016-0359; FRL-9956-63-Region 4] Air Plan Approval; TN; Revisions to the Knox County Portion of the TN SIP AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted by the State of Tennessee, through the Tennessee Department of Environment and Conservation (TDEC), on January 11, 2016. The revision was submitted by TDEC on behalf of the Knox County Department of Air Quality Management, which has jurisdiction over Knox County, Tennessee. The revision that EPA is approving amends the Knox County Air Quality Management Department's regulations, which are part of the Tennessee SIP, to address EPA's startup, shutdown, and malfunction (SSM) SIP call for Knox County. EPA is approving the January 11, 2016, SIP revision because the Agency has determined that it is in accordance with the requirements for SIP provisions under the Clean Air Act (CAA or Act).

    DATES:

    This rule will be effective January 17, 2017.

    ADDRESSES:

    EPA has established a docket for this action under Docket Identification No. EPA-R04-OAR-2016-0359. All documents in the docket are listed on the www.regulations.gov Web site. Although listed in the index, some information is not publicly available, i.e., Confidential Business Information or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through www.regulations.gov or in hard copy at 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. EPA requests that if at all possible, you contact the person listed in the FOR FURTHER INFORMATION CONTACT section to schedule your inspection. The Regional Office's official hours of business are Monday through Friday 8:30 a.m. to 4:30 p.m., excluding Federal holidays.

    FOR FURTHER INFORMATION CONTACT:

    Madolyn Sanchez, Air Regulatory Management Section, Air Planning and Implementation Branch, Pesticides and Toxics Management Division, Region 4, U.S. Environmental Protection Agency, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960. Ms. Sanchez can be reached via telephone at (404) 562-9644 and via electronic mail at [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Background

    On May 22, 2015, EPA finalized an action (hereafter referred to as the “SSM SIP Action”) 1 that responded to a Sierra Club petition for rulemaking concerning state rule treatment of excess emissions by sources during periods of SSM and called for 36 states to submit corrective SIP revisions to EPA by November 22, 2016. As discussed in that action, EPA determined that Knox County Regulation 32.1(C) 2 is inconsistent with the fundamental requirements of CAA sections 113(e)(1), 114(c) and 304 and the credible evidence rule 3 and thus issued a SIP call requiring the State to submit a corrective SIP revision addressing this provision. See 80 FR 33965.

    1See “State Implementation Plans: Response to Petition for Rulemaking; Restatement and Update of EPA's SSM Policy Applicable to SIPs; Findings of Substantial Inadequacy; and SIP Calls To Amend Provisions Applying to Excess Emissions During Periods of Startup, Shutdown and Malfunction,” 80 FR 33839 (June 12, 2015).

    2 Knox County SIP Regulation 32.1(C) is a subsection of Section 32.0, “Use of Evidence.”

    3 40 CFR 51.212(c); see also “Credible Evidence Revisions,” 62 FR 8314 (Feb. 24, 1997).

    On January 11, 2016, the State of Tennessee submitted a SIP revision, pursuant to a request by the Knox County Department of Air Quality Management, to address the SSM SIP Action with respect to Knox County. The revision removes the language from Knox County Regulation 32.1(C) that EPA found to be unlawful in the SSM SIP Action and replaces it with “(Reserved).” In a proposed rulemaking published on September 22, 2016 (81 FR 65313), EPA proposed to approve that SIP revision. The details of Tennessee's SIP revision and the rationale for EPA's action are explained in the proposed rulemaking. Comments on the proposed rulemaking were due on or before October 24, 2016. EPA did not receive any comments on the proposed action.

    II. Incorporation by Reference

    In this rule, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of Knox County Regulation Section 32.0 entitled “Use of Evidence,” effective November 12, 2015, which replaces the language previously included in Section 32.1(C) with “(Reserved).” Therefore, these materials have been approved by EPA for inclusion in the SIP, have been incorporated by reference by EPA into that plan, are fully federally enforceable under sections 110 and 113 of the CAA as of the effective date of the final rulemaking of EPA's approval, and will be incorporated by reference by the Director of the Federal Register in the next update to the SIP compilation.4 EPA has made, and will continue to make, these materials generally available through www.regulations.gov and/or at the EPA Region 4 Office (please contact the person identified in the “For Further Information Contact” section of this preamble for more information).

    4 62 FR 27968 (May 22, 1997).

    III. Final Action

    EPA is approving the Tennessee SIP revision consisting of replacing the language in Section 32.1(C) currently in the EPA-approved SIP for Knox County with “(Reserved).” EPA is approving the January 11, 2016 SIP revision because the Agency has determined that it is in accordance with the requirements for SIP provisions under the CAA, is otherwise consistent with the CAA, and adequately addresses the SSM SIP call with respect to the Knox County portion of the Tennessee SIP.

    IV. Statutory and Executive Order Reviews

    Under the CAA, 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, this action merely approves state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

    • Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

    • 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 (Pub. L. 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 CAA; and

    • does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

    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.

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this action 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. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 14, 2017. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. See section 307(b)(2).

    List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.

    Dated: December 1, 2016. Heather McTeer Toney, Regional Administrator, Region 4.

    40 CFR part 52 is amended as follows:

    PART 52—APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS 1. The authority citation for part 52 continues to read as follows: Authority:

    42.U.S.C. 7401 et seq.

    Subpart RR—Tennessee 2. Section 52.2220(c) is amended under Table 3 by revising the entry for “32.0” to read as follows:
    § 52.2220 Identification of plan.

    (c) * * *

    Table 3—EPA Approved Knox County, Regulations State section Title/subject State
  • effective date
  • EPA approval date Explanation
    *         *         *         *         *         *         * 32.0 Use of Evidence 11/12/2015 12/16/2016, [Insert citation of publication] EPA is replacing the language in Section 32.1(C) with “(Reserved)”. *         *         *         *         *         *         *
    [FR Doc. 2016-30056 Filed 12-15-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 52 and 81 [EPA-R05-OAR-2016-0269; FRL-9956-60-Region 5] Air Plan Approval; Ohio; Redesignation of the Ohio Portion of the Cincinnati, Ohio-Kentucky-Indiana Area to Attainment of the 2008 Ozone Standard AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is finding that the Cincinnati, Ohio-Kentucky-Indiana area is attaining the 2008 ozone National Ambient Air Quality Standard (NAAQS or standard) and is redesignating the Ohio portion of the Cincinnati area to attainment for the 2008 ozone NAAQS because the area meets the statutory requirements for redesignation under the Clean Air Act (CAA or Act). The Cincinnati area includes Butler, Clermont, Clinton, Hamilton, and Warren Counties in Ohio; Lawrenceburg Township in Dearborn County, Indiana; and, Boone, Campbell, and Kenton Counties in Kentucky. EPA is also approving, as a revision to the Ohio State Implementation Plan (SIP), the state's plan for maintaining the 2008 ozone standard through 2030 in the Cincinnati area. Finally, EPA finds adequate and is approving the state's 2020 and 2030 volatile organic compound (VOC) and oxides of nitrogen (NOX) Motor Vehicle Emission Budgets (MVEBs) for the Ohio and Indiana portion of the Cincinnati area. The Ohio Environmental Protection Agency (Ohio EPA) submitted the SIP revision and redesignation request on April 21, 2016.

    DATES:

    This final rule is effective December 16, 2016.

    ADDRESSES:

    EPA has established a docket for this action under Docket ID No. EPA-R05-OAR-2016-0269. All documents in the docket are listed in the http://www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., Confidential Business Information or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either through http://www.regulations.gov, or please contact the person identified in the FOR FURTHER INFORMATION CONTACT section for additional availability information.

    FOR FURTHER INFORMATION CONTACT:

    Kathleen D'Agostino, Environmental Scientist, Attainment Planning and Maintenance Section, Air Programs Branch (AR-18J), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604, (312) 886-1767, [email protected]

    SUPPLEMENTARY INFORMATION:

    Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

    I. What is being addressed in this document?

    This rule takes action on the submission from Ohio EPA, dated April 21, 2016, requesting redesignation of the Ohio portion of the Cincinnati area to attainment for the 2008 ozone standard. The background for today's action is discussed in detail in EPA's proposal, dated September 28, 2016 (81 FR 66602). In that rulemaking, we noted that, under EPA regulations at 40 CFR part 50, the 2008 ozone NAAQS is attained in an area when the 3-year average of the annual fourth highest daily maximum 8-hour average concentration is equal to or less than 0.075 ppm, when truncated after the thousandth decimal place, at all of the ozone monitoring sites in the area. (See 40 CFR 50.15 and appendix P to 40 CFR part 50.) Under the CAA, EPA may redesignate nonattainment areas to attainment if sufficient complete, quality-assured data are available to determine that the area has attained the standard and if it meets the other CAA redesignation requirements in section 107(d)(3)(E). The proposed rule, dated September 28, 2016, provides a detailed discussion of how Ohio has met these CAA requirements.

    As discussed in the September 28, 2016, proposal, quality-assured and certified monitoring data for 2013-2015 and preliminary data for 2016 show that the Cincinnati area has attained and continues to attain the 2008 ozone standard. In the maintenance plan submitted for the area, Ohio has demonstrated that the ozone standard will be maintained in the area through 2030. Finally, Ohio and Indiana have adopted 2020 and 2030 VOC and NOX MVEBs for the Ohio and Indiana portion of the Cincinnati area that are supported by Ohio's maintenance demonstration.

    II. What comments did we receive on the proposed rule?

    EPA provided a 30-day review and comment period for the September 28, 2016, proposed rule. The comment period ended on October 28, 2016. During the comment period, comments in support of the action were submitted on behalf of the Ohio Utility Group and its member companies. We received no adverse comments on the proposed rule.

    III. What action is EPA taking?

    EPA is determining that the Cincinnati nonattainment is attaining the 2008 ozone standard, based on quality-assured and certified monitoring data for 2013-2015 and that the Ohio portion of this area has met the requirements for redesignation under section 107(d)(3)(E) of the CAA. EPA is thus changing the legal designation of the Ohio portion of the Cincinnati area from nonattainment to attainment for the 2008 ozone standard. EPA is also approving, as a revision to the Ohio SIP, the state's maintenance plan for the area. The maintenance plan is designed to keep the Cincinnati area in attainment of the 2008 ozone NAAQS through 2030. Finally, EPA finds adequate and is approving the newly-established 2020 and 2030 MVEBs for the Indiana and Ohio portion of the Cincinnati area.

    In accordance with 5 U.S.C. 553(d), EPA finds there is good cause for these actions to become effective immediately upon publication. This is because a delayed effective date is unnecessary due to the nature of a redesignation to attainment, which relieves the area from certain CAA requirements that would otherwise apply to it. The immediate effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rulemaking actions may become effective less than 30 days after publication if the rule “grants or recognizes an exemption or relieves a restriction,” and section 553(d)(3), which allows an effective date less than 30 days after publication “as otherwise provided by the agency for good cause found and published with the rule.” The purpose of the 30-day waiting period prescribed in section 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Today's rule, however, does not create any new regulatory requirements such that affected parties would need time to prepare before the rule takes effect. Rather, today's rule relieves the state of planning requirements for this ozone nonattainment area. For these reasons, EPA finds good cause under 5 U.S.C. 553(d)(3) for these actions to become effective on the date of publication of these actions.

    IV. 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 CAA 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 CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

    • Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

    • 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 (Pub. L. 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 CAA; and

    • Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

    In addition, 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, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because redesignation is an action that affects the status of a geographical area and does not impose any new regulatory requirements on tribes, impact any existing sources of air pollution on tribal lands, nor impair the maintenance of ozone national ambient air quality standards in tribal lands.

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this action 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. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 14, 2017. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

    List of Subjects 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Oxides of nitrogen, Ozone, Volatile organic compounds.

    40 CFR Part 81

    Environmental protection, Administrative practice and procedure, Air pollution control, Designations and classifications, Intergovernmental relations, Nitrogen oxides, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.

    Dated: December 5, 2016. Robert A. Kaplan, Acting Regional Administrator, Region 5.

    Parts 52 and 81, chapter I, title 40 of the Code of Federal Regulations is amended as follows:

    PART 52—[AMENDED] 1. The authority citation for part 52 continues to read as follows: Authority:

    42 U.S.C. 7401 et seq.

    2. Section 52.1885 is amended by revising paragraph (ff) introductory text and adding paragraph (pp) to read as follows:
    § 52.1885 Control strategy: Ozone.

    (ff) Approval—The 1997 8-hour ozone standard maintenance plans for the following areas have been approved:

    (pp) Approval—The 2008 8-hour ozone standard maintenance plans for the following areas have been approved:

    (1) Approval—On April 21, 2016, the Ohio Environmental Protection Agency submitted a request to redesignate the Ohio portion of the Cincinnati, OH-KY-IN area to attainment of the 2008 ozone NAAQS. As part of the redesignation request, the State submitted a maintenance plan as required by section 175A of the Clean Air Act. Elements of the section 175 maintenance plan include a contingency plan and an obligation to submit a subsequent maintenance plan revision in 8 years as required by the Clean Air Act. The 2020 motor vehicle emissions budgets for the Ohio and Indiana portions of the Cincinnati, OH-KY-IN area are 30.00 tons per summer day (TPSD) for VOC and 26.77 TPSD for NOX. The 2030 motor vehicle emissions budgets for the Ohio and Indiana portions of the area are 18.22 TPSD for VOC and 16.22 TPSD for NOX.

    PART 81—[AMENDED] 1. The authority citation for part 81 continues to read as follows: Authority:

    42 U.S.C. 7401 et seq.

    2. Section 81.336 is amended by revising the entry for Cincinnati, OH-KY-IN in the table entitled “Ohio—2008 8-Hour Ozone NAAQS (Primary and secondary)” to read as follows:
    § 81.336 Ohio. Ohio—2008 8-Hour Ozone NAAQS [Primary and secondary] Designated area Designation Date 1 Type Classification Date 1 Type Cincinnati, OH-KY-IN: 2 December 16, 2016 Attainment. Butler County Clermont County Clinton County Hamilton County Warren County *         *         *         *         *         *         * 1 This date is July 20, 2012, unless otherwise noted. 2 Excludes Indian country located in each area, unless otherwise noted.
    [FR Doc. 2016-30054 Filed 12-15-16; 8:45 am] BILLING CODE 6560-50-P
    LEGAL SERVICES CORPORATION 45 CFR Part 1602 Procedures for Disclosure of Information Under the Freedom of Information Act AGENCY:

    Legal Services Corporation.

    ACTION:

    Final rule.

    SUMMARY:

    The Legal Services Corporation (LSC) is revising its regulation on procedures for disclosure of information under the Freedom of Information Act to implement the statutorily required amendments in the FOIA Improvement Act of 2016. LSC is also making technical changes to improve the structure and clarity of its Freedom of Information Act (FOIA) regulations.

    DATES:

    The final rule is effective as of December 16, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Helen Gerostathos Guyton, Assistant General Counsel, Legal Services Corporation, 3333 K Street NW., Washington, DC 20007, (202) 295-1632 (phone), (202) 337-6519 (fax), [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Background

    LSC is subject to the FOIA by the terms of the Legal Services Corporation Act. 42 U.S.C. 2996d(g). LSC has implemented FOIA by adopting regulations that contain the rules and procedures LSC will follow in making its records available to the public. LSC last amended its FOIA regulations in 2008. 73 FR 67791, Dec. 31, 2008.

    On June 30, 2016, President Obama signed into law the FOIA Improvement Act of 2016 (“2016 Amendments” or the “Act”). The Act codifies a number of transparency and openness principles and enacts housekeeping measures designed to facilitate FOIA requests and production. The revised regulations described in this final rule reflect the required changes prescribed by the Act. LSC also clarified the language and updated the structure of its FOIA regulations.

    In light of the deadline established by Congress, LSC management requested that the Operations and Regulations Committee (Committee) recommend that the Board authorize expedited rulemaking and publication of this final rule. On October 16, 2016, the Committee considered the request and voted to make the recommendation to the Board. On October 18, 2016, the Board voted to authorize expedited rulemaking and the publication of the final rule and request for comments. LSC published the final rule and request for comments on October 31, 2016, 81 FR 75330, and the comment period closed on November 30, 2016. LSC received no substantive adverse comments. LSC received comments from two parties recommending technical changes, which LSC has incorporated into this final rule where noted.

    II. Section-by-Section Analysis Section 1602.1 Purpose

    There are no proposed changes to this section.

    Section 1602.2 Definitions

    LSC modified several existing definitions, deleted one definition, and added five new definitions to make its regulations clearer. LSC amended the Definitions section as follows:

    Duplication. LSC modified this definition to require the release of records “in a form appropriate for release.” This change complies with FOIA guidance that records be released in the format requested, where possible.

    LSC. LSC replaced all references to “the Corporation” with “LSC” for simplicity. LSC introduced this definition to make clear that, unless otherwise specified, references to LSC in this rule include both the Corporation and LSC's Office of Inspector General.

    Office. LSC added this definition in order to simplify references to the Office of Inspector General and/or the Office of Legal Affairs, where appropriate.

    Office of Inspector General records. LSC deleted this definition because the general definition of records includes the Office of Inspector General records, making this definition redundant.

    Person. LSC's prior regulations did not define person. To address this gap, LSC added a definition modeled after the definition of person contained in the FOIA, 5 U.S.C. 551(2). In response to the rule published in the Federal Register on October 31, 2016, 81 FR 75330, LSC received a comment recommending that it add “or a Federal agency” to the definition of person to clarify that a Federal agency is not a person. LSC is adopting that recommendation.

    Records. LSC modified the definition of this term to comport with the definition of records in LSC's Records Management Policy, which was updated in September 2015. It also incorporates Office of Inspector General records, which were previously defined separately.

    Rule. LSC's FOIA regulations cite to personnel rules, rules of procedure, and substantive rules, but do not define the term rule. To address this gap, LSC added a definition of rule modeled on the definition contained in the FOIA, 5 U.S.C. 551(4).

    Submitter. On February 14, 2003, LSC published in the Federal Register a final rule adding provisions for a submitter's rights process to its FOIA regulations. 68 FR 7433, Feb. 14, 2003. These provisions were modeled after the process outlined in Executive Order No. 12,600 (June 23, 1987). The 2003 final rule limited submitter solely to any person or entity from whom LSC receives grant application records. LSC is expanding the definition of submitter to include “any person or applicant for funds who provides confidential commercial information to LSC.” This definition more closely conforms with the spirit of E.O. 12,600 and ensures that submitters who may have an interest in the protection of their confidential commercial information are properly notified.

    Confidential Commercial Information. LSC added a definition of confidential commercial information modeled on the definition in E.O. 12,600 to comport with the new definition of submitter described above. LSC received a comment recommending that the phrase “because disclosure could reasonably be expected to cause substantial competitive harm” be deleted from the definition of confidential commercial information because substantial competitive harm is not the only reason that information could be withheld under Exemption 4. LSC is adopting that recommendation.

    Section 1602.3 Policy

    LSC made minor technical edits to clarify this section, including clarifying the foreseeability definition as recommended by one commenter.

    Section 1602.4 Records Published in the Federal Register

    LSC made minor technical edits to clarify this section.

    Section 1602.5 Public Reading Room

    This section sets out the process by which LSC makes available for public inspection the records described in the FOIA, 5 U.S.C. 552(a)(2). In the prior version of its FOIA regulations, LSC set out the specific categories of records that must be publicly disclosed. LSC deleted those specific provisions and replaced them with a broader reference to 552(a)(2) generally in anticipation of implementing the “Release to One, Release to All” policy. One commenter recommended that LSC implement “Release to One, Release to All” as a policy and delete the reference to the policy from its regulations. LSC also received a comment recommending that it delete reference to § 1602.10 as authority for LSC to withhold records from the public reading room because the FOIA itself provides sufficient authority. LSC is adopting these recommendations.

    LSC also made minor technical revisions to clarify this section.

    Section 1602.6 Procedures for Using the Public Reading Room

    LSC added a provision to this section that will provide requesters with onsite computer and printer access to electronic reading room records. This provision is consistent with Federal agency practice and provides greater access to LSC's records to the public at large.

    Section 1602.7 Index of Records

    LSC updated this section to reflect its current practice of maintaining its index of records electronically.

    Section 1602.8 Requests for Records

    The prior version of § 1602.8 included provisions relating to the format of requests for records, the timing of responses, and the format of responses to requests. There were no subheadings to distinguish these provisions within the section, making it difficult to follow. To improve readability, LSC restructured § 1602.8 by limiting the section solely to provisions related to the format of FOIA requests. LSC also added a provision that informs requesters of their right to specify the preferred form or format for the records sought and that requires requesters to provide their contact information to assist LSC in communicating with them about their request. One commenter recommended that LSC delete the phrase “LSC shall respond to such a request as promptly as possible”, referring to requests for fee waivers or reductions, because LSC would not adjudicate a fee waiver until fees are at issue. The proposed language suggested that all fee waivers would be adjudicated promptly, when this may not always occur. LSC is adopting this recommendation.

    Section 1602.9 Timing and Responses to Requests for Records

    This is a new section. As described in the discussion of § 1602.8, LSC determined that it would be clearer if the provisions for timing and responses to requests were contained in a separate section. LSC also made technical changes to the language and structure to improve clarity. In addition, LSC added provisions describing the dispute resolution processes available to the public as required by the 2016 Amendments. These provisions describe when a requester may seek assistance, including dispute resolution services, from an LSC FOIA Public Liaison or the U.S. National Archives and Record Administration's Office of Government Information Services. In response to the final rule published on October 31, 2016, 81 FR 75330, LSC received a comment recommending that it articulate the procedures for consultations and referrals when it processes a request that contains within the records information of interest to another Office or Federal agency. LSC also received a comment recommending that it remove § 1602.9(b)(3)'s reference to “two or more components of LSC” because LSC has only two components, LSC and the Office of Inspector General. LSC is adopting both recommendations.

    Section 1602.10 Exemptions for Withholding Records

    LSC amended this section to incorporate the 2016 Amendments' codification of the Department of Justice's foreseeable harm standard, which requires LSC to withhold information only if disclosure would harm an interest protected by an exemption or prohibited by law. It further obligates LSC to consider whether partial disclosure of information is possible when full disclosure is not and to take reasonable steps to segregate and release nonexempt information. One commenter recommended that LSC clarify the foreseeable harm standard. LSC is adopting this recommendation.

    In addition, LSC modified its rule regarding the applicability of the deliberative process privilege, as required by the 2016 Amendments. The privilege now applies only to records created within 25 years of the date on which the records were requested.

    Finally, LSC added exemptions 1, 8, and 9 from 5 U.S.C. 552(8)(B)(b) to its regulations. While these exemptions, which deal with national security, financial institutions, and geological information, generally do not apply to the work of LSC, their absence caused confusion because LSC's exemption numbers did not track the commonly used exemption numbers found in both the FOIA and case law. This change will eliminate any confusion.

    Section 1602.11 Officials Authorized To Grant or Deny Requests for Records

    LSC deleted paragraph (a) of this section, which describes the role of the General Counsel in adequately and consistently applying the provisions of this part within LSC. The 2016 Amendments establish the role of the Chief FOIA Officer in ensuring compliance with FOIA, thereby superseding LSC's prior regulations.

    Section 1602.12 Denials

    LSC added a provision to this section requiring it to include a provision in its denial decisions notifying the requester of his or her right to seek dispute resolution services from LSC's FOIA Public Liaison or the Office of Government Information Services.

    Section 1602.13 Appeals of Denials

    LSC made minor technical edits to clarify this section. LSC also added a provision that requires LSC to notify a requester of the dispute resolution services offered by the Office of Government Information Services as a non-exclusive alternative to litigation. LSC received a comment recommending that it include contact information for the Office of Government Information Services' voluntary dispute resolution services. LSC is adopting this recommendation.

    Section 1602.14 Fees

    LSC added a provision to this section that prohibits LSC from assessing fees if its response time is delayed, subject to limited exceptions described in the 2016 Amendments. One commenter recommended that LSC add a provision excusing a failure to comply with the time limits set forth in the regulation when a court determines that exceptional circumstances exist. The commenter also recommended that LSC detail its fee structure and provide requesters an opportunity to reformulate their request at a lower cost. LSC is adopting both recommendations.

    Section 1602.15 Submitter's Rights Process

    As previously described in the discussion of § 1602.2's definition of the term submitter, LSC expanded the submitter's rights process to include “any person or applicant for funds who provides confidential commercial information to LSC.” This definition more closely conforms with the spirit of E.O. 12600 and ensures that submitters who may have an interest in the protection of their confidential information are properly notified.

    Finally, LSC clarified an ambiguous provision that requires a submitter to provide to LSC within seven days his or her statement objecting to disclosure of his information. One commenter recommended that LSC delete the seven-day response period and instead specify in its notice to the requester a reasonable time period within which the submitter must respond. LSC also received a comment recommending that LSC's regulations comport with agency practice that makes the notice of proposed release the final administrative action by LSC. LSC is adopting these recommendations.

    List of Subjects in 45 CFR Part 1602

    Freedom of information.

    For the reasons stated in the preamble, the Legal Services Corporation revises 45 CFR part 1602 to read as follows: PART 1602—PROCEDURES FOR DISCLOSURE OF INFORMATION UNDER THE FREEDOM OF INFORMATION ACT Sec. 1602.1 Purpose. 1602.2 Definitions. 1602.3 Policy. 1602.4 Records published in the Federal Register. 1602.5 Public reading room. 1602.6 Procedures for use of public reading room. 1602.7 Index of records. 1602.8 Requests for records. 1602.9 Timing and responses to requests for records. 1602.10 Exemptions for withholding records. 1602.11 Officials authorized to grant or deny requests for records. 1602.12 Denials. 1602.13 Appeals of denials. 1602.14 Fees. 1602.15 Submitter's rights process. Authority:

    42 U.S.C. 2996g(e).

    § 1602.1 Purpose.

    This part contains the rules and procedures the Legal Services Corporation (LSC) follows in making records available to the public under the Freedom of Information Act.

    § 1602.2 Definitions.

    (a) Commercial use request means a request from or on behalf of one who seeks information for a use or purpose that furthers the commercial, trade, or profit interests of the requester or the person on whose behalf the request is made. In determining whether a requester properly belongs in this category, LSC will look to the use to which a requester will put the documents requested. When LSC has reasonable cause to doubt the requester's stated use of the records sought, or where the use is not clear from the request itself, it will seek additional clarification before assigning the request to a category.

    (b) Confidential commercial information means records provided to LSC by a submitter that arguably contain material exempt from release under Exemption 4 of the FOIA, 5 U.S.C. 552(b)(4).

    (c) Duplication means the process of making a copy of a requested record pursuant to this part in a form appropriate for release in response to a FOIA request.

    (d) Educational institution means a preschool, a public or private elementary or secondary school, an institution of undergraduate or graduate higher education, or an institution of professional or vocational education which operates a program or programs of scholarly research.

    (e) FOIA means the Freedom of Information Act, 5 U.S.C. 552.

    (f) LSC means the Legal Services Corporation. Unless explicitly stated otherwise, LSC includes the Office of Inspector General.

    (g) Non-commercial scientific institution means an institution that is not operated on a commercial basis and which is operated solely for the purpose of conducting scientific research, the results of which are not intended to promote any particular product or industry.

    (h) Office refers to the Office of Legal Affairs and/or the Office of Inspector General (OIG).

    (i) Person includes an individual, partnership, corporation, association, or public or private organization other than LSC or a Federal agency.

    (j) Records are any type of information made or received by LSC or the OIG for purposes of transacting LSC or OIG business and preserved by LSC or the OIG (either directly or maintained by a third party under contract to LSC or the OIG for records management purposes) regardless of form (e.g., paper or electronic, formal or informal, copies or original) as evidence of LSC's or OIG's organization, functions, policies, decisions, procedures, operations, or other activities of LSC or the OIG or because the record has informational value.

    (k) Representative of the news media means any person or entity that gathers information of potential interest to a segment of the public, uses its editorial skills to turn the raw materials into a distinct work, and distributes that work to an audience. In this clause, the term “news” means information that is about current events or that would be of current interest to the public. Examples of news media entities are television or radio stations broadcasting to the public at large and publishers of periodicals (but only if such entities qualify as disseminators of “news”) who make their products available for purchase or subscription or by free distribution to the general public. These examples are not all-inclusive. Moreover, as methods of news delivery evolve (for example, the adoption of the electronic dissemination of newspapers through telecommunications services), such alternative media shall be considered to be news media entities. A freelance journalist shall be regarded as working for a news media entity if the journalist can demonstrate a solid basis for expecting publication through that entity, whether or not the journalist is actually employed by the entity. A publication contract would present a solid basis for such an expectation. LSC may also consider the past publication record of the requester in making such a determination.

    (l) Review means the process of examining documents located in response to a request to determine whether any portion of any such document is exempt from disclosure. It also includes processing any such documents for disclosure. Review does not include time spent resolving general legal or policy issues regarding the application of exemptions.

    (m) Rule means the whole or a part of an LSC statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of LSC.

    (n) Search means the process of looking for and retrieving records that are responsive to a request for records. It includes page-by-page or line-by-line identification of material within documents and also includes reasonable efforts to locate and retrieve information from records maintained in electronic form or format. Searches may be conducted manually or by automated means and will be conducted in the most efficient and least expensive manner.

    (o) Submitter means any person or applicant for funds who provides confidential commercial information to LSC.

    § 1602.3 Policy.

    LSC will make records concerning its operations, activities, and business available to the public to the maximum extent reasonably possible. LSC will withhold records from the public only in accordance with the FOIA and this part. LSC will disclose records otherwise exempt from disclosure under the FOIA when LSC does not reasonably foresee that disclosure would harm an interest protected by an exemption and disclosure is not prohibited by law or protected under Exemption 3.

    § 1602.4 Records published in the Federal Register.

    LSC routinely publishes in the Federal Register information on its basic structure and operations necessary to inform the public how to deal effectively with LSC. LSC will make reasonable efforts to currently update such information, which will include basic information on LSC's location, functions, rules of procedure, substantive rules, statements of general policy, and information regarding how the public may obtain information, make submittals or requests, or obtain decisions.

    § 1602.5 Public reading room.

    (a) LSC will maintain a public reading room at its offices at 3333 K St. NW., Washington, DC 20007. This room will be supervised and will be open to the public during LSC's regular business hours. Procedures for use of the public reading room are described in § 1602.6. LSC also maintains an electronic public reading room that may be accessed at http://www.lsc.gov/about-lsc/foia/foia-electronic-public-reading-room.

    (b) Subject to the limitation stated in paragraph (c) of this section, LSC will make available for public inspection in its electronic public reading room the records described in 5 U.S.C. 552(a)(2).

    (c) Records required by FOIA to be available in the public reading room may be exempt from mandatory disclosure pursuant to 5 U.S.C. 552(b). LSC will not make such records available in the public reading room. LSC may edit other records maintained in the reading room by redacting details about individuals to prevent clearly unwarranted invasions of personal privacy. In such cases, LSC will attach a full explanation of the redactions to the record. LSC will indicate the extent of the redactions unless doing so would harm an interest protected by the exemption under which the redactions are made. If technically feasible, LSC will indicate the extent of the redactions at the place in the record where the redactions were made.

    § 1602.6 Procedures for use of public reading room.

    (a) A person who wishes to inspect or copy records in the public reading room should arrange a time in advance, by telephone or letter request made to the Office of Legal Affairs, Legal Services Corporation, 3333 K Street NW., Washington, DC 20007 or by email to [email protected]

    (1) In appropriate circumstances, LSC will advise persons making telephonic requests to use the public reading room that a written request would aid in the identification and expeditious processing of the records sought.

    (2) Written requests should identify the records sought in the manner provided in § 1602.8(b) and should request a specific date for inspecting the records.

    (b) LSC will advise the requester as promptly as possible if, for any reason, it is not feasible to make the records sought available on the date requested.

    (c) A computer terminal and printer are available upon request in the public reading room for accessing Electronic Reading Room records.

    § 1602.7 Index of records.

    LSC will maintain and make available for public inspection in an electronic format a current index identifying any matter within the scope of § 1602.4 and § 1602.5(b).

    § 1602.8 Requests for records.

    (a) LSC will make its records promptly available, upon request, to any person in accordance with this section, unless:

    (1) the FOIA requires the records to be published in the Federal Register (§ 1602.4) or to be made available in the public reading room (§ 1602.5); or

    (2) LSC determines that such records should be withheld and are exempt from mandatory disclosure under the FOIA and § 1602.10.

    (b)(1) Requests for LSC records. All requests for LSC records must be clearly marked Freedom of Information Act Request and shall be addressed to the FOIA Analyst, Office of Legal Affairs, Legal Services Corporation, 3333 K Street NW., Washington, DC 20007. Email requests shall be sent to [email protected] Requests for LSC Records may also be made online using the FOIA Request Electronic Submission Form located at http://www.lsc.gov/about-lsc/foia.

    (2) Requests for Office of Inspector General records. All requests for records maintained by the OIG must be clearly marked Freedom of Information Act Request and shall be addressed to the FOIA Officer, Office of Inspector General, Legal Services Corporation, 3333 K Street NW., Washington, DC 20007. Email requests shall be sent to [email protected]

    (3) Any request not marked and addressed as specified in this section will be so marked by LSC personnel as soon as it is properly identified, and will be forwarded immediately to the appropriate Office. A request improperly addressed will be deemed to have been received as in accordance with § 1602.9 only when it has been received by the appropriate Office. Upon receipt of an improperly addressed request, the Chief FOIA Officer, Office of Inspector General Legal Counsel or their designees shall notify the requester of the date on which the time period began.

    (c) A request must reasonably describe the records requested so that employees of LSC who are familiar with the subject area of the request are able, with a reasonable amount of effort, to determine which particular records are within the scope of the request. Before submitting their requests, requesters may contact LSC's or OIG's FOIA Analyst or FOIA Public Liaison to discuss the records they seek and to receive assistance in describing the records. If LSC determines that a request does not reasonably describe the records sought, LSC will inform the requester what additional information is needed or why the request is otherwise insufficient. Requesters who are attempting to reformulate or modify their request may discuss their request with LSC's or OIG's FOIA Analyst or FOIA Public Liaison. If a request does not reasonably describe the records sought, LSC's response to the request may be delayed.

    (d) To facilitate the location of records by LSC, a requester should try to provide the following kinds of information, if known:

    (1) The specific event or action to which the record refers;

    (2) The unit or program of LSC that may be responsible for or may have produced the record;

    (3) The date of the record or the date or period to which it refers or relates;

    (4) The type of record, such as an application, a grant, a contract, or a report;

    (5) Personnel of LSC who may have prepared or have knowledge of the record;

    (6) Citations to newspapers or publications which have referred to the record.

    (e) Requests may specify the preferred form or format (including electronic formats) for the records sought. LSC will provide records in the form or format indicated by the requester to the extent such records are readily reproducible in the requested form or format. LSC reserves the right to limit the number of copies of any document that will be provided to any one requester or to require that special arrangements for duplication be made in the case of bound volumes or other records representing unusual problems of handling or reproduction.

    (f) Requesters must provide contact information, such as their phone number, email address, and/or mailing address, to assist LSC in communicating with them and providing released records.

    (g) LSC is not required to create a record or to perform research to satisfy a request.

    (h) Any request for a waiver or reduction of fees should be included in the FOIA request, and any such request should indicate the grounds for a waiver or reduction of fees, as set out in § 1602.14(g).

    § 1602.9 Timing and responses to requests for records.

    (a)(1) Upon receiving a request for LSC or Inspector General records under § 1602.8, the Chief FOIA Officer, Office of Inspector General Legal Counsel or their designees shall make an initial determination of whether to comply with or deny such request. The Chief FOIA Officer, Office of Inspector General Legal Counsel or their designees will send the determination to the requester within 20 business days after receipt of the request and will notify the requester of their right to seek assistance from an LSC FOIA Public Liaison.

    (2) The 20-day period under paragraph (a)(1) of this section shall commence on the date on which the request is first received by the appropriate Office, but in no event later than 10 working days after the request has been received by either the Office of Legal Affairs or the Office of Inspector General. The 20-day period shall not be tolled by the Office processing the request except that the processing Office may make one request to the requester for information pursuant to paragraph (b) of this section and toll the 20-day period while

    (i) It is awaiting such information that it has reasonably requested from the requester under this section; or

    (ii) It communicates with the requester to clarify issues regarding fee assessment.

    In either case, the processing Office's receipt of the requester's response to such a request for information or clarification ends the tolling period.

    (b) Consultation. When records originated with the Office processing the request, but contain within them information of interest to another Office or Federal agency, the Office processing the request should typically consult with that other entity prior to making a release determination.

    (c) Referral. (1) If the processing Office determines that the other Office or Federal agency is best able to determine whether to disclose the record, the processing Office will typically refer the responsibility for responding to the request for that record to the other Office or Federal agency. Ordinarily, the Office that originated the record is presumed to be the best Office to make the disclosure determination. However, if the Offices or Federal agency jointly agree that the processing Office is in the best position to respond regarding the record, then the record may be released by the processing Office after consultation with the other Office or Federal agency.

    (2) Whenever a referral occurs, the processing Office must document the referral, maintain a copy of the record that it refers, and notify the requester of the referral, informing the requester of the name(s) of the Office or Federal agency to which the record was referred, including that Office's or Federal agency's FOIA contact information.

    (d)(1) In unusual circumstances, as specified in paragraph (d)(3) of this section, LSC may extend the time limit for up to 10 working days by written notice to the requester setting forth the reasons for such extension and the date on which LSC expects to send its determination.

    (2) LSC may also provide an opportunity to the requester to narrow the request. In addition, to aid the requester, LSC shall make available a FOIA Public Liaison, who shall assist in the resolution of any disputes between the requester and LSC, and shall notify the requester of his right to seek dispute resolution services from the U.S. National Archives and Records Administration's Office of Government Information Services.

    (3) Unusual circumstances. As used in this part, unusual circumstances are limited to the following, but only to the extent reasonably necessary for the proper processing of the particular request:

    (i) The need to search for and collect the requested records from establishments that are separate from the office processing the request;

    (ii) The need to search for, collect, and appropriately examine a voluminous amount of separate and distinct records which are demanded in a single request; or

    (iii) The need for consultation, which shall be conducted with all practicable speed, with another Office, Federal agency, or organization having a substantial interest in the determination of the request.

    (c)(1) When the processing Office cannot send a determination to the requester within the applicable time limit, the Chief FOIA Officer, Office of the Inspector General Legal Counsel, or their designees shall inform the requester of the reason for the delay, the date on which the processing Office expects to send its determination, and the requester's right to treat the delay as a denial and to appeal to LSC's President or Inspector General, in accordance with § 1602.13, or to seek dispute resolution services from a FOIA Public Liaison or the Office of Government Information Services.

    (2) If the processing Office has not sent its determination by the end of the 20-day period or the last extension thereof, the requester may deem the request denied, and exercise a right of appeal in accordance with § 1602.13, or seek dispute resolution services from LSC's or OIG's FOIA Public Liaison or the National Archives and Records Administration's Office of Government Information Services. The Chief FOIA Officer, Office of Inspector General Legal Counsel, or their designees may ask the requester to forego appeal until a determination is made.

    (d) After the processing Office determines that a request will be granted, LSC or the OIG will act with due diligence in providing a substantive response.

    (e)(1) Expedited treatment. Requests and appeals will be taken out of order and given expedited treatment whenever the requester demonstrates a compelling need. A compelling need means:

    (i) Circumstances in which the lack of expedited treatment could reasonably be expected to pose an imminent threat to the life or physical safety of an individual;

    (ii) An urgency to inform the public about an actual or alleged LSC activity and the request is made by a person primarily engaged in disseminating information;

    (iii) The loss of substantial due process rights; or

    (iv) A matter of widespread and exceptional media interest raising questions about LSC's integrity which may affect public confidence in LSC.

    (2) A request for expedited processing may be made at the time of the initial request for records or at any later time. For a prompt determination, a request for expedited processing must be properly addressed and marked and received by LSC pursuant to § 1602.8.

    (3) A requester who seeks expedited processing must submit a statement demonstrating a compelling need and explaining in detail the basis for requesting expedited processing. The requester must certify that the statement is true and correct to the best of the requester's knowledge and belief.

    (4) Within 10 calendar days of receiving a request for expedited processing, the Chief FOIA Officer, Office of Inspector General Legal Counsel or their designees shall decide whether to grant the request and shall notify the requester of the decision. If a request for expedited treatment is granted, the request shall be given priority and shall be processed as soon as practicable. If a request for expedited processing is denied, the requester may appeal in writing to LSC's President or Inspector General in the format described in § 1602.13(a). Any appeal of a denial for expedited treatment shall be acted on expeditiously by LSC.

    § 1602.10 Exemptions for withholding records.

    (a) LSC shall—

    (1) Withhold information under this section only if—

    (i) LSC reasonably foresees that disclosure would harm an interest protected by an exemption described in paragraph (b); or

    (ii) Disclosure is prohibited by law; and

    (2)(i) Consider whether partial disclosure of information is possible whenever LSC determines that a full disclosure of a requested record is not possible; and

    (ii) Take reasonable steps necessary to segregate and release nonexempt information;

    (b) LSC may withhold a requested record from public disclosure only if one or more of the following exemptions authorized by the FOIA apply:

    (1)(i) Matter that is specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy; and

    (ii) Is in fact properly classified pursuant to such Executive Order;

    (2) Matter that is related solely to the internal personnel rules and practices of LSC;

    (3) Matter that is specifically exempted from disclosure by statute (other than the exemptions under FOIA at 5 U.S.C. 552(b)), provided that such statute requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or establishes particular criteria for withholding, or refers to particular types of matters to be withheld;

    (4) Trade secrets and commercial or financial information obtained from a person and privileged or confidential;

    (5) Inter-agency or intra-agency memoranda or letters that would not be available by law to a party other than an agency in litigation with LSC, provided that the deliberative process privilege shall not apply to records created 25 years or more before the date on which the records were requested;

    (6) Personnel and medical files and similar files, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy;

    (7) Records or information compiled for law enforcement purposes, including enforcing the Legal Services Corporation Act or any other law, but only to the extent that the production of such law enforcement records or information:

    (i) Could reasonably be expected to interfere with enforcement proceedings;

    (ii) Would deprive a person or a recipient of a right to a fair trial or an impartial adjudication;

    (iii) Could reasonably be expected to constitute an unwarranted invasion of personal privacy;

    (iv) Could reasonably be expected to disclose the identity of a confidential source, including a State, local, or foreign agency or authority or any private institution that furnished information on a confidential basis, and in the case of a record or information compiled by a criminal law enforcement authority in the course of a criminal investigation, information furnished by a confidential source;

    (v) Would disclose techniques and procedures for law enforcement investigations or prosecutions, or would disclose guidelines for law enforcement investigations or prosecutions if such disclosure could reasonably be expected to risk circumvention of the law; or

    (vi) Could reasonably be expected to endanger the life or physical safety of any individual;

    (8) Matter that is contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions; or

    (9) Geological and geophysical information and data, including maps, concerning wells.

    (c) In the event that one or more of the exemptions in paragraph (b) of this section applies, any reasonably segregable portion of a record shall be provided to the requester after redaction of the exempt portions. The amount of information redacted and the exemption under which the redaction is being made shall be indicated on the released portion of the record, unless doing so would harm the interest protected by the exemption under which the redaction is made. If technically feasible, the amount of information redacted and the exemption under which the redaction is being made shall be indicated at the place in the record where the redaction occurs.

    (d) No requester shall have a right to insist that any or all of the techniques in paragraph (c) of this section should be employed in order to satisfy a request.

    (e) Records that may be exempt from disclosure pursuant to paragraph (b) of this section may be made available at the discretion of the LSC official authorized to grant or deny the request for records, after appropriate consultation as provided in § 1602.11. LSC will disclose records otherwise exempt from disclosure under the FOIA when LSC does not reasonably foresee that disclosure would harm an interest protected by an exemption and disclosure is not prohibited by law or protected under Exemption 3.

    § 1602.11 Officials authorized to grant or deny requests for records.

    (a) The Chief FOIA Officer, Office of Inspector General Legal Counsel or their designees are authorized to grant or deny requests under this part. In the absence of an Office of Inspector General Legal Counsel, the Inspector General shall name a designee who will be authorized to grant or deny requests under this part and who will perform all other functions of the Office of Inspector General Legal Counsel under this part.

    (b)(1) The Chief FOIA Officer or designee shall consult with the Office of Inspector General Legal Counsel or designee prior to granting or denying any request for records or portions of records which originated with the OIG, or which contain information which originated with the OIG, but which are maintained by other components of LSC.

    (2) The Office of Inspector General Legal Counsel or designee shall consult with the Chief FOIA Officer or designee prior to granting or denying any request for records or portions of records which originated with any component of LSC other than the OIG, or which contain information which originated with a component of LSC other than the OIG, but which are maintained by the OIG.

    § 1602.12 Denials.

    (a) A denial of a written request for a record that complies with the requirements of § 1602.8 shall be in writing and shall include the following:

    (1) A reference to the applicable exemption or exemptions in § 1602.10(b) upon which the denial is based;

    (2) An explanation of how the exemption applies to the requested records;

    (3) A statement explaining why it is deemed unreasonable to provide segregable portions of the record after deleting the exempt portions;

    (4) An estimate of the volume of requested matter denied unless providing such estimate would harm the interest protected by the exemption under which the denial is made;

    (5) The name and title of the person or persons responsible for denying the request;

    (6) An explanation of the right to appeal the denial and of the procedures for submitting an appeal, as described in § 1602.13, including the address of the official to whom appeals should be submitted; and

    (7) An explanation of the right of the requester to seek dispute resolution services from a FOIA Public Liaison or the Office of Government Information Services.

    (b) Whenever LSC makes a record available subject to the deletion of a portion of the record, such action shall be deemed a denial of a record for purposes of paragraph (a) of this section.

    (c) All denials shall be treated as final opinions under § 1602.5(b).

    § 1602.13 Appeals of denials.

    (a) Any person whose written request has been denied is entitled to appeal the denial within 90 days of the date of the response by writing to the President of LSC or, in the case of a denial of a request for OIG records, the Inspector General, at the mailing or email addresses given in § 1602.8(b)(1) and (2). The envelope and letter or email appeal should be clearly marked: “Freedom of Information Appeal.” An appeal need not be in any particular form, but should adequately identify the denial, if possible, by describing the requested record, identifying the official who issued the denial, and providing the date on which the denial was issued.

    (b) No personal appearance, oral argument, or hearing will ordinarily be permitted on appeal of a denial. Upon request and a showing of special circumstances, however, this limitation may be waived and an informal conference may be arranged with the President, Inspector General or their designees for this purpose.

    (c)(1) The decision of the President or the Inspector General on an appeal shall be in writing and, in the event the denial is in whole or in part upheld, shall contain an explanation responsive to the arguments advanced by the requester, the matters described in § 1602.12(a)(1) through (4), and the provisions for judicial review of such decision under 5 U.S.C. 552(a)(4). The decision must also notify the requester of the dispute resolution services offered by the National Archives and Records Administration's Office of Government Information Systems as a non-exclusive alternative to litigation. A requester may contact the Office of Government Information Services in any of the following ways:

    (i) Office of Government Information Services, National Archives and Records Administration, 8601 Adelphi Road—OGIS, College Park, MD 20740.

    (ii) ogis.archives.gov.

    (iii) Email: [email protected]

    (iv) Telephone: 202-741-5770.

    (v) Facsimile: 202-741-5769.

    (vi) Toll-free: 1-877-684-6448.

    (2) Dispute resolution through the Office of Government Information Services is a voluntary process. If LSC agrees to participate in the dispute resolution services provided by the Office of Government Information Services, it will actively engage in the process in an attempt to resolve the dispute.

    (d) LSC will send its decision to the requester within 20 business days after receipt of the appeal, unless an additional period is justified due to unusual circumstances, as described in § 1602.9, in which case LSC may extend the time limit for up to 10 working days by written notice to the requester setting forth the reasons for such extension and the date on which LSC expects to send its determination. The decision of the President or the Inspector General shall constitute the final action of LSC. All such decisions shall be treated as final opinions under § 1602.5(b)(1).

    (e) On an appeal, the President or designee shall consult with the OIG prior to reversing in whole or in part the denial of any request for records or portions of records which originated with the OIG, or which contain information which originated with the OIG, but which are maintained by LSC. The Inspector General or designee shall consult with the President prior to reversing in whole or in part the denial of any request for records or portions of records which originated with LSC, or which contain information which originated with LSC, but which are maintained by the OIG.

    § 1602.14 Fees.

    (a) LSC will not charge fees for information routinely provided in the normal course of doing business.

    (b)(1) When records are requested for commercial use, LSC shall limit fees to reasonable standard charges for document search, review, and duplication.

    (2) LSC shall not assess any search fees (or if the requester is a representative of the news media, duplication fees) if LSC has failed to comply with the time limits set forth in § 1602.9 and no unusual circumstances, as defined in that section apply.

    (3)(i) If LSC has determined that unusual circumstances as defined in § 1602.9 apply and LSC has provided timely written notice to the requester in accordance with § 1602.9, a failure described in paragraph (2) is excused for an additional 10 days. If LSC fails to comply with the extended time limit, LSC may not assess any search fees (or, if the requester is a representative of the news media, duplication fees) except as provided in paragraphs (a)(3)(ii)-(iii) of this section.

    (ii) If LSC has determined that unusual circumstances as defined in § 1602.9 apply and more than 5,000 pages are necessary to respond to the request, LSC may charge search fees or duplication fees if LSC has provided a timely written notice to the requester in accordance with § 1602.9 and LSC has discussed with the requester via written mail, electronic mail, or telephone (or made not less than three good faith attempts to do so) how the requester could effectively limit the scope of the request in accordance with § 1602.9.

    (iii) If a court has determined that exceptional circumstances exist, as defined by the FOIA, a failure to comply with the time limits shall be excused for the length of time provided by the court order.

    (c) When records are sought by a representative of the news media or by an educational or non-commercial scientific institution, LSC shall limit fees to reasonable standard charges for document duplication after the first 100 pages; and

    (d) For all other requests, LSC shall limit fees to reasonable standard charges for search time after the first 2 hours and duplication after the first 100 pages.

    (e) The schedule of charges and fees for services regarding the production or disclosure of the Corporation's records is as follows:

    (1) Manual search for and review of records will be charged as follows:

    (i) Administrative fee: $22.35/hour;

    (ii) Professional fee: $66.26/hour;

    (iii) Charges for search and review time less than a full hour will be billed by quarter-hour segments;

    (2) Duplication by paper copy: 35 cents per page;

    (3) Duplication by other methods: actual charges as incurred;

    (4) Packing and mailing records: no charge for regular mail;

    (5) Express mail: actual charges as incurred.

    (f) LSC may charge for time spent searching even if it does not locate any responsive records or it withholds the records located as exempt from disclosure.

    (g) Fee waivers. A requester may seek a waiver or reduction of the fees established under paragraph (e) of this section. A fee waiver or reduction request will be granted where LSC has determined that the requester has demonstrated that disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations of LSC and is not primarily in the commercial interest of the requester.

    (1) In order to determine whether disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of LSC, LSC shall consider the following four factors:

    (i) The subject of the request: Whether the subject of the requested records concerns “the operations or activities of LSC.” The subject of the requested records must concern identifiable operations or activities of LSC, with a connection that is direct and clear, not remote or attenuated.

    (ii) The informative value of the information to be disclosed: Whether the disclosure is “likely to contribute” to an understanding of LSC operations or activities. The requested records must be meaningfully informative about LSC operations or activities in order to be likely to contribute to an increased public understanding of those operations or activities. The disclosure of information that is already in the public domain, in either a duplicative or a substantially identical form, would not be likely to contribute to such understanding where nothing new would be added to the public's understanding.

    (iii) The contribution to an understanding of the subject by the public likely to result from disclosure: Whether disclosure of the requested records will contribute to “public understanding.” The disclosure must contribute to a reasonably broad audience of persons interested in the subject, as opposed to the personal interest of the requester. A requester's expertise in the subject area and ability and intention to effectively convey information to the public shall be considered. LSC shall presume that a representative of the news media will satisfy this consideration.

    (iv) The significance of the contribution to public understanding: Whether the disclosure is likely to contribute “significantly” to public understanding of LSC operations or activities. The disclosure must enhance the public's understanding of the subject in question to a significant extent.

    (2) In order to determine whether disclosure of the information is not primarily in the commercial interest of the requester, LSC will consider the following two factors:

    (i) The existence and magnitude of a commercial interest: Whether the requester has a commercial interest that would be furthered by the requested disclosure. LSC shall consider any commercial interest of the requester (with reference to the definition of commercial use in this part) or of any person on whose behalf the requester may be acting, that would be furthered by the requested disclosure.

    (ii) The primary interest in disclosure: Whether the magnitude of the identified commercial interest is sufficiently large, in comparison with the public interest in disclosure, that disclosure is “primarily” in the commercial interest of the requester. A fee waiver or reduction is justified where the public interest is of greater magnitude than is any identified commercial interest in disclosure. LSC ordinarily shall presume that where a news media requester has satisfied the public interest standard, the public interest will be the interest primarily served by disclosure to that requester. Disclosure to data brokers or others who merely compile and market government information for direct economic return shall not be presumed primarily to serve a public interest.

    (3) Where LSC has determined that a fee waiver or reduction request is justified for only some of the records to be released, LSC shall grant the fee waiver or reduction for those records.

    (4) Requests for fee waivers and reductions shall be made in writing and must address the factors listed in this paragraph as they apply to the request.

    (h) Requesters must agree to pay all fees charged for services associated with their requests. LSC will assume that requesters agree to pay all charges for services associated with their requests up to $25 unless otherwise indicated by the requester. For requests estimated to exceed $25, LSC will consult with the requester prior to processing the request, and such requests will not be deemed to have been received by LSC until the requester agrees in writing to pay all fees charged for services. LSC will also make available its FOIA Public Liaison or other FOIA professional to assist any requester in reformulating a request to meet the requester's needs at a lower cost.

    (i) No requester will be required to make an advance payment of any fee unless:

    (1) The requester has previously failed to pay a required fee within 30 days of the date of billing, in which case an advance deposit of the full amount of the anticipated fee together with the fee then due plus interest accrued may be required (and the request will not be deemed to have been received by LSC until such payment is made); or

    (2) LSC determines that an estimated fee will exceed $250, in which case the requester shall be notified of the amount of the anticipated fee or such portion thereof as can readily be estimated. Such notification shall be transmitted as soon as possible, but in any event within five working days of receipt by LSC, giving the best estimate then available. The notification shall offer the requester the opportunity to confer with appropriate representatives of LSC for the purpose of reformulating the request so as to meet the needs of the requester at a reduced cost. The request will not be deemed to have been received by LSC for purposes of the initial 20-day response period until the requester makes a deposit on the fee in an amount determined by LSC.

    (j) Interest may be charged to those requesters who fail to pay the fees charged. Interest will be assessed on the amount billed, starting on the 31st day following the day on which the billing was sent. The rate charged will be as prescribed in 31 U.S.C. 3717.

    (k) If LSC reasonably believes that a requester or group of requesters is attempting to break a request into a series of requests for the purpose of evading the assessment of fees, LSC shall aggregate such requests and charge accordingly. Likewise, LSC will aggregate multiple requests for documents received from the same requester within 45 days.

    § 1602.15 Submitter's rights process.

    (a) When LSC receives a FOIA request seeking the release of confidential commercial information, LSC shall provide prompt written notice of the request to the submitter in order to afford the submitter an opportunity to object to the disclosure of the requested confidential commercial information. The notice shall reasonably describe the confidential commercial information requested, inform the submitter of the process required by paragraph (b) of this section, and provide a reasonable time period for the submitter to respond.

    (b) If a submitter who has received notice of a request for the submitter's confidential commercial information wishes to object to the disclosure of the confidential commercial information, the submitter must provide LSC within the time period set forth in the notice, a detailed written statement identifying the information which it objects. The submitter must send its objections to the Office of Legal Affairs or, if it pertains to Office of Inspector General records, to the Office of Inspector General, and must specify the grounds for withholding the information under FOIA or this part. In particular, the submitter must demonstrate why the information is commercial or financial information that is privileged or confidential. If the submitter fails to respond to the notice from LSC within the time period specified in the notice, LSC will deem the submitter to have no objection to the disclosure of the information.

    (c) Upon receipt of written objection to disclosure by a submitter, LSC shall consider the submitter's objections and specific grounds for withholding in deciding whether to release the disputed information. Whenever LSC decides to disclose information over the objection of the submitter, LSC shall give the submitter written notice which shall include:

    (1) A description of the information to be released and a notice that LSC intends to release the information;

    (2) A statement of the reason(s) why the submitter's request for withholding is being rejected; and

    (3) A specified disclosure date, which must be a reasonable time after the notice.

    (d) The requirements of this section shall not apply if:

    (1) LSC determines upon initial review of the requested confidential commercial information that the requested information should not be disclosed;

    (2) The information has been previously published or officially made available to the public; or

    (3) Disclosure of the information is required by statute (other than FOIA) or LSC's regulations.

    (e) Whenever a requester files a lawsuit seeking to compel disclosure of a submitter's information, LSC shall promptly notify the submitter.

    (f) Whenever LSC provides a submitter with notice and opportunity to oppose disclosure under this section, LSC shall notify the requester that the submitter's rights process under this section has been triggered. Likewise, whenever a submitter files a lawsuit seeking to prevent the disclosure of the submitter's information, LSC shall notify the requester.

    Dated: December 12, 2016. Stefanie K. Davis, Assistant General Counsel.
    [FR Doc. 2016-30144 Filed 12-15-16; 8:45 am] BILLING CODE P
    NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Parts 1845 and 1852 RIN 2700-AE33 NASA Federal Acquisition Regulation Supplement: Contractor Financial Reporting of Property (2016-N024) AGENCY:

    National Aeronautics and Space Administration.

    ACTION:

    Final rule.

    SUMMARY:

    NASA is issuing a final rule amending the NASA Federal Acquisition Regulation Supplement (NFS) to add a monthly reporting requirement for contractors having custody of $10 million or more in NASA-owned Property, Plant and Equipment (PP&E).

    DATES:

    Effective: January 17, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Andrew O'Rourke, telephone 202-358-4560.

    SUPPLEMENTARY INFORMATION:

    I. Background

    NASA published a proposed rule in the Federal Register at 81 FR 48726 on July 26, 2016, to amend the NFS to add a monthly reporting requirement at 1852.245-73 for contracts in which the contractor has custody of NASA-owned PP&E valued at $10 million or more to ensure contractor-held PP&E are more accurately represented in NASA financial statements. Two respondents provided comments in response to the proposed rule.

    II. Discussion and Analysis

    NASA reviewed the public comments in the development of the final rule. A discussion of the comments and any changes made to the rule as a result of these comments is provided, as follows:

    A. Changes. No changes are being made to the final rule as a result of the public comments received with the exception of minor editorial changes.

    B. Analysis of Public Comments.

    1. Recommend use of different approach to asset management.

    Comment: One respondent agreed with the overall objective of the rule, but disagreed with NASA's proposed approach and changes in the rule. The respondent commented that the NFS clause is fundamentally flawed, is non-GAAP accounting, and it does not in of itself create adequate infrastructure to provide reliable accounting data and financial reporting. The respondent commented that the clause inappropriately combines and transforms property management accountability data under a contract based upon FAR 45 Government Property, into Financial Accounting Standards Board (FASB) accounting data. The respondent commented that NASA-owned and contractor-furnished internal use property, acquired under a contract that is accountable to a contract is generally not subject to NASA's capitalization threshold of $500,000; however, what is acquired and furnished includes property transactions for research and development, period cost, program cost . . ., probably very little individual capital items, per FASAB No. 6—Accounting for property, plant, and equipment. The respondent commented that using property accountability data subject to FAR 45, for financial accounting data is wrong, as it does not provide faithful representation of NASA's PP&E as well as external reporting of property accountability in all other Government agencies is not on a monthly basis. The respondent commented that reporting this information will not result in improved decision making. The respondent also stated that reporting unreliable financial data on a yearly basis or monthly basis is a waste of NASA resources, the cost to increase the reporting cycle from annual to monthly is not inconsequential, and NASA should expect their contractors to ask for a contract modification with due consideration. The respondent recommended that NASA not proceed with the proposed rule, rather NASA should migrate to the new ISO 55000 Asset Management standard.

    Response: NASA does not concur with the respondent's stance on the proposed rule. The objective of the rule is to clarify and emphasize the supplemental instructions in paragraph (a) of NFS clause 1852.245-73 that all contractors having custody of NASA Property, Plant, and Equipment (PP&E) with a value of $10 million or more are required to report this information on a monthly basis to NASA. The property reporting requirement is to help assess the efficiency and effectiveness of asset management consistent with the Statement of Federal Financial Accounting Standard (SFFAS) No. 6, Accounting for Property, Plant, and Equipment, and NASA Procedural Requirement (NPR) 9250.1, Property, Plant, and Equipment and Operating Materials and Supplies, which implements SFFAS No. 6. The respondent failed to provide data to support their comments concerning the NFS clause or the recommendation to migrate to a new standard. Thus, no changes were made in response to this comment.

    2. Difference between monthly and annual reporting.

    Comment: One respondent submitted the following questions on the proposed rule:

    • If a contractor has $10M worth of property, is reporting is required?

    • If the value drops below $10M, does the contractor stop reporting on a monthly basis?

    • Is the $10M per contract or the sum of NASA property accountable to the contractor?

    • Is the NASA Form 1018 required for the monthly reporting or is another format/system used?

    • If NASA is going to require monthly financial reporting, are they referring to how the contractor reports monthly financials on the CHATS report or how the contractor reports on the NASA Form 1018?

    • Will NASA require the contractor to submit a NASA Form 1018 monthly or a CHATS monthly?

    • Currently in the month of September an annual and a monthly financial report is due. Will NASA eliminate one of these if they are going to require 1018s on a monthly basis?

    Response: If at any time during performance of the contract, NASA-owned property in the custody of the contractor has a value of $10 million or more for the contract, the contractor shall submit a report no later than the 21st of each month. At any time during performance of the contract if the value of property for the contract drops below $10M, the contractor does not have to submit the monthly report. A contractor having NASA-owned property in their custody of $10 million or more will be required to report both the monthly and yearly reporting in accordance with the requirements of paragraph (c)(1) and paragraph (c)(2) of the clause utilizing the NASA Form 1018, the NASA Form 1018 Electronic Submission System (NESS), NASA Form 533 Contractor Financial Management Report, and any supplemental instructions issued by the contracting officer. Accordingly, no changes were made in response to this respondent's questions.

    III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 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). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

    IV. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows:

    The objective of this rule is to add a monthly reporting requirement for contractors having custody of NASA-owned PP&E valued at $10 million or greater to ensure that contractor-held PP&E are more accurately represented in NASA financial statements consistent with the Statement of Federal Financial Accounting Standard (SFFAS) No. 6, Accounting for Property, Plant, and Equipment and NASA Procedural Requirement (NPR) 9250.1, Property, Plant, and Equipment and Operating Materials and Supplies.

    Two respondents provided comments in response to the proposed rule, but none of the comments were submitted in response to the Initial Regulatory Flexibility Act request in the proposed rule. Thus, no changes were made to the final rule.

    NASA does not expect this final rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., because the affected NASA contractors with custody of NASA-owned Property, Plant, and Equipment (PP&E) valued at $10 million or greater are primarily large businesses.

    The requirements under this rule apply to any contract award (including contracts for supplies, services, construction, and major systems) that requires contractors to use Government property. According to NASA Property Records in Fiscal Year (FY) 2015 there were 643 contracts that required reporting NASA contractors with custody of Government property to report that property. Of the 643 contracts, approximately 20% or 129 contracts were with small business contractors. Of the 643 contracts, 32 contracts had NASA-owned and contractor-held PP&E with a value of $10 million or more and required monthly reporting. Of those 32 contracts, only three were awarded to small business contractors.

    Each NASA contractor is required to submit annually the NASA Form 1018, NASA Property in the Custody of Contractors. This rule will add a new reporting requirement requiring contractors to submit a report if at any time during performance of the contract NASA-owned property in the custody of the contractor has a value of $10 million or more. However, the impact of this reporting requirement is minimal on small entities based on FY 2015 NASA property records that show only three small business contractors with custody of NASA PP&E valued at $10 million or more. There are no additional professional skills necessary in this area on the part of small businesses.

    There are no significant alternatives that could further minimize the already minimal impact on businesses, small or large. New PP&E reporting requirements are the same for both large and small businesses once the NASA-owned PP&E threshold of $10 million is reached.

    V. Paperwork Reduction Act

    The rule contains information collection requirements that require the approval of the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C chapter 35); however, these changes to the NFS do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Number 2700-0017, titled NASA Property in the Custody of Contractors and OMB Control No. 9000-0075, titled Government Furnished Property Requirements.

    List of Subjects in 48 CFR Parts 1845 and 1852

    Government procurement.

    Manuel Quinones, NASA FAR Supplement Manager.

    Accordingly, 48 CFR parts 1845 and 1852 are amended as follows:

    PART 1845—GOVERNMENT PROPERTY 1. The authority citation for part 1845 continues to read as follows: Authority:

    51 U.S.C. 20113(a) and 48 CFR chapter 1.

    2. Amend section 1845.107-70 by revising paragraph (d) to read as follows:
    1845.107-70 NASA solicitation provisions and contract clauses.

    (d) The contracting officer shall insert the clause at 1852.245-73, Financial Reporting of NASA Property in the Custody of Contractors, in cost reimbursement solicitations and contracts and in all contracts in which the contractor has custody of NASA-owned property with a value of $10 million or more, unless all property to be provided is subject to the clause at 1852.245-71, Installation-Accountable Government Property. Insert the clause 1852.245-73 in other types of solicitations and contracts when it is known at award that property will be provided to the contractor or that the contractor will acquire property title to which will vest in the Government prior to delivery.

    PART 1852—SOLICITATION PROVISIONS AND CONTRACT CLAUSES 3. The authority citation for part 1852 continues to read as follows: Authority:

    51 U.S.C. 20113(a) and 48 CFR chapter 1.

    4. Amend section 1852.245-73 by— a. Revising the date of the clause; and b. Revising paragraphs (b)(2) and (c).

    The revised text reads as follows:

    1852.245-73 Financial reporting of NASA property in the custody of contractors. Financial Reporting of NASA Property in the Custody of Contractors (Jan 2017)

    (b) * * *

    (2) The Contractor shall mail the original signed NF 1018 directly to the cognizant NASA Center Industrial Property Officer and a copy to the cognizant NASA Center Deputy Chief Financial Officer, Finance, unless the Contractor uses the NF 1018 Electronic Submission System (NESS) for report preparation and submission.

    (c)(1) The annual reporting period shall be from October 1 of each year through September 30 of the following year. The report shall be submitted in time to be received by October 31st. The information contained in these reports is entered into the NASA accounting system to reflect current asset values for agency financial statement purposes. Therefore, it is essential that required reports be received no later than October 31st.

    (2) Some activity may be estimated for the month in which the report is submitted, if necessary, to ensure the NF 1018 is received when due. However, contractors' procedures must document the process for developing these estimates based on planned activity such as planned purchases or NASA Form 533 (NF 533) Contractor Financial Management Report cost estimates. It should be supported and documented by historical experience or other corroborating evidence, and be retained in accordance with FAR Subpart 4.7, Contractor Records Retention. Contractors shall validate the reasonableness of the estimates and associated methodology by comparing them to the actual activity once that data is available, and adjust them accordingly. In addition, differences between the estimated cost and actual cost must be adjusted during the next reporting period. Contractors shall have formal policies and procedures, which address the validation of NF 1018 data, including data from subcontractors, and the identification and timely reporting of errors. The objective of this validation is to ensure that information reported is accurate and in compliance with the NASA FAR Supplement. If errors are discovered on NF 1018 after submission, the contractor shall contact the cognizant NASA Center Industrial Property Officer (IPO) within 30 days after discovery of the error to discuss corrective action.

    (3) In addition to an annual report, if at any time during performance of the contract, NASA-owned property in the custody of the contractor has a value of $10 million or more, the contractor shall also submit a report no later than the 21st of each month in accordance with the requirements of paragraph (c)(2) of this clause.

    (4) The Contracting Officer may, in NASA's interest, withhold payment until a reserve not exceeding $25,000 or 5 percent of the amount of the contract, whichever is less, has been set aside, if the Contractor fails to submit annual NF 1018 reports in accordance with NFS subpart 1845.71, any monthly report in accordance with (c)(3) of this clause, and any supplemental instructions for the current reporting period issued by NASA. Such reserve shall be withheld until the Contracting Officer has determined that NASA has received the required reports. The withholding of any amount or the subsequent payment thereof shall not be construed as a waiver of any Government right.

    [FR Doc. 2016-30157 Filed 12-15-16; 8:45 am] BILLING CODE 7510-13-P
    81 242 Friday, December 16, 2016 Proposed Rules DEPARTMENT OF ENERGY 10 CFR Part 430 [Docket No. EERE-2013-BT-STD-0006] RIN 1904-AC55 Energy Efficiency Program for Commercial and Industrial Equipment: Availability of Provisional Analysis Tools and Notice of Data Availability AGENCY:

    Office of Energy Efficiency and Renewable Energy, Department of Energy.

    ACTION:

    Reopening of public comment period.

    SUMMARY:

    On November 1, 2016, the U.S. Department of Energy (DOE) published in the Federal Register a notice of data availability (NODA) pertaining to the provisional analysis of energy conservation standards for commercial and industrial fans and blowers. The notice provided an opportunity for submitting written comments, data, and information by December 1, 2016. This document announces a reopening of the public comment period for submitting comments and data on the NODA. The comment period is reopened until January 6, 2017.

    DATES:

    The comment period for the notice of data availability published on November 1, 2016 (81 FR 75742) is reopened. DOE will accept comments, data, and information regarding this rulemaking received no later than January 6, 2017.

    ADDRESSES:

    Instructions: Any comments submitted must identify the NODA for commercial and industrial fans and blowers and provide docket number EERE-2013-BT-STD-0006 and/or RIN number 1904-AC55. Comments may be submitted using any of the following methods:

    (1) Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

    (2) Email: [email protected] Include the docket number and/or RIN in the subject line of the message. Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form of encryption.

    (3) Postal Mail: Appliance and Equipment Standards Program, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. If possible, please submit all items on a compact disc (CD), in which case it is not necessary to include printed copies.

    (4) Hand Delivery/Courier: Appliance and Equipment Standards Program, U.S. Department of Energy, Building Technologies Office, 950 L'Enfant Plaza SW., 6th Floor, Washington, DC 20024. Telephone: (202) 586-6636. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

    Docket: The docket, which includes Federal Register notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at www.regulations.gov. All documents in the docket are listed in the www.regulations.gov index. However, some documents listed in the index may not be publicly available, such as those containing information that is exempt from public disclosure.

    The docket Web page can be found at: https://www.regulations.gov/docket?D=EERE-2013-BT-STD-0006. The docket Web page contains simple instructions on how to access all documents, including public comments, in the docket.

    FOR FURTHER INFORMATION CONTACT:

    Ashley Armstrong, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies, EE-2J, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-6636. Email: [email protected]. Mr. Peter Cochran, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-9496. Email: [email protected]. SUPPLEMENTARY INFORMATION:

    On November 1, 2016, DOE published a notice of data availability (NODA) pertaining to energy conservation standards for commercial and industrial blowers (81 FR 75742). The NODA announced the availability of provisional analysis tools and results that DOE may use to support energy conservation standards for commercial and industrial fans and blowers. The November 2016 NODA provided for the submission of public comments by December 1, 2016. The Air Conditioning, Heating, and Refrigeration Institute (AHRI), and the Air Movement and Control Association (AMCA) requested an extension of the public comment period to allow for additional time to review and evaluate the changes reflected in the provisional analysis tools and results associated with the November 2016 NODA compared to the revised provisional analysis tools and results associated with the previous NODA, which DOE published on May 1, 2015. 80 FR 24841.

    In view of the requests for an additional comment period extension for the November 2016 NODA, DOE has determined that a reopening of the comment period to allow additional time for interested parties to submit comments is appropriate. Therefore, DOE is reopening the comment period until January 6, 2017, to provide interested parties additional time to prepare and submit comments. DOE further notes that any submissions of comments or other information submitted between the original comment end date and January 6, 2017, will be deemed timely filed.

    Issued in Washington, DC, on November 30, 2016. Kathleen B. Hogan, Deputy Assistant Secretary for Energy Efficiency, Energy Efficiency and Renewable Energy. [FR Doc. 2016-30299 Filed 12-15-16; 8:45 am] BILLING CODE 6450-01-P
    SMALL BUSINESS ADMINISTRATION 13 CFR Part 107 RIN 3245-AG65 Small Business Investment Companies—Administrative Fees AGENCY:

    U.S. Small Business Administration.

    ACTION:

    Proposed rule.

    SUMMARY:

    The U.S. Small Business Administration (SBA) proposes to increase the Small Business Investment Company (SBIC) licensing and examination fees. The Small Business Investment Act of 1958, as amended, allows SBA to collect licensing and examination fees to offset SBA's costs associated with the administration of these two activities. SBA last increased fees for SBICs in 1996. Current fees offset less than 40% of SBA's administrative expenses related to these activities. The proposed rule would revise existing regulations to increase, over a five-year period, SBIC licensing and examination fees in order to annually recoup an estimated 70% of SBA administrative expenses related to these activities. After the five year period, the rule proposes annual increases of these fees based on inflation. To encourage investment into underserved areas, the proposed rule would establish certain examination fee discounts for SBICs that make significant low and moderate income (LMI) investments.

    DATES:

    Comments on the proposed rule must be received on or before February 14, 2017.

    ADDRESSES:

    You may submit comments, identified by RIN 3245-AG65, by any of the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

    Mail, Hand Delivery/Courier: Mark Walsh, Associate Administrator for the Office of Investment and Innovation, U.S. Small Business Administration, 409 Third Street SW., Washington, DC 20416.

    SBA will post comments on http://www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at http://www.regulations.gov, please submit the information to Theresa Jamerson, Office of Investment and Innovation, 409 Third Street SW., Washington, DC 20416. Highlight the information that you consider to be CBI and explain why you believe this information should be held confidential. SBA will review the information and make the final determination of whether it will publish the information or not.

    FOR FURTHER INFORMATION CONTACT:

    Theresa Jamerson, Office of Investment and Innovation, (202) 205-7563 or [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Background Information

    The Small Business Investment Act of 1958, as amended, authorizes SBA to collect fees to cover the costs associated with the licensing and examination of SBICs. 15 U.S.C. 681(e)(2)(B) and 687b(b). Although SBA has regulations setting the amount of these fees, SBA has not increased licensing and examination fees for SBICs since 1996. As part of the final rule published January 31, 1996 (61 FR 3177), SBA set licensing fees “to reflect the Agency's costs of processing applications” and similarly set examination fees to “produce total revenue sufficient to cover the current direct costs to SBA of conducting examinations.” In a subsequent rule published on April 30, 1997 (62 FR 23337), SBA capped examination fees at $14,000, which lowered the fee for SBICs with over $60 million in assets. As part of the rationale for this change, the rule stated, “many of the largest SBICs are bank-owned and do not use federal leverage, so that fees computed on the basis of total assets do not appropriately reflect the level of effort and risk associated with the examination process.” In December 1996, only 6 of the 28 SBICs with over $60 million in assets used leverage and only 1 of the 12 SBICs with over $120 million in assets used leverage. As of September 14, 2016, 114 of the 121 SBICs with over $60 million in assets used leverage and 64 of the 66 SBICs with over $120 million in assets used leverage. Since nearly all of the SBIC program's largest SBICs now utilize leverage, the rationale stated in the 1997 rule as a basis for reducing examination fees no longer applies.

    The 1997 rule, which remains in place today, does not include an inflation adjustment for these fees. Consequently, these fees have not kept pace with rising SBA costs due to changes in inflation and increased risk in its portfolio. In 1996 when the fees were most recently increased to cover SBA's costs, aggregate outstanding SBA leverage was less than $1.4 billion; this figure has grown to $10.4 billion as of June 30, 2016. Licensing and examination fees received in Fiscal Year (FY) 2015 were slightly lower than those received in FY 1999 (the earliest date fees paid and SBA expenses for these activities are readily available) because, at that time, SBA was licensing SBICs issuing Participating Securities (in addition to SBICs issuing only Debentures), which pay higher licensing and examination fees than SBICs issuing only Debentures. While licensing and examination fees have decreased, SBA's expenses related to licensing and examination activities have doubled due to inflation and the cost of obtaining necessary resources to manage SBA's increased risk.

    Although fees set in 1996, as adjusted in 1997, were intended to fully reimburse SBA's costs, by FY 1999, licensing and examination fees only covered approximately 85% of SBA's related expenses. In FY 2015, licensing and examination fees covered less than 40% of SBA's related licensing and examination expenses.

    In FY 2015, SBA processed 44 Management Assessment Questionnaires as part of its initial licensing review and 32 SBIC license applications in its final licensing review. SBA collected approximately $0.4 million in SBIC licensing fees, which reimbursed less than a quarter of SBA's expenses associated with licensing. In FY 2015 SBA issued 222 exam reports for over 300 operating SBICs and collected $1.8 million in examination fees, reimbursing less than half of SBA's costs associated with examination activities. SBA's Office of Inspector General (OIG) also noted the disparity between examination costs and fees collected in Audit Report 13-22: Improved Examination Quality Can Strengthen SBA's Oversight of Small Business Investment Companies (available at http://www.sba.gov/oig/audit-report-13-22-improved-examination-quality-can-strengthen-sbas-oversight-small-business), stating, “while the SBA has continued to exercise its statutory authority to collect examination fees, we determined the fees were not sufficient to keep pace with rising costs.” OIG Audit Report 13-22 at 8.

    The primary reason that licensing and examination fees do not cover the current cost of these activities is inflation. Another factor is the increased number of SBICs utilizing higher amounts of leverage. Since 1996 (when the fees were last increased), the number of leveraged SBICs with assets over $60 million has risen from 6 SBICs in 1996 to 114 in September 2016. SBA applies a higher level of credit analysis to leveraged SBICs than non-leveraged SBICs in both licensing and exams. Another factor is that SBA has intensified its licensing activities in the past ten years due to the increased amounts of leverage sought by applicants and in order to improve the quality of its SBIC portfolio. SBA has adopted many industry best practices in its licensing process, including accessing relevant private equity performance resources and benchmarking applicants to industry performance. These industry-standard best practices cost money. For example, SBA spent over $100,000 for information subscription services to support licensing activities in FY 2016. However, SBICs ultimately benefit financially from improvements in the quality of the SBIC program portfolio through lower annual charges on SBA-guaranteed debenture leverage. SBA formulates the annual charge each year to keep the program at zero subsidy cost. The SBIC debenture leverage annual charge has decreased from 1% in FY 1999 to an annual charge of 0.347% in FY 2017, reflecting improvements to the SBIC debenture portfolio.

    Even with these improvements, SBA recognizes that its oversight capabilities must continue to improve, particularly in the areas of technology and training in connection with its licensing and examination activities. As indicated by the OIG's report, “without proper training and technology examiners may not effectively identify all regulatory violations as intended by the Act.” OIG Audit Report 13-22 at 11. Testimony to the House Small Business Committee on behalf of the Small Business Investor Alliance in July 2013 also indicated that the SBIC Program has “a number of major technological and information systems challenges.” Examining the Small Business Investment Company Program: Hearing Before the House Subcommittee on Investigations, Oversight and Regulations, 113th Congress (Statement by Steven Brown, President, Trinity Capital Investment, testifying on behalf of the Small Business Investor Alliance), which may be found at http://smallbusiness.house.gov/uploadedfiles/7-25-2013_steven_brown_testimony_final_july_25.pdf. In order to overcome some of these technological challenges, SBA needs to expand its web-based reporting application to address licensing and examinations needs. These efforts are expected to increase licensing and examination costs by $500,000 annually. SBA believes that improvements in its web-based tools will facilitate the exchange and analysis of information and result in more effective licensing and examination activities, as well as improve efficiency and ease of use by SBIC program stakeholders. To address identified training needs, SBA expects to incur additional training costs amounting to between $50,000 and $100,000 to support analysts in licensing and examinations.

    Finally, due to recent attrition in staffing and to address peaks in licensing, SBA expects to hire contractors to support both examinations and licensing processes. Due to the specialized skill set associated with these activities, SBA estimates additional contracting resources may cost an additional $600,000 for examinations and up to $400,000 for licensing annually.

    Based on estimated costs for FY 2017, SBA projects costs exceeding $2 million for SBIC licensing activities and $4.5 million for SBIC examination activities. SBA is not currently proposing to increase fees to 100% of its anticipated costs; SBA estimates the proposed fees would recoup only 70% of its anticipated licensing and examination costs. Under this proposed rule, SBA seeks to increase SBIC licensing and examination fees in order to: (1) Recoup a significant portion of its projected expenses associated with licensing and examination activities; (2) pay for necessary technology upgrades related to licensing and examinations; (3) pay for additional licensing and examiner training; (4) pay for necessary information resources commonly available to private equity fund of funds to support due diligence, analysis and decision-making in the licensing area; and (5) pay for contractors with specialized expertise to help support staff associated with licensing and examination-related activities. SBA proposes to increase these fees over a five year period in order to provide a more gradual impact on SBICs and then annually adjust these fees for inflation beginning on October 1, 2021. SBA may consider increasing its fees to reimburse more of its expenses at a later time, but will be mindful of any impact on the level of interest in the program.

    II. Section by Section Analysis A. Indexing Fees Section 107.50—Definition of Terms

    In order to adjust licensing and examination fees to remain current with inflation after the five year period, SBA proposes to add the defined term “Inflation Adjustment”, which would be defined as the methodology used to increase SBIC administrative fees using the consumer price index for all urban consumers (CPI-U), as calculated by the U.S. Bureau of Labor and Statistics (BLS), based on the U.S. city average for all items, not seasonally adjusted, with the base period 1982-84=100. After consulting with BLS, SBA chose this index because it reflects the average change in the prices paid for a market basket of goods and services and is most frequently used in escalation agreements, as discussed on the BLS Web site (http://www.bls.gov/cpi/cpi1998d.htm). Historical CPI-U values may be found at http://data.bls.gov/timeseries/CUUR0000SA0?. Beginning October 1, 2021, SBA would recalculate the examination and licensing fees annually to reflect increases in the CPI-U at the beginning of each government fiscal year (October 1) based on the change in the index from the previous year and round the amount to the nearest $100. If the CPI-U decreases, no change will be made to the fees. SBA will publish the resulting fees in a notice in the Federal Register each year prior to the date of the increase. SBA is proposing to calculate the increase based on the change from the previous year's June CPI-U to the most recent June CPI-U, which will provide sufficient time for SBA to publish the revised fee before October. For example, the CPI-U is 238.638 in June 2015 and 241.038 in June 2016, a 1.0057% increase.

    B. Licensing Fees Section 107.300—License Application Form and Fee

    Regulations currently require SBIC applicants to pay a base fee of $10,000 plus an additional $5,000 if the applicant intends to operate as a limited partnership (Partnership Licensee). Most SBIC applicants are organized as limited partnerships and therefore currently pay a licensing fee of $15,000. Applicants seeking to be licensed as Early Stage SBICs are required to pay both the additional $5,000 Partnership Licensee fee and an additional $10,000 Early Stage fee, for a total of $25,000. Current regulations also include an additional $5,000 fee for applicants intending to issue Participating Securities leverage (a type of leverage, no longer available, that was designed to encourage SBICs to invest in equity securities).

    Current regulations require applicants to pay the licensing fee when they submit their complete license application, which initiates the final phase in the SBIC licensing process. SBA expends significant resources prior to this submission. The first phase in the licensing process begins when a first time applicant submits its Management Assessment Questionnaire (“MAQ”), which consists of SBA Forms 2181 and exhibits A through F of SBA Form 2182, or when the management of an existing SBIC submits a request to SBA to be considered for a subsequent SBIC license. (SBIC application forms are available on SBA's Web site at www.sba.gov/sbic.) SBA reviews the MAQ or subsequent SBIC applicant materials, performs due diligence, analyzes the management team's performance, interviews those management teams invited for an in-person interview, and ultimately determines whether to issue a formal invitation (Green Light letter) to the applicant to proceed to the final licensing phase of the process. Once an applicant receives a Green Light letter, the applicant typically has up to 18 months to raise the requisite private capital. During this timeframe, SBA keeps in touch with the applicant, conducts SBIC training classes, and provides guidance as needed. The applicant pays the licensing fee only at the final licensing phase, which occurs when it submits its complete license application (consisting of an updated SBA Form 2181 and complete SBA Forms 2182 and 2183) after raising sufficient private capital. A number of applicants fail to raise the requisite capital or for other reasons do not submit a license application. As a result, SBA estimates that less than half of SBIC applicants pay the licensing fee, even though SBA expends resources on all applicants.

    To clarify its existing practices, the proposed rule defines SBA's licensing phases and what forms and fees are required at each phase as discussed above. SBA considered adding a fee at the beginning of the licensing process to help spread the costs across all applicants on which SBA expends resources, but decided not to pursue this approach so as to not discourage applicants from applying to the program. SBA invites comments on whether SBA should charge a fee at the first phase to help spread the costs across all applicants on which SBA expends resources.

    The proposed rule would remove the additional fee currently charged to applicants seeking to operate as a Partnership Licensee, since substantially all applicants intend to operate as a Partnership Licensee and this is not a significant variable in determining costs. The proposed rule also removes the additional fee for Participating Securities Licensees, since SBA stopped issuing commitments for Participating Securities Leverage and licensing new Participating Securities SBICs as of October 1, 2004. The proposed rule increases the licensing fee to $25,000 in FY 2017, after the effective date of a final rule, with further increases of $5,000 each October for the next 4 years, resulting in a licensing fee of $45,000 by October 1, 2020. Beginning on October 1, 2021, SBA will increase the licensing fee using the Inflation Adjustment and, prior to the date of the increase, will publish the amount in a Notice in the Federal Register. As previously discussed, this increase will be used to offset SBA's costs associated with additional training, upgraded information technology, necessary subscription services, and specialized contractor support. Even with this increase, SBA expects these fees to offset less than half of SBA's licensing expenses by FY 2021. SBA may consider further increases in the future in order to fully cover the costs of its licensing activities as authorized by the Small Business Investment Act, but does not want to increase fees too sharply without better understanding the impact fee increases may have on application submission rates.

    Section 107.410—Changes in Control of Licensee

    SBA treats a change in control of a Licensee as a licensing action, since SBA must perform similar functions and processes to those in SBA's final licensing phase. Current regulations require SBICs seeking a change in control to pay a $10,000 fee, similar to the current licensing fee. Since the procedures and costs are similar to those in the final licensing process, the proposed regulations change the current fee to be equal to the licensing fee identified in proposed § 107.300.

    C. Examination Fees Section 107.692—Examination Fees

    Current § 107.692(b) provides for a base examination fee calculated as a percentage of an SBIC's total assets at cost. As more specifically set forth in current § 107.692(b), the percentage decreases as the assets increase, with the maximum base examination fee set at $14,000 for SBICs with total assets greater than $60 million.

    Current § 107.692(c) then provides for various adjustments to the base examination fee which are summarized in the table set forth in § 107.692(d), as shown on Table 1: Current SBIC Examination Fee Adjustments, as follows:

    Table 1—Current SBIC Examination Fee Adjustments Examination fee
  • discounts
  • Amount of
  • discount—%
  • of base examination fee
  • Examination fee additions Amount of
  • addition—%
  • of base examination fee
  • No prior violations 15 Partnership or limited liability company 5 Responsiveness 10 Participating Security Licensee 10 Records/Files at multiple locations 10 Early Stage SBIC 10

    Current § 107.692(e) provides that SBA may assess an additional fee of $500 per day if SBA determines the examination is delayed due to the SBIC's lack of cooperation or the condition of its records.

    Proposed § 107.692(b) would replace the base fee calculation with the following formula: Base Fee = Minimum Base Fee + 0.024% of assets at cost, but not to exceed the Maximum Base Fee. Both the Minimum Base Fee and the Maximum Base Fee would change each year as shown on Table 3: Minimum and Maximum Base Fees:

    Table 3—Minimum and Maximum Base Fees Time period
  • (based on the examination start date)
  • Minimum
  • base fee
  • Maximum base fee for non-leveraged SBICs Maximum base fee for leveraged SBICs
    February 14, 2017 to September 30, 2017 $5,000 $20,000 $20,000 October 1, 2017 to September 30, 2018 6,000 22,500 26,000 October 1, 2018 to September 30, 2019 7,000 25,000 32,000 October 1, 2019 to September 30, 2020 8,000 27,500 38,000 October 1, 2020 to September 30, 2021 9,000 30,000 44,000

    For the purposes of calculating the examination fee, the proposed rule defines Non-leveraged SBICs as SBICs that have no outstanding SBA-guaranteed leverage or leverage commitments and, in the case of SBICs that have issued leverage in the form of Participating Securities, those SBICs that have no outstanding Earmarked Assets. An SBIC that satisfies these requirements must also certify to SBA that it will not seek new SBA leverage in the future. As discussed in the 1997 rule, non-leveraged SBICs pose no credit risk to SBA and therefore require less time to examine. The lower Maximum Base Fee for non-leveraged SBICs reflects this reduced effort. The lower Maximum Base Fee for non-leveraged SBICs also provides a small incentive for leveraged SBICs to repay their leverage. By October 1, 2020, the examination fees are estimated to cover most of SBA's costs related to examination activities.

    An example may be helpful to demonstrate the gradual phase-in of the proposed exam fees. Assume that in March 2019, a leveraged SBIC has $125 million in assets at cost. The Base Fee would be equal to $32,000, the Maximum Base Fee for that time period, since the Base Fee calculation ($7,000 + .024% × $125 million) computes to $37,000. If the SBIC still had $125 million in assets at cost and outstanding leverage in March 2021, the Base Fee would be $39,000, since the Base Fee calculation ($9,000 + .024% × $125 million) would compute to $39,000 and the Maximum Base Fee for leveraged SBICs would be $40,000. If the SBIC had repaid all SBA leverage, had no leverage commitments and certified that it did not intend to seek leverage in the future, it would qualify as a non-leveraged SBIC and the Base Fee would be reduced to $30,000, based on the non-leveraged Maximum Base Fee in March 2021.

    In considering examination fees, SBA reviewed the expenses reported in the Form 468 related to private sector financial auditors (which perform activities similar to an examination). In FY 2015, private sector auditor expenses for SBICs ranged from $35,000 to over $65,000 (depending on the size of the fund) with an average audit cost of approximately $43,000. By FY 2021, the SBIC Base Fee would range from $9,000 to $44,000 with an expected average examination fee of $19,300. SBA believes the proposed examination fees are reasonable.

    To keep the fees aligned with SBA's costs, beginning on October 1, 2021, the Base Fee would be adjusted annually by increasing both the Minimum and Maximum Base Fees using the Inflation Adjustment. For example, if the Inflation Adjustment was 1.5% between June 2020 and June 2021, the Minimum Base Fee beginning in FY 2022 would be $9,100 and the Maximum Base Fee would be $30,600 for non-leveraged SBICs and $44,900 for leveraged SBICs.

    Consistent with current regulations, proposed § 107.692(b) only computes a Base Fee. That Base Fee is then increased or decreased using the adjustments defined in § 107.692(c) to determine the final examination fee. Proposed § 107.692(c) would change the examination fee adjustments to better reflect SBA costs and provide certain incentives to SBICs. These changes are identified below:

    Low and Moderate Income (LMI) Investing Discount: Proposed § 107.692(c)(2) would apply a discount of 1% of the Base Fee for every $10 million in LMI Investments (in dollars at cost) financed since the Licensee's last examination up to a maximum 10% of the Base Fee. SBA will not spend any less time or resources examining SBICs with LMI Investments as a result of this discount, but is including the discount in order to provide an incentive to SBICs to make LMI Investments.

    Remove Fully-responsive Discount and Non-responsiveness Addition: Current regulations provide a 15% discount if the SBIC is “fully responsive to the letter of notification of examination.” Most SBICs currently receive this discount, and the proposed Base Fee already reflects the cost efficiencies resulting from responsiveness. To compensate SBA for the additional time associated with SBICs that are not responsive, proposed § 107.692(c)(3) would add 15% of the Base Fee for non-responsiveness or “not fully responsive to the letter of notification of examination.”

    Remove Additions for Partnership and LLC: Current regulations identify additions to the Base Fee for SBICs organized as partnerships or limited liability companies (LLCs). The proposed rule would remove these additional fees from § 107.692(c). Since substantially all SBICs are organized as partnerships or LLCs, the cost to SBA of examining SBICs with this structure is reflected in the proposed Base Fee.

    Remove Additions for Participating Securities Licensees and Early Stage SBICs: Current regulations include additions to the Base Fee if the SBIC is authorized to issue Participating Securities or is licensed as an Early Stage SBIC. SBA promulgated these additional fees because these types of SBICs were perceived to engage in particularly complex financing transactions. However, given the sophistication of the financing transactions of many of today's SBICs, whether standard debenture SBICs or otherwise, SBA no longer sees a need for this fee adjustment and proposes to remove it from § 107.692(c).

    Unresolved Finding Addition: SBA expends significant time monitoring and resolving examination findings that have remained unresolved for many months, and in some cases, years. SBA believes that SBICs should resolve all examination findings within 90 days from notification. To encourage SBICs to resolve findings in a timely manner, proposed § 107.692(c)(5) would assess an additional fee equal to 5% of the Base Fee for every 30 calendar days or portion thereof for each examination finding that remains unresolved after a 90 calendar day grace period after the SBIC is notified that corrective action must be taken to resolve an examination finding, unless SBA ultimately resolves the finding in the SBIC's favor.

    As an example, if an SBIC is notified on May 1, 2018 of an examination finding that requires resolution, the SBIC would have 90 calendar days (through July 30, 2018) to resolve the finding. If the SBIC does not resolve the examination finding until September 10, 2018, the SBIC would have taken 132 days to resolve the finding, or 42 days beyond the 90 calendar day cure period. If the SBIC's base examination fee was $20,000, SBA would assess an additional fee of $2,000 calculated as follows:

    First 30 days: $1,000 (5% of Base Fee) + Next 12 days: $1,000 Total Unresolved Finding Addition: $2,000

    If the SBIC had two findings that each took 132 days to resolve, the total unresolved finding addition would be $4,000. There would be no additional charge if SBA ultimately resolved the finding in the SBIC's favor.

    Proposed § 107.692(c)(1) keeps the 15% discount for SBICs that have no outstanding regulatory violations at the time of the commencement of the examination and no violations as a result of the most recent prior examination. Proposed § 107.692(c)(5) retains the 10% addition charged to SBICs that maintain records located in multiple locations. SBA believes both these adjustments continue to be appropriate. A summary of the resulting proposed examination fee discounts and additions is summarized in Table 4: Proposed Examination Fee Discounts and Additions, below:

    Table 4—Proposed Examination Fee Discounts and Additions Examination fee discounts Amount of discount—% of base fee Examination fee additions Amount of addition—% of base fee No outstanding violations; no violations in prior exam 15% Non-responsive 15% LMI Investments 1% of Base Fee for every $10 million in LMI Investments funded since the last examination up to a maximum discount of 10% of Base Fee Records/Files at multiple locations 10% Unresolved Findings 5% of Base Fee for every 30 days or portion thereof beyond the 90 day grace period for each unresolved finding

    Just as with current § 107.692, the final examination fee is calculated by taking the Base Fee determined under § 107.692(b) and adding or deducting the adjustments identified in proposed § 107.692(c). The following example demonstrates this calculation. Assume that in March 2019, a leveraged SBIC has $125 million in assets at cost. The Base Fee calculation ($8,500 + .024% × $200 million) computes to $38,500. Since the Base Fee may not exceed the Maximum Base Fee for the relevant time period, the Base Fee would be equal to $30,000. If the SBIC is non-responsive to the examiner's requests, has records in multiple locations, and does not qualify for any of the proposed discounts, the examination fee would be calculated as follows:

    $30,000 Base Fee determined per proposed § 107.692(b) + $ 4,500 15% addition for non-responsiveness per proposed § 107.692(c)(3) + $ 3,000 10% addition for records in multiple locations per proposed § 107.692(c)(4) $37,500 Examination Fee

    Although the Base Fee has a minimum and maximum, the resulting examination fee does not have a minimum or maximum. Unresolved findings beyond the 90-day grace period could result in increasingly higher examination fees. These additions are intended to incentivize SBICs to be responsive and resolve any findings as quickly as possible.

    Proposed § 107.692(e) changes the current $500 per day delay fee to $700 per day, which will be adjusted annually using the Inflation Adjustment, beginning on October 1, 2021 to coincide with the date on which the other fee inflation adjustments are computed.

    Compliance With Executive Orders 12866, 12988 and 13132, the Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 U.S.C. 601-612) Executive Order 12866

    The Office of Management and Budget has determined that this rule is not a “significant” regulatory action under Executive Order 12866. However, to provide additional transparency for the SBIC community, a Regulatory Impact Analysis is set forth below.

    1. Necessity of Regulation

    The Small Business Investment Act authorizes SBA to collect administrative fees to cover licensing and examination costs. Currently, licensing fees cover less than a quarter of SBA's licensing costs and examination fees cover less than half of examination costs. It is critical that SBA increase fees in order to (1) improve its technology for both licensing and examinations; (2) improve examiner training; (3) pay for necessary information subscription services; and (4) provide contractor resources to support licensing and examination activities.

    2. Alternative Approaches to the Regulation A. Licensing Fees

    SBA considered several alternatives to the proposed regulations regarding licensing fees. SBA first considered indexing the licensing fees for inflation from 1996 (the year in which SBA most recently raised licensing fees) to 2017. This alternative did not produce sufficient fees to offset SBA licensing costs and produced lower licensing fees than those in the proposed rule. SBA therefore rejected the option of adjusting the current fees only for inflation.

    Given its technology and processing time concerns, SBA considered higher licensing fees than those in the proposed rule in order to obtain the same technology and resources utilized by industry peers and further use of contractor support to reduce times in the licensing process. Although increasing fees even higher than SBA is proposing would provide more resources, SBA believes the proposed fee increases would be sufficient to meet essential needs while remaining well within the ability of qualified applicants to pay.

    SBA considered adding a fee at the first licensing phase (Initial Review), but was concerned that this might substantially reduce the number of applicants to the program. SBA invites comments from industry as to whether SBA should add a fee at the first licensing phase to help spread costs across all applicants on which SBA expends resources.

    SBA also considered implementing a larger increase in FY 2017 in order to offset costs more quickly. SBA opted to pursue the gradual increase identified in the proposed rule to allow potential applicants time to adjust to these increases.

    B. Examination Fees

    SBA considered several alternatives to the proposed regulations regarding examination fees. SBA considered indexing the fees utilizing the existing table in current § 107.692(b) to reflect inflation from 1997 to 2017. This alternative did not produce sufficient fees to offset SBA costs in examinations. In assessing the reasons for this, SBA analyzed the SBIC portfolios from both periods, and recognized that the SBIC portfolio in 1997 was significantly different than today. In 1997, most of the SBICs with the highest total assets were bank-owned SBICs that did not issue SBA leverage and therefore required less time and resources for SBA to examine. Today, most of the highest-asset SBICs have significant amounts of SBA leverage. Therefore, merely indexing the existing fees would not appropriately reflect the costs associated with examinations.

    SBA also considered proposing examination fee increases that were only sufficient to cover current costs and did not cover additional money needed to address technology upgrades, training, or contractor support. SBA rejected this alternative for three reasons. First, the OIG indicated the need for improved technology and training for examiners and suggested that SBA increase its fees to cover these costs. SBA agrees that such resources would improve the examination function. Second, SBA believes its proposed examination fees are less than fees charged for similar activities such as financial audits. SBA calculated the median private sector financial audit fee paid by SBICs in FY 2015 to be $43,000, where the proposed fees would result in an average Base Fee of $19,300 in FY 2021. Third, while SBA's outstanding leverage in its operating portfolio has more than tripled from $3.1 billion at the end of September 30, 2000 to $10.4 billion as of June 30, 2016, the number of personnel in SBIC Examinations has declined by over a third. In order to continue to monitor the SBIC program at the same level as in previous years, SBA will likely need to hire contractors with specialized skills to support this function.

    SBA also considered a flat examination fee, regardless of the asset cost. SBA believes its examination activities are similar to financial auditor or bank examiner activities, which typically are based on asset cost and therefore rejected this alternative.

    SBA considered increasing the fees to cover most of its cost in FY 2017, but believes that a gradual increase over a five year period would allow SBICs time to budget and adjust to the higher fees.

    3. Potential Benefits and Costs

    SBA anticipates this proposed rule may benefit the taxpayer by covering a larger portion of SBIC program administrative costs through the collection of an additional estimated $3 million to $4 million per year by October 2020. As noted above, these increased fees will (1) improve SBIC program technology for both licensing and examinations, (2) improve examiner training, (3) pay for necessary information subscription services, and (4) provide contractor resources to support licensing and examination activities. Collections are expected to increase annually each year beginning in October 2021 based on the CPI-U Inflation Adjustment.

    The proposed rule would increase licensing costs for applicants and examination costs for SBICs. The proposed rule would, by October 2020, increase licensing costs by $30,000 for all applicants that submit a complete license application. Based on the proposed rule, SBA estimates that by October 2020, the average non-leveraged examination fee would increase by $5,100 and the average examination fee for leveraged SBICs would increase by $12,100 based on FY 2015 examinations data. These fees would further impact SBICs through annual increases to reflect inflation.

    Executive Order 13563

    A description of the need for this regulatory action and benefits and costs associated with this action is included above in the Regulatory Impact Analysis under Executive Order 12866.

    In considering this proposed rule, SBA talked with fund of fund managers, auditors, and contractors to determine whether the proposed fees were reasonable. In reviewing organizational costs for SBIC applicants, including legal and other professional costs, SBIC applicants often incur organizational costs amounting to around $500,000. The proposed increased licensing fee represents a small percentage of the total organizational costs typically incurred by SBIC applicants. SBA also compared Federal bank examiner fees and SBIC auditor fees (based on the SBIC annual Financial Reporting Form 468s submitted in 2015) with proposed SBIC examination fees. SBA believes the proposed licensing and examination fees are reasonable in comparison to the market.

    Executive Order 12988

    This action would meet applicable standards set forth in section 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action would not have retroactive or presumptive effect.

    Executive Order 13132

    For the purpose of Executive Order 13132, SBA has determined that the rule would 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. Therefore, for the purpose of Executive Order 13132, Federalism, SBA has determined that this proposed rule has no federalism implications warranting the preparation of a federalism assessment.

    Paperwork Reduction Act, 44 U.S.C. Ch. 35

    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this rule would not impose any new reporting or recordkeeping requirements.

    Regulatory Flexibility Act, 5 U.S.C. 601-612

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires administrative agencies to consider the effect of their actions on small entities, small non-profit businesses, and small local governments. Pursuant to the RFA, when an agency issues a rule, the agency must prepare an Initial Regulatory Flexibility Act (IRFA) analysis which describes whether the impact of the rule will have a significant economic impact on a substantial number of small entities. However, § 605 of the RFA allows an agency to certify a rule, in lieu of preparing an IRFA, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. This proposed rule would affect all applicants that submit applications at final licensing (which averaged 35 per year for FYs 2013 to 2015), and all operating SBICs (currently approximately 300). SBA estimates that approximately 98% of these SBICs are small entities. Therefore, SBA has determined that this proposed rule does have an impact on a substantial number of small entities. However, SBA has determined that the impact on entities affected by the rule is not significant.

    As noted above, proposed § 107.300 would increase licensing costs by $30,000 by October 1, 2020 for all applicants that submit a license application, which represents less than 0.1% of the average applicant's Regulatory Capital based on newly licensed SBICs between October 1, 2014 and June 30, 2016. Many applicants have organizational costs totaling around $500,000, and some have far in excess of that amount. The proposed FY 2021 licensing fee of $45,000 would represent a small fraction of those costs.

    SBA estimates that proposed § 107.692 would eventually increase the average examination fee by $5,100, representing approximately 0.02% of the average non-leveraged SBIC's Regulatory Capital, and the average leveraged SBIC examination fee by $12,100, representing approximately 0.01% of the average total capital under management (Regulatory Capital and outstanding SBA guaranteed leverage). As a point of comparison, most SBIC managers charge management fees of approximately 2% of capital under management. (Management fees, like the examination fees, are paid by the SBIC.) For a leveraged SBIC with $50 million in Regulatory Capital and using 2 tiers of leverage charging a 2% management fee, the management fee would equal $3 million a year. If the leveraged SBIC had assets at cost of $150 million, no regulatory violations, and did not incur any exam fee additions, the exam fee in FY 2021 would amount to $37,400 ($44,000 minus the 15% discount for no violations), representing 0.025% of the SBIC's total capital. The examination fee would be a very small percentage of the SBIC's expenses.

    SBA believes that most applicants with sufficient private equity experience and capital raising ability will not be discouraged from applying to the program based on the proposed administrative fee increases. SBA asserts that the economic impact of the rule is minimal. Accordingly, the Administrator of the SBA certifies that this proposed rule would not have a significant impact on a substantial number of small entities.

    List of Subjects in 13 CFR Part 107

    Examination fees, Investment companies, Loan programs—business, Licensing fees, Small businesses.

    For the reasons stated in the preamble, SBA proposes to amend 13 CFR part 107 as follows:

    PART 107—SMALL BUSINESS INVESTMENT COMPANIES 1. The authority citation for part 107 continues to read as follows: Authority:

    15 U.S.C. 681, 683, 687(c), 687b, 687d, 687g, 687m.

    2. Amend § 107.50 by adding a definition of “Inflation Adjustment” to read as follows:
    § 107.50 Definitions of terms.

    Inflation Adjustment is the methodology used to increase SBIC administrative fees using the Consumer Price Index for Urban Consumers (CPI-U), calculated by the U.S. Bureau of Labor and Statistics (BLS), using the U.S. city average for all items, not seasonally adjusted, with the base period of 1982-84=100. To calculate the Inflation Adjustment, each year, SBA will divide the CPI-U from the most recent June by the CPI-U from June of the preceding year. If the result is greater than 1, SBA will increase the relevant fees as follows:

    (1) Multiply the result by the current fee; and

    (2) Round to the nearest $100.

    3. Revise § 107.300 to read as follows:
    § 107.300 License application form and fee.

    SBA evaluates license applicants in two review phases: (1) Initial review and (2) final licensing, as follows:

    (a) Initial review. Except as provided in this paragraph, SBIC applicants must submit a MAQ. MAQ means the Management Assessment Questionnaire in the form approved by SBA and available on SBA's Web site at www.sba.gov/sbic. An applicant under Common Control with one or more Licensees must submit a written request to SBA to be considered for a license and is exempt from the requirement in this paragraph to submit a MAQ unless otherwise determined by SBA in SBA's discretion.

    (b) Final licensing. (1) An applicant may proceed to the final licensing phase only if notified in writing by SBA that it may do so. Following receipt of such notice, in order to proceed to the final licensing phase, the applicant must submit (i) a complete license application, in the form approved by SBA and available on SBA's Web site at www.sba.gov/sbic, within the timeframe identified by SBA and (ii) the Licensing Fee. The Licensing Fee means a non-refundable fee (determined as of the date SBA accepts the application) fee adjusted annually as follows:

    Time period Licensing fee February 14, 2017 to September 30, 2017 $25,000 October 1, 2017 to September 30, 2018 30,000 October 1, 2018 to September 30, 2019 35,000 October 1, 2019 to September 30, 2020 40,000 October 1, 2020 to September 30, 2021 45,000

    (2) Beginning on October 1, 2021, SBA will annually adjust the fee using the Inflation Adjustment and will publish a Notice prior to such adjustment in the Federal Register identifying the amount of the fee.

    4. In § 107.410, revise paragraph (b) to read as follows:
    § 107.410 Changes in Control of Licensee (through change in ownership or otherwise).

    (b) Fee. A processing fee equal to the Licensing Fee defined in § 107.300(b) must accompany any application for approval of one or more transactions or events that will result in a transfer of Control.

    5. In § 107.692, revise paragraphs (b) through (e) to read as follows:
    § 107.692 Examination Fees.

    (b) Base fee. (1) The Base Fee will be assessed based on your total assets (at cost) as of the date of your latest certified financial statement, including if requested by SBA in connection with the examination, a more recently submitted interim statement. For purposes of this § 107.692, Base Fee means the Minimum Base Fee plus 0.024% of assets at cost, rounded to the nearest $100, not to exceed the Maximum Base Fee. The Minimum and Maximum Base Fees are adjusted annually as follows:

    Time period
  • (Based on the examination start date)
  • Minimum base fee Maximum base fee for non-leveraged SBICs Maximum base fee for leveraged SBICs
    February 14, 2017 to September 30, 2017 $5,000 $20,000 $20,000 October 1, 2017 to September 30, 2018 6,000 22,500 26,000 October 1, 2018 to September 30, 2019 7,000 25,000 32,000 October 1, 2019 to September 30, 2020 8,000 27,500 38,000 October 1, 2020 to September 30, 2021 9,000 30,000 44,000

    (2) In the table in paragraph (b)(1) of this section, a Non-leveraged SBIC means any SBIC that, as of the date of the examination, has no outstanding Leverage or Leverage commitment, has no Earmarked Assets, and certifies to SBA that it will not seek Leverage in the future. Beginning on October 1, 2021, SBA will annually adjust the Minimum Base Fee and Maximum Base Fees using the Inflation Adjustment and will publish a Notice prior to such adjustment in the Federal Register identifying the amount of the fees.

    (c) Adjustments to base fee. In order to determine the amount of your examination fee, your Base Fee, as determined in paragraph (b) of this section, will be adjusted (increased or decreased) based on the following criteria:

    (1) If you have no outstanding regulatory violations at the time of the commencement of the examination and SBA did not identify any violations as a result of the most recent prior examination, you will receive a 15% discount on your Base Fee;

    (2) If you have funded at least $10 million in LMI Investments at cost since the last examination, you will receive a 1% discount for every $10 million in LMI Investments made since the last examination up to a maximum of a 10% discount on your Base Fee;

    (3) If you were not fully responsive to the letter of notification of examination (that is, you did not provide all requested documents and information within the time period stipulated in the notification letter in a complete and accurate manner, or you did not prepare or did not have available all information requested by the examiner for on-site review), you will pay an additional charge equal to 15% of your Base Fee;

    (4) If you maintain your records/files in multiple locations (as permitted under § 107.600(b)), you will pay an additional charge equal to 10% of your Base Fee; and

    (5) For any regulatory violation that remains unresolved 90 days from the date SBA notified you that you must take corrective action (as established by the date of the notification letter), you will pay an additional charge equal to 5% of the Base Fee for every 30 days or portion thereof that the violation remains unresolved after the 90 day cure period, unless SBA resolves the finding in your favor.

    (d) Fee discounts and additions table. The following table summarizes the discounts and additions noted in paragraph (c) of this section:

    Examination fee discounts Amount of discount—% of base fee Examination fee additions Amount of addition—% of base fee No outstanding violations; no violations in prior exam 15 Non-responsive 15 LMI Investments 1% of Base Fee for every $10 million in LMI Investments made since the last examination up to a maximum discount of 10% of Base Fee Records/Files at multiple locations 10 Unresolved Findings 5% of Base Fee for every 30 days or portion thereof beyond the 90 day grace period for each unresolved finding.

    (e) Delay fee. If, in the judgment of SBA, the time required to complete your examination is delayed due to your lack of cooperation or the condition of your records, SBA may assess an additional fee of $700 per day. Beginning on October 1, 2021, SBA will annually adjust this fee using the Inflation Adjustment and will publish a Notice prior to such adjustment in the Federal Register identifying the amount of the fee.

    Dated: November 17, 2016. Maria Contreras-Sweet, Administrator.
    [FR Doc. 2016-30104 Filed 12-15-16; 8:45 am] BILLING CODE 8025-01-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9438; Directorate Identifier 2016-NM-109-AD] RIN 2120-AA64 Airworthiness Directives; Bombardier, Inc. 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 Bombardier, Inc. Model DHC-8-400 series airplanes. This proposed AD was prompted by reports of interruptions in the airstair door operation. This proposed AD would require repetitive inspections and modification of the handrail hardware. We are proposing this AD to address the unsafe condition on these products.

    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 Bombardier, Inc., Q-Series Technical Help Desk, 123 Garratt Boulevard, Toronto, Ontario M3K 1Y5, Canada; telephone 416-375-4000; fax 416-375-4539; email [email protected]; Internet http://www.bombardier.com. 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-2016-9438; 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:

    Cesar A. Gomez, Aerospace Engineer, Airframe and Mechanical Systems Branch, ANE-171, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7318; fax 516-794-5531.

    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-2016-9438; Directorate Identifier 2016-NM-109-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

    Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian Airworthiness Directive CF-2015-02, dated January 27, 2015 (referred to after this as the Mandatory Continuing Airworthiness Information, or ”the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model DHC-8-400, -401, and -402 airplanes. The MCAI states:

    A number of airstair door operation interruptions have been reported. In one case, the airstair door could not be opened. It was found that the airstair door handrail holder bracket was deformed and became lodged into the adjacent wardrobe bulkhead, which prevented the door from opening.

    On airstair doors with Jetway Compatible option, a deformed handrail holder bracket or a failure of the pin retainer bracket can interfere with the operation of the airstair door and prevent it from opening.

    The airstair door is classified as an emergency exit. The inability to open an emergency exit could impede evacuation in the event of an emergency.

    This [Canadian] AD mandates the repetitive inspection of airstair door handrail hardware, and the modification of the handrail stowage hardware.

    Required actions include applicable corrective actions (replacing or removing brackets, installing lanyards, adjusting pins, and adjusting affected parts of the assembly). 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-2016-9438.

    Related Service Information Under 1 CFR Part 51

    We reviewed Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016. This service information describes procedures for a general visual inspection to detect deformities and cracks of the forward and aft handle holder brackets on the airstair handrail; a detailed visual inspection of the forward and aft pin retainer brackets for the condition of the lanyards and the pins; a check for unobstructed movement of the pin retainer brackets; and rework of the airstair door handrail to prevent damage to the bulkhead and to prevent the door from jamming once the handrails are stowed. 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 the same type design.

    Costs of Compliance

    We estimate that this proposed AD affects 82 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 Repetitive Inspections 1 work-hour × $85 per hour = $85 per inspection cycle $0 $85 per inspection cycle $6,970 per inspection cycle. Modification 3 work-hours × $85 per hour = $255 1,556 $1,811 $148,502.

    We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this proposed AD.

    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): Bombardier, Inc.: Docket No. FAA-2016-9438; Directorate Identifier 2016-NM-109-AD. (a) Comments Due Date

    We must receive comments by January 30, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Bombardier, Inc. Model DHC-8-400, -401, and -402 airplanes, certificated in any category, serial numbers 4001 through 4473 inclusive, equipped with Jetway Compatible Passenger Airstair Door Modsum 4-422100 or Modsum 4-458687.

    (d) Subject

    Air Transport Association (ATA) of America Code 52, Doors.

    (e) Reason

    This AD was prompted by reports of interruptions in the airstair door operation, including one case where the door would not open. The airstair door is classified as an emergency exit. We are issuing this AD to ensure the ability to evacuate passengers through the airstair door in the event of an emergency.

    (f) Compliance

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

    (g) Repetitive Inspections of the Forward and Aft Handle Holder Brackets and Forward and Aft Pin Retainer Brackets, Repetitive Checks, and Corrective Actions

    Within 600 flight hours after the effective date of this AD, perform a general visual inspection of the forward and aft handle holder brackets for damage, such as visible cracks and deformation; a detailed visual inspection of the forward and aft pin retainer brackets to make sure that both lanyards are installed and to make sure that the head of each pin is installed correctly; a check of the pin retainer brackets for unobstructed movement; an operational check of the forward passenger door; and all applicable corrective actions; in accordance with PART A1 and PART A2 of the Accomplishment Instructions of Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016, except as required by paragraphs (g)(1), (g)(2), and (g)(3) of this AD. Do all applicable corrective actions before further flight. Repeat the inspections and checks thereafter at intervals not to exceed 600 flight hours until the terminating action required by paragraph (h) of this AD is accomplished.

    (1) If one or both lanyards are missing, before further flight, install lanyards as specified in, and in accordance with PART A1 of the Accomplishment Instructions of Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016.

    (2) If a pin is not installed correctly, as specified in PART A1 of the Accomplishment Instructions of Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016, before further flight, adjust the affected pin until it is installed correctly as specified in, and in accordance with PART A1 of the Accomplishment Instructions Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016.

    (3) If a pin retainer bracket does not rotate freely, before further flight, adjust affected parts of the assembly until the pin retainer bracket rotates freely as specified in, and in accordance with PART A1 of the Accomplishment Instructions of Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016.

    (h) Terminating Action

    Within 6,000 flight hours or 36 months, whichever occurs first, after the effective date of this AD: Incorporate ModSum 4-903234 to modify installed Jetway Compatible Handrail Stowage Bracket, in accordance with PART A3 of the Accomplishment Instructions of Bombardier Service Bulletin 84-52-79, Revision C, dated February 2, 2016. Incorporating ModSum 4-903234 terminates the actions required by paragraph (g) of this AD.

    (i) 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 (i)(1), (i)(2), or (i)(3) of this AD.

    (1) Bombardier Service Bulletin 84-52-79, dated May 1, 2014.

    (2) Bombardier Service Bulletin 84-52-79, Revision A, dated November 18, 2014.

    (3) Bombardier Service Bulletin 84-52-79, Revision B, dated April 8, 2015.

    (j) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, New York Aircraft Certification Office (ACO), ANE-170, 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 ACO, send it to ATTN: Program Manager, Continuing Operational Safety, FAA, New York ACO, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; fax 516-794-5531. 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. The AMOC approval letter must specifically reference this AD.

    (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, New York ACO, ANE-170, FAA; or Transport Canada Civil Aviation (TCCA); or Bombardier, Inc.'s TCCA Design Approval Organization (DAO). If approved by the DAO, the approval must include the DAO-authorized signature.

    (k) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) Canadian Airworthiness Directive CF-2015-02, dated January 27, 2015, 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-2016-9438.

    (2) For service information identified in this NPRM, contact Bombardier, Inc., Q-Series Technical Help Desk, 123 Garratt Boulevard, Toronto, Ontario M3K 1Y5, Canada; telephone 416-375-4000; fax 416-375-4539; email [email protected]; Internet http://www.bombardier.com. 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.

    Issued in Renton, Washington, on December 2, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-29671 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9498; Directorate Identifier 2016-NM-105-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to adopt a new airworthiness directive (AD) for all Airbus Model A321 series airplanes. This proposed AD was prompted by a determination from fatigue testing on the Model A321 airframe that cracks could develop in the cabin floor beam junction at certain fuselage frame locations. This proposed AD would require repetitive inspections for cracking in the cabin floor beam junction at certain fuselage frame locations, and repair 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 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 Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com. 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-2016-9498; 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:

    Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1405; 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-2016-9498; Directorate Identifier 2016-NM-105-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 Airworthiness Directive 2016-0105, dated June 6, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition on all Airbus Model A321 series airplanes. The MCAI states:

    Following the results of a new full scale fatigue test campaign on the A321 airframe in the context of the A321 extended service goal, it was identified that cracks could develop in the cabin floor beam junctions at fuselage frame (FR) 35.1 and FR 35.2, on both left hand (LH) and right hand (RH) sides, also on aeroplanes operated in the context of design service goal.

    This condition, if not detected and corrected, could reduce the structural integrity of the fuselage.

    Prompted by these findings, Airbus developed an inspection programme, published in Service Bulletin (SB) A320-53-1317, SB A320-53-1318, SB A320-53-1319, and SB A320-53-1320, each containing instructions for a different location.

    For the reasons described above, this [EASA] AD requires repetitive detailed inspections (DET) of the affected cabin floor beam junctions and [for cracking], depending on findings, accomplishment of a repair.

    This [EASA] AD is considered an interim action, pending development of a permanent solution.

    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-2016-9498.

    Related Service Information Under 1 CFR Part 51

    Airbus has issued the following service information, which describes procedures for inspections for cracking on the frame to cabin floor beam junction at certain fuselage frame locations, and repairs.

    • Airbus Service Bulletin A320-53-1317, dated December 15, 2015 (FR 35.1 on the right-hand side).

    • Airbus Service Bulletin A320-53-1318, dated October 9, 2015 (FR 35.1 on the left-hand side).

    • Airbus Service Bulletin A320-53-1319, dated October 9, 2015 (FR 35.2 on the right-hand side).

    • Airbus Service Bulletin A320-53-1320, dated October 9, 2015 (FR 35.2 on the left-hand side).

    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 the same type design.

    Costs of Compliance

    We estimate that this proposed AD affects 175 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 6 work-hours × $85 per hour = $510 per inspection cycle $0 $510 per inspection cycle $89,250 per inspection cycle.

    We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this proposed AD.

    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): Airbus: Docket No. FAA-2016-9498; Directorate Identifier 2016-NM-105-AD. (a) Comments Due Date

    We must receive comments by January 30, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Airbus Model A321-111, -112, -131, -211, -212, -213, -231, and -232 airplanes, certificated in any category, all manufacturer serial numbers.

    (d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

    (e) Reason

    This AD was prompted by a determination from fatigue testing on the Model A321 airframe that cracks could develop in the cabin floor beam junction at certain fuselage frame locations. We are issuing this AD to detect and correct cracking in the cabin floor beam junction at certain fuselage frame locations, which could result in reduced structural integrity of the airplane.

    (f) Compliance

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

    (g) Repetitive Inspections

    Before exceeding 36,900 total flight cycles since first flight of the airplane, or within 2,100 flight cycles after the effective date of this AD, whichever occurs later: Do a detailed inspection for cracking of the frame to cabin floor beam junction on the aft and forward sides at frame (FR) 35.1 and FR 35.2 on the left-hand and right-hand sides, in accordance with the Accomplishment Instructions of the Airbus service information specified in paragraphs (g)(1), (g)(2), (g)(3), and (g)(4) of this AD. Repeat the inspection of the frame to cabin floor beam junction on the aft and forward sides at FR 35.1 and FR 35.2 on the left-hand and right-hand sides thereafter at intervals not to exceed 15,300 flight cycles.

    (1) Airbus Service Bulletin A320-53-1317, dated December 15, 2015 (FR 35.1 right-hand side).

    (2) Airbus Service Bulletin A320-53-1318, dated October 9, 2015 (FR 35.1 left-hand side).

    (3) Airbus Service Bulletin A320-53-1319, dated October 9, 2015 (FR 35.2 right-hand side).

    (4) Airbus Service Bulletin A320-53-1320, dated October 9, 2015 (FR 35.2 left-hand side).

    (h) Repair

    If any crack is found during any inspection required by paragraph (g) of this AD: Before further flight, repair using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Airbus's EASA Design Organization Approval (DOA). Although the service information specified in paragraph (g) of this AD specifies to contact Airbus for repair instructions, and specifies that action as “RC” (Required for Compliance), this AD requires repair as specified in this paragraph. Repair of an airplane as required by this paragraph does not constitute terminating action for the repetitive actions required by paragraph (g) of this AD, unless specified otherwise in the instructions provided by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA DOA.

    (i) 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: Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1405; 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 EASA; or Airbus's EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature.

    (3) Required for Compliance (RC): Except as required by paragraph (h) of this AD: If any service information contains procedures or tests that are identified as RC, those procedures and tests must be done to comply with this AD; any procedures or tests that are not identified as RC are recommended. Those procedures and tests that are not identified as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the procedures and tests identified as RC can be done and the airplane can be put back in an airworthy condition. Any substitutions or changes to procedures or tests identified as RC require approval of an AMOC.

    (j) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2016-0105, dated June 6, 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-2016-9498.

    (2) For service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com. 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 December 2, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-29676 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-8428; Directorate Identifier 2014-NM-032-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Supplemental notice of proposed rulemaking (SNPRM); reopening of comment period.

    SUMMARY:

    We are revising an earlier proposal to supersede Airworthiness Directive (AD) 2011-17-09 for all Airbus Model A330-200, -200 Freighter, and -300 series airplanes; and AD 2012-25-12 for all Airbus Model A330-200 and -300 series airplanes. The notice of proposed rulemaking (NPRM) proposed to require revising the maintenance or inspection program, as applicable, to incorporate new or revised airworthiness limitation requirements. The NPRM was prompted by revisions to certain airworthiness limitations items (ALI) documents, which specify more restrictive instructions and/or airworthiness limitations. This action revises the NPRM by proposing to require revising the maintenance or inspection program, as applicable, to incorporate more restrictive, instructions and/or airworthiness limitations that the manufacturer has recently issued. We are proposing this AD to address the unsafe condition on these products.

    DATES:

    We must receive comments on this SNPRM 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: U.S. Department of Transportation, Docket Operations, M-30, 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.

    For Airbus service information identified in this SNPRM, contact Airbus service information identified in this final rule, contact Airbus SAS—Airworthiness Office—EAL, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 45 80; email [email protected]; Internet http://www.airbus.com.

    For Messier-Bugatti-Dowty service information identified in this SNPRM, contact Messier-Bugatti USA, One Carbon Way, Walton, KY 41094; telephone 859-525-8583; fax 859-485 8827; email [email protected]

    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-2015-8428; 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 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:

    Vladimir Ulyanov, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1138; 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-2015-8428; Directorate Identifier 2014-NM-032-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

    We issued an NPRM to amend 14 CFR part 39 to supersede AD 2011-17-09, Amendment 39-16773 (76 FR 53305, August 26, 2011) (“AD 2011-17-09”); and AD 2012-25-12, Amendment 39-17293 (77 FR 75825, December 26, 2012) (“AD 2012-25-12”). AD 2011-17-09 applies to all Airbus Model A330-200 series airplanes, -200 Freighter, and -300 series airplanes. AD 2012-25-12 applies to all Airbus Model A330-200 and -300 series airplanes. The NPRM published in the Federal Register on January 13, 2016 (81 FR 1570) (“the NPRM”). The NPRM was prompted by revisions to certain airworthiness limitations items (ALI) documents, which specify more restrictive instructions and/or airworthiness limitations. The NPRM proposed to require revising the maintenance or inspection program, as applicable, to incorporate new or revised airworthiness limitation requirements.

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive, 2014-0009, dated January 8, 2014 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus Model A330-200, -200 Freighter, and -300 series airplanes; and Model A340-200, -300, -500, and -600 series airplanes. The MCAI states:

    The airworthiness limitations for Airbus aeroplanes are currently published in Airworthiness Limitations Section (ALS) documents.

    The instructions and airworthiness limitations applicable to the Safe Life Airworthiness Limitation Items (SL ALI) are given in Airbus A330 ALS Part 1 and A340 ALS Part 1, which are approved by EASA.

    The revision 07 of Airbus A330 and A340 ALS Part 1 introduces more restrictive instructions and/or airworthiness limitations. Failure to comply with this revision could result in an unsafe condition.

    For the reason described above, this [EASA] AD retains the requirements of EASA AD 2012-0179, which is superseded, and requires accomplishment of the actions specified in Airbus A330 or A340 ALS Part 1 revision 07.

    In addition, this [EASA] AD also supersedes EASA AD 2011-0122-E and EASA AD 2011-0212, whose requirements have been transferred into Airbus A330 and A340 ALS Part 1 revision 07.

    The unsafe condition is fatigue cracking, accidental damage, and corrosion in certain principal structural elements, and possible failure of certain life limited parts, which could result in reduced structural integrity of the airplane.

    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-2015-8428.

    Actions Since the NPRM Was Issued

    Since we issued the NPRM, Airbus has issued Airbus A330 ALS Part 1, Safe Life Airworthiness Limitation Items (SL-ALI), Revision 08, dated April 11, 2016, which specifies more restrictive instructions and/or airworthiness limitations.

    Related Rulemaking

    We are considering similar rulemaking for Model A340-200, -300, -500, and -600 series airplanes that would revise the maintenance or inspection program, as applicable, to incorporate more restrictive instructions and/or airworthiness limitations. Currently, there are no U.S.-registered Model A340 series airplanes.

    Airworthiness Limitations Based on Type Design

    The FAA recently became aware of an issue related to the applicability of ADs that require incorporation of an ALS revision into an operator's maintenance or inspection program.

    Typically, when these types of ADs are issued by civil aviation authorities of other countries, they apply to all airplanes covered under an identified type certificate (TC). The corresponding FAA AD typically retains applicability to all of those airplanes.

    In addition, U.S. operators must operate their airplanes in an airworthy condition, in accordance with 14 CFR 91.7(a). Included in this obligation is the requirement to perform any maintenance or inspections specified in the ALS, and in accordance with the ALS as specified in 14 CFR 43.16 and 91.403(c), unless an alternative has been approved by the FAA.

    When a TC is issued for a type design, the specific ALS, including revisions, is a part of that type design, as specified in 14 CFR 21.31(c).

    The sum effect of these operational and maintenance requirements is an obligation to comply with the ALS defined in the type design referenced in the manufacturer's conformity statement. This obligation may introduce a conflict with an AD that requires a specific ALS revision if new airplanes are delivered with a later revision as part of their type design.

    To address this conflict, the FAA has approved alternative methods of compliance (AMOCs) that allow operators to incorporate the most recent ALS revision into their maintenance/inspection programs, in lieu of the ALS revision required by the AD. This eliminates the conflict and enables the operator to comply with both the AD and the type design.

    However, compliance with AMOCs is normally optional, and we recently became aware that some operators choose to retain the AD-mandated ALS revision in their fleet-wide maintenance/inspection programs, including those for new airplanes delivered with later ALS revisions, to help standardize the maintenance of the fleet. To ensure that operators comply with the applicable ALS revision for newly delivered airplanes containing a later revision than that specified in an AD, we plan to limit the applicability of ADs that mandate ALS revisions to those airplanes that are subject to an earlier revision of the ALS, either as part of the type design or as mandated by an earlier AD.

    This SNPRM therefore applies to Model A330-200, -200 Freighter, and -300 series airplanes with an original certificate of airworthiness or original export certificate of airworthiness that was issued on or before the date of approval of the ALS revision identified in this SNPRM. Operators of airplanes with an original certificate of airworthiness or original export certificate of airworthiness issued after that date must comply with the airworthiness limitations specified as part of the approved type design and referenced on the TC data sheet.

    Related Service Information Under 1 CFR Part 51

    Airbus has issued Airbus A330 ALS Part 1, SL-ALI, Revision 08, dated April 11, 2016. Messier-Bugatti-Dowty has issued Service Letter A33-34 A20, Revision 7, including Appendices A through F, dated July 20, 2012. This service information describes Safe Life Airworthiness Limitation Items SL-ALI for the landing gear. This service information is distinct since it was issued by two different manufacturers for different purposes.

    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.

    Comments

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

    Request To Specify New Service Information

    Air France requested that we revise paragraph (i) of the proposed AD to include Messier-Bugatti-Dowty Service Letter A33-34 A20, Revision 7, including Appendices A through F, dated July 20, 2012, as the required service information.

    We agree with the commenter's request. The changes in Messier-Bugatti-Dowty Service Letter A33-34 A20, Revision 7, including Appendices A through F, dated July 20, 2012, do not specify additional work. We have revised paragraph (i) of this proposed AD to specify using Messier-Dowty Service Letter A33-34 A20, Revision 5, including Appendices A through F, dated July 31, 2009; or Messier-Bugatti-Dowty Service Letter A33-34 A20, Revision 7, including Appendices A through F, dated July 20, 2012.

    Requests To Specify Airbus A330 Variations

    Air France requested that we revise paragraph (k) of the proposed AD to list all of the Airbus A330 variations to Airbus A330 ALS Part 1, SL-ALS, Revision 07, dated September 23, 2013, applicable at the effective date of this AD. Air France submitted a list of the requested variations.

    American Airlines (AAL) requested that we add three Airbus A330 variations to paragraph (k) of the proposed AD. AAL stated that the NPRM does not include two variation documents that AAL currently utilizes as part of its approved maintenance program.

    We partially agree with the commenters' requests. Airbus has issued A330 ALS Part 1, SL-ALI, Revision 08, dated April 11, 2016. Therefore, the variations for Airbus A330 ALS Part 1, SL-ALI, Revision 07, dated September 23, 2013, are no longer applicable to this SNPRM.

    We have changed paragraph (k) of this proposed AD to reference Airbus A330 ALS Part 1, SL-ALI, Revision 08, dated April 11, 2016. We have also changed paragraph (c) of this proposed AD to reference the date of April 11, 2016, for the certificate of airworthiness.

    FAA's Determination and Requirements of This SNPRM

    This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of the same type design.

    Certain changes described above expand the scope of the NPRM. As a result, we have determined that it is necessary to reopen the comment period to provide additional opportunity for the public to comment on this SNPRM.

    This SNPRM would require revisions to certain operator maintenance documents to include new actions (e.g., inspections). Compliance with these actions is required by 14 CFR 91.403(c). For airplanes that have been previously modified, altered, or repaired in the areas addressed by this SNPRM, the operator may not be able to accomplish the actions described in the revisions. In this situation, to comply with 14 CFR 91.403(c), the operator must request approval for an AMOC according to paragraph (m)(1) of this proposed AD. The request should include a description of changes to the required actions that will ensure the continued damage tolerance of the affected structure.

    Costs of Compliance

    We estimate that this SNPRM affects 82 airplanes of U.S. registry.

    The actions that are required by AD 2011-17-09, and retained in this SNPRM, take about 1 work-hour per product, at an average labor rate of $85 per work-hour. Based on these figures, the estimated cost of the actions that are required by AD 2011-17-09 is $85 per product.

    The actions that are required by AD 2012-25-12, and retained in this SNPRM, take about 16 work-hours per product (2 main landing gear (MLG) bogie beams per airplane), at an average labor rate of $85 per work-hour. Required parts cost about $255,000 per MLG bogie beam. Based on these figures, the estimated cost of the actions that are required by AD 2012-25-12 is up to $256,360 per MLG bogie beam.

    We also estimate that it would take about 1 work-hour per product to comply with the basic requirements of this SNPRM. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this SNPRM on U.S. operators to be $6,970, or $85 per product.

    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 removing Airworthiness Directive (AD) 2011-17-09, Amendment 39-16773 (76 FR 53305, August 26, 2011); and AD 2012-25-12, Amendment 39-17293 (77 FR 75825, December 26, 2012); and adding the following new AD: Airbus: Docket No. FAA-2015-8428; Directorate Identifier 2014-NM-032-AD. (a) Comments Due Date

    We must receive comments by January 30, 2017.

    (b) Affected ADs

    This AD replaces AD 2011-17-09, Amendment 39-16773 (76 FR 53305, August 26, 2011) (“AD 2011-17-09”); and AD 2012-25-12, Amendment 39-17293 (77 FR 75825, December 26, 2012) (“AD 2012-25-12”).

    (c) Applicability

    This AD applies to the Airbus airplanes identified in paragraphs (c)(1), (c)(2), and (c)(3) of this AD, certificated in any category, with an original certificate of airworthiness or original export certificate of airworthiness issued on or before April 11, 2016.

    (1) Airbus Model A330-201, -202, -203, -223, and -243 airplanes.

    (2) Airbus Model A330-223F and -243F airplanes.

    (3) Airbus Model A330-301, -302, -303, -321, -322, -323, -341, -342, and -343 airplanes.

    (d) Subject

    Air Transport Association (ATA) of America Code 05, Periodic inspections.

    (e) Reason

    This AD was prompted by revisions to certain airworthiness limitations items (ALI) documents, which specify more restrictive instructions and/or airworthiness limitations. We are issuing this AD to detect and correct fatigue cracking, accidental damage, or corrosion in principal structural elements, and possible failure of certain life limited parts, which could result in reduced structural integrity of the airplane.

    (f) Compliance

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

    (g) Retained Maintenance Program Revision, With New Terminating Action

    This paragraph restates the requirements of paragraph (h) of AD 2011-17-09, with new terminating action. Within 3 months after September 30, 2011 (the effective date of AD 2011-17-09): Revise the maintenance program by incorporating Airbus A330 ALS Part 1, “Safe Life Airworthiness Limitation Items (SL-ALI), Revision 05, dated July 29, 2010. Comply with all Airbus A330 ALS Part 1, SL-ALI, Revision 05, dated July 29, 2010, at the times specified therein. Accomplishing the actions specified in paragraph (k) of this AD terminates the requirements of this paragraph.

    (h) Retained Limitation of No Alternative Intervals or Limits, With No Changes

    This paragraph restates the requirements of paragraph (i) of AD 2011-17-09, with no changes. Except as provided by paragraph (m) of this AD, after accomplishment of the actions specified in paragraph (g) of this AD, no alternatives to the maintenance tasks, intervals, or limitations specified in paragraph (g) of this AD may be used.

    (i) Retained Bogie Beam Replacement, With Specific Delegation Approval Language, New Terminating Action, and New Service Information

    This paragraph restates the requirements of paragraph (g) of AD 2012-25-12, with specific delegation approval language and terminating action and new service information. For airplanes identified in paragraphs (c)(1) and (c)(3) of this AD: At the later of the times specified in paragraphs (i)(1) and (i)(2) of this AD, replace all main landing gear (MLG) bogie beams having part number (P/N) 201485300, 201485301, 201272302, 201272304, 201272306, or 201272307, except those that have serial number (S/N) S2A, S2B, or S2C, as identified in Messier-Dowty Service Letter A33-34 A20, Revision 5, including Appendices A through F, dated July 31, 2009; or Messier-Bugatti-Dowty Service Letter A33-34 A20, Revision 7, including Appendices A through F, dated July 20, 2012; with a new or serviceable part, using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, or the European Aviation Safety Agency (EASA) (or its delegated agent). As of the effective date of this AD, the applicable MLG bogie beams specified in this paragraph must be replaced using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Airbus's EASA Design Organization Approval (DOA). Accomplishing the actions specified in paragraph (k) of this AD terminates the requirements of this paragraph.

    (1) At the applicable time specified in paragraphs (i)(1)(i), (i)(1)(ii), and (i)(1)(iii) of this AD.

    (i) For Model A330-201, -202, -203, -223, -243 series airplanes, weight variant (WV)02x, WV05x (except WV058), and WV06x series: Before the accumulation of a life limit of 50,000 landings or 72,300 total flight hours, whichever occurs first from the first installation of a MLG bogie beam on the airplane.

    (ii) For Model A330-201, -202, -203, -223, -243 WV058 series airplanes: Before the accumulation of a life limit of 50,000 landings or 57,900 total flight hours, whichever occurs first from the first installation of a MLG bogie beam on the airplane.

    (iii) For Model A330-301, -302, -303, -321, -322, -323, -341, -342, -343 series airplanes, WV00x, WV01x, WV02x, and WV05x series: Before the accumulation of a life limit of 46,000 landings or 75,000 total flight hours, whichever occurs first from the first installation of a MLG bogie beam on the airplane.

    (2) Within 6 months after January 30, 2013 (the effective date of AD 2012-25-12).

    (j) Retained Parts Installation Limitation, With New Terminating Action

    This paragraph restates the requirements of paragraph (h) of AD 2012-25-12, with new terminating action. For airplanes identified in paragraphs (c)(1) and (c)(3) of this AD, as of January 30, 2013 (the effective date of AD 2012-25-12), a MLG bogie beam having any part number identified in paragraph (i) of this AD may be installed on an airplane, provided its life has not exceeded the life limit specified in paragraphs (i)(1)(i), (i)(1)(ii), and (i)(1)(iii) of this AD, and is replaced with a new or serviceable part before reaching the life limit specified in paragraphs (i)(1)(i), (i)(1)(ii), and (i)(1)(iii) of this AD. Accomplishing the actions specified in paragraph (k) of this AD terminates the requirements of this paragraph.

    (k) New Maintenance or Inspection Program Revision

    Within 3 months after the effective date of this AD: Revise the maintenance or inspection program, as applicable, by incorporating the information in Airbus A330 ALS Part 1, SL-ALI, Revision 08, dated April 11, 2016. The initial compliance times for the actions specified in Airbus A330 ALS Part 1, SL-ALI, Revision 08, dated April 11, 2016, are at the times specified in Airbus A330 ALS Part 1, SL-ALI, Revision 08, dated April 11, 2016, or within 3 months after the effective date of this AD, whichever occurs later. Accomplishing the actions specified in this paragraph terminates the requirements specified in paragraphs (g) through (j) of this AD.

    (l) New Limitation of No Alternative Actions or Intervals

    After the maintenance or inspection program, as applicable, has been revised, as required by paragraph (k) of this AD, no alternative actions (e.g., inspections) or intervals may be used unless the actions or intervals are approved as an AMOC in accordance with the procedures specified in paragraph (m)(1) of this AD.

    (m) 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: Vladimir Ulyanov, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1138; 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. The AMOC approval letter must specifically reference this AD.

    (2) Contacting the Manufacturer: As of the effective date of this AD, 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 EASA; or Airbus's EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature.

    (n) Related Information

    (1) For Airbus service information identified in this AD, contact Airbus SAS—Airworthiness Office—EAL, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 45 80; email [email protected]; Internet http://www.airbus.com.

    (2) For Messier-Bugatti-Dowty service information identified in this AD, contact Messier-Bugatti USA, One Carbon Way. Walton, KY 41094; telephone 859-525-8583; fax 859-485 8827; email [email protected]

    (3) 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 22, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-28802 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9439; Directorate Identifier 2016-NM-170-AD] RIN 2120-AA64 Airworthiness Directives; The Boeing Company 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 The Boeing Company Model 787-8 airplanes. This proposed AD was prompted by a report indicating that during an airplane inspection in production, the variable frequency starter generator (VFSG) power feeder cables were found to contain terminal lugs incorrectly installed common to terminal blocks located in the wing front spar. This proposed AD would require a general visual inspection of the wings, section 16, terminal lugs at the terminal power block of the VFSG power feeder cable for correct installation and if required, applicable corrective actions. We are proposing this AD to address the unsafe condition on these products.

    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 Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone: 562-797-1717; Internet: https://www.myboeingfleet.com. 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9439.

    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-2016-9439; 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 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:

    Brendan Shanley, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6492; fax: 425-917-6590; email: [email protected]

    SUPPLEMENTARY INFORMATION: Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-9439; Directorate Identifier 2016-NM-170-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

    We have received a report indicating that during an airplane inspection in production, the variable frequency starter generator (VFSG) power feeder cables were found to contain terminal lugs incorrectly installed common to terminal blocks located in the wing front spar; the lugs were close to the structure causing the lug sleeve to come in contact with adjacent fasteners. The installation procedures have been corrected on subsequent production airplanes. Operators have not reported any issues with the power feeder cables. This condition, if not corrected, could result in electrical arcing in a flammable leakage zone which could result in an electrical short and the possible introduction of energy into the main fuel tanks.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing Alert Service Bulletin B787-81205-SB240027-00, Issue 002, dated September 6, 2016. The service information describes procedures for a general visual inspection of the right and left wing, section 16, VFSG power feeder cable terminal lugs for correct installation and corrective actions. 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

    We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

    Proposed AD Requirements

    This proposed AD would require accomplishing the actions specified in the service information described previously. For information on the procedures and compliance times, see this service information at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9439.

    The phrase “corrective actions” is used in this proposed AD. Corrective actions correct or address any condition found. Corrective actions in an AD could include, for example, repairs.

    Costs of Compliance

    We estimate that this proposed AD affects 6 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 8 work-hours × $85 per hour = $680 $0 $680 $4,080

    We estimate the following costs to do any necessary repairs that would be required based on the results of the proposed inspection. We have no way of determining the number of aircraft that might need these repairs:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Rework Wing Terminal Lugs 9 work-hours × $85 per hour = $765 1 $0 $765 1 Labor costs are specific to each wing (left or right.)

    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): The Boeing Company: Docket No. FAA-2016-9439; Directorate Identifier 2016-NM-170-AD. (a) Comments Due Date

    We must receive comments by January 30, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to The Boeing Company Model 787-8 airplanes, certificated in any category, as identified in Boeing Alert Service Bulletin B787-81205-SB240027-00, Issue 002, dated September 6, 2016.

    (d) Subject

    Air Transport Association (ATA) of America Code 24, Electrical power.

    (e) Unsafe Condition

    This AD was prompted by a report indicating that during an airplane inspection in production, the variable frequency starter generator (VFSG) power feeder cables were found to contain terminal lugs incorrectly installed common to terminal blocks located in the wing front spar; the lugs were close to the structure causing the lug sleeve to come in contact with adjacent fasteners. We are issuing this AD to detect and correct incorrectly installed terminal lugs which may contact adjacent structure and be damaged. Damaged terminal lugs could cause electrical arcing in a flammable leakage zone which could result in an electrical short and the possible introduction of energy into the main fuel tanks.

    (f) Compliance

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

    (g) Inspection of Terminal Lugs and Corrective Actions

    Within the applicable times specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin B787-81205-SB240027-00, Issue 002, dated September 6, 2016: Do a general visual inspection of the right and left wing, section 16, VFSG power feeder cable terminal lugs at the terminal block for correct installation and do all applicable corrective actions in accordance with Boeing Alert Service Bulletin B787-81205-SB240027-00, Issue 002, dated September 6, 2016. Do all applicable corrective actions before further flight.

    (h) Credit for Previous Actions

    This paragraph provides credit for the actions specified in paragraph (g) of this AD, if those actions were performed before the effective date of this AD using Boeing Alert Service Bulletin B787-81205-SB240027-00, Issue 001, dated January 21, 2014.

    (i) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (j)(1) of this AD. Information may be emailed to: [email protected]

    (2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.

    (3) An AMOC that provides an acceptable level of safety may be used for any repair, modification, or alteration required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Seattle ACO, to make those findings. To be approved, the repair method, modification deviation, or alteration deviation must meet the certification basis of the airplane, and the approval must specifically refer to this AD.

    (j) Related Information

    (1) For more information about this AD, contact Brendan Shanley, Aerospace Engineer, Systems and Equipment Branch, ANM-130S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6492; fax: 425-917-6590; email: [email protected]

    (2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Contractual & Data Services (C&DS), 2600 Westminster Blvd., MC 110-SK57, Seal Beach, CA 90740-5600; telephone: 562-797-1717; Internet: https://www.myboeingfleet.com. 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.

    Issued in Renton, Washington, on December 1, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-29670 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9435; Directorate Identifier 2016-NM-108-AD] RIN 2120-AA64 Airworthiness Directives; Fokker Services B.V. Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to supersede Airworthiness Directive (AD) 2012-22-15 for all Fokker Services B.V. Model F28 Mark 0070 and Mark 0100 airplanes. AD 2012-22-15 currently requires revising the maintenance program to incorporate the limitations, tasks, thresholds, and intervals specified in certain revised Fokker maintenance review board (MRB) documents. Since we issued AD 2012-22-15, we received new revisions of airworthiness limitations items (ALI) documents, which introduce new and more restrictive maintenance requirements and airworthiness limitations. This proposed AD would require revising the maintenance or inspection program to incorporate new maintenance requirements and airworthiness limitations. We are proposing this AD to prevent the unsafe condition on these products.

    DATES:

    We must receive comments on this proposed AD by January 30, 2017.

    ADDRESSES:

    You may send comments 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: U.S. Department of Transportation, Docket Operations, M-30, 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.

    For service information identified in this NPRM, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone: +31 (0)88-6280-350; fax: +31 (0)88-6280-111; email: [email protected]; Internet http://www.myfokkerfleet.com. 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-2016-9435; 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:

    Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1137; fax 425-227-1149.

    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-2016-9435; Directorate Identifier 2016-NM-108-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

    On October 30, 2012, we issued AD 2012-22-15, Amendment 39-17252 (77 FR 68063, November 15, 2012) (“AD 2012-22-15”). AD 2012-22-15 requires actions intended to address an unsafe condition on all Fokker Services B.V. Model F28 Mark 0070 and Mark 0100 airplanes.

    Since we issued AD 2012-22-15, we received Fokker Services Engineering Reports that consist of new and more restrictive airworthiness limitations (ALS).

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive AD 2016-0125, dated June 21, 2016 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Fokker Services B.V. Model F28 Mark 0070 and Mark 0100 airplanes. The MCAI states:

    Fokker Services recently published issue 15 of Engineering Report SE-623, containing Airworthiness Limitation Items (ALIs) and Safe Life Items (SLIs). This report is Part 2 of the Airworthiness Limitations Section (ALS Part 2) of the Instructions for Continued Airworthiness, referred to in Section 06, Appendix 1, of the Fokker 70/100 Maintenance Review Board document.

    The complete ALS currently consists of:

    Part 1—Report SE-473, Certification Maintenance Requirements (CMRs)—reference: EASA AD 2015-0027 [which corresponds to FAA AD 2016-11-22, Amendment 39-18549 (81 FR 36438, June 7, 2016)].

    Part 2—Report SE-623, ALIs and SLIs—reference: EASA AD 2014-0224 [which corresponds to FAA AD 2012-22-15], and

    Part 3—Report SE-672, Fuel ALIs and CDCCLs—reference: EASA AD 2015-0032 [which corresponds to FAA AD 2016-11-15, Amendment 39-18542 (81 FR 36447, June 7, 2016)].

    The instructions contained in those reports have been identified as mandatory actions for continued airworthiness. Failure to accomplish these actions could result in an unsafe condition.

    EASA previously issued AD 2014-0224, requiring the actions described in ALS Part 1 (report SE-473 issue 10), Part 2 (report SE-623 issue 13) and Part 3 (report SE-672 issue 4). Since that [EASA] AD was issued, ALS Part 1 was revised (SE-473 issue 11) and EASA issued AD 2015-0027 accordingly. ALS Part 3 was also revised (SE-672 issue 5) and EASA issued AD 2015-0032 accordingly.

    For the reasons described above, this [EASA] AD retains part of the requirements of [EASA] AD 2014-0224, which is superseded, and requires implementation of the maintenance actions as specified in ALS Part 2 of the Instructions for Continued Airworthiness, Fokker Services Engineering Report SE-623 at issue 15 (hereafter referred to as `ALS Part 2' in this [EASA] AD).

    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-2016-9435.

    Related Service Information Under 1 CFR Part 51

    Fokker Services B.V. has issued Fokker Services B.V. Engineering Report SE-623, “Fokker 70/100 ALI's and SLI's,” Issue 16, issued June 3, 2016. The service information describes new and more restrictive maintenance requirements and airworthiness limitations. 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 the same type design.

    This proposed AD would require revisions to certain operator maintenance documents to include new actions (e.g., inspections). Compliance with these actions is required by 14 CFR 91.403(c). For airplanes that have been previously modified, altered, or repaired in the areas addressed by this AD, the operator may not be able to accomplish the actions described in the revisions. In this situation, to comply with 14 CFR 91.403(c), the operator must request approval for an alternative method of compliance according to paragraph (m)(1) of this AD. The request should include a description of changes to the required inspections that will ensure the continued operational safety of the airplane.

    Costs of Compliance

    We estimate that this proposed AD affects 15 airplanes of U.S. registry.

    The actions required by AD 2012-22-15, and retained in this proposed AD, take about 1 work-hour per product, at an average labor rate of $85 per work-hour. Based on these figures, the estimated cost of the actions that are required by AD 2012-22-15 is $85 per product.

    We also estimate that it would take about 1 work-hour per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $1,275, or $85 per product.

    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 removing Airworthiness Directive (AD) 2012-22-15, Amendment 39-17252 (77 FR 68063, November 15, 2012), and adding the following new AD: Fokker Services B.V.: Docket No. FAA-2016-9435; Directorate Identifier 2016-NM-108-AD. (a) Comments Due Date

    We must receive comments by January 30, 2017.

    (b) Affected ADs

    (1) This AD replaces AD 2012-22-15, Amendment 39-17252 (77 FR 68063, November 15, 2012) (“AD 2012-22-15”).

    (2) This AD affects AD 2012-12-07, Amendment 39-17087 (77 FR 37788, June 25, 2012) (“AD 2012-12-07”).

    (3) This AD affects AD 2008-06-20 R1, Amendment 39-16089 (74 FR 61018, November 23, 2009) (“AD 2008-06-20 R1”).

    (c) Applicability

    This AD applies to Fokker Services B.V. Model F28 Mark 0070 and Mark 0100 airplanes, certificated in any category, all serial numbers.

    (d) Subject

    Air Transport Association (ATA) of America Code 05, Time Limits/Maintenance Checks.

    (e) Reason

    This AD was prompted by a revision of an airworthiness limitations items (ALI) document, which introduces new and more restrictive maintenance requirements and airworthiness limitations. We are issuing this AD to prevent reduced structural integrity of the airplane.

    (f) Compliance

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

    (g) Retained Maintenance Program Revision, With Revised Compliance Language

    This paragraph restates the requirements of paragraph (i) of AD 2012-22-15, with revised compliance language. Within 3 months after December 20, 2012 (the effective date of AD 2012-22-15), revise the maintenance program to incorporate the airworthiness limitations specified in Fokker Report SE-623, “Fokker 70/100 Airworthiness Limitation Items and Safe Life Items,” Issue 13, released August 25, 2014 (“Fokker Report SE-623, Issue 13”). For all tasks and retirement lives identified in Fokker Report SE-623, Issue 13, the initial compliance times start from the later of the times specified in paragraphs (g)(1) and (g)(2) of this AD, and the repetitive inspections must be accomplished thereafter at the applicable interval specified in Fokker Report SE-623, Issue 13. Accomplishing the revision required by paragraph (k) of this AD terminates the requirements of this paragraph.

    (1) Within 3 months after December 20, 2012 (the effective date of AD 2012-22-15).

    (2) At the time specified in Fokker Report SE-623, Issue 13.

    (h) Retained Corrective Actions, With Specific Delegation Approval Language

    This paragraph restates the requirements of paragraph (j) of AD 2012-22-15, with specific delegation approval language. If any discrepancy, as defined in Fokker Report SE-623, Issue 13, is found during accomplishment of any task specified in Fokker Report SE-623, Issue 13: Within the applicable compliance time specified in Fokker Report SE-623, Issue 13, accomplish the applicable corrective actions in accordance with Fokker Report SE-623, Issue 13.

    (1) If no compliance time is identified in Fokker Report SE-623, Issue 13, accomplish the applicable corrective actions before further flight.

    (2) If any discrepancy is found and there is no corrective action specified in Fokker Report SE-623, Issue 13: Before further flight, repair using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the European Aviation Safety Agency (EASA); or Fokker Services' EASA Design Organization Approval (DOA).

    (i) Retained “No Alternative Actions or Intervals,” With a New Exception

    This paragraph restates the requirements of paragraph (k) of AD 2012-22-15, with a new exception. Except as required by paragraph (k) of this AD, after accomplishing the revision required by paragraph (g) of this AD, no alternative actions (e.g., inspections) or intervals may be used unless the actions or intervals are approved as an alternative method of compliance (AMOC) in accordance with the procedures specified in paragraph (m)(1) of this AD.

    (j) Retained Method of Compliance With AD 2008-06-20, With Revised Compliance Language

    This paragraph restates the requirements of paragraph (m) of AD 2012-22-15, with revised compliance language. Accomplishing the actions specified in paragraph (g) of this AD terminates the requirements of paragraphs (f)(1) through (f)(5) of AD 2008-06-20 R1.

    (k) New Requirement of This AD: Maintenance or Inspection Program Revision

    Within 30 days of the effective date of this AD, revise the maintenance or inspection program, as applicable, to incorporate the ALI instructions specified in Fokker Services B.V. Engineering Report SE-623, “Fokker 70/100 ALI's and SLI's,” Issue 16, issued June 3, 2016 (“Fokker Services B.V. Engineering Report SE-623, Issue 16”). Accomplishing the revision required by this paragraph terminates the requirements of paragraph (g) of this AD. Accomplishing the revision required by this paragraph also terminates the requirements of paragraph (g) of AD 2012-12-07.

    (1) The initial compliance times for the tasks specified in Fokker Services B.V. Engineering Report SE-623, Issue 16, are at the later of the applicable compliance times specified in Fokker Services B.V. Engineering Report SE-623, Issue 16, or within 30 days after the effective date of this AD, whichever is later.

    (2) If any discrepancy is found, before further flight, repair using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or the EASA; or Fokker B.V. Service's EASA DOA.

    (l) No Alternative Actions or Intervals

    After the maintenance or inspection program, as applicable, has been revised as required by paragraph (k) of this AD, no alternative actions (e.g., inspections) or intervals may be used unless the actions or intervals are approved as an AMOC in accordance with the procedures specified in paragraph (m)(1) of this AD.

    (m) 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: Tom Rodriguez, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1137; fax 425-227-1149. Information may be emailed to: [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: As of the effective date of this AD, for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA; or EASA; or Fokker B.V. Services' EASA DOA. If approved by the DOA, the approval must include the DOA-authorized signature.

    (n) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2016-0125, dated June 21, 2016, for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-9435.

    (2) For service information identified in this AD, contact Fokker Services B.V., Technical Services Dept., P.O. Box 1357, 2130 EL Hoofddorp, the Netherlands; telephone: +31 (0)88-6280-350; fax: +31 (0)88-6280-111; email: [email protected]; Internet http://www.myfokkerfleet.com. 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. 2016-28669 Filed 12-15-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 216 [Docket No. FDA-2016-N-3464] RIN 0910-AH29 List of Bulk Drug Substances That Can Be Used To Compound Drug Products in Accordance With Section 503A of the Federal Food, Drug, and Cosmetic Act AGENCY:

    Food and Drug Administration, HHS.

    ACTION:

    Proposed rule.

    SUMMARY:

    The Food and Drug Administration (FDA or Agency) is proposing a regulation to identify an initial list of bulk drug substances that can be used to compound drug products in accordance with certain compounding provisions of the Federal Food, Drug, and Cosmetic Act (the FD&C Act), although they are neither the subject of an applicable United States Pharmacopeia (USP) or National Formulary (NF) monograph nor components of FDA-approved drugs. Specifically, the Agency proposes to place six bulk drug substances on the list. This proposed rule also identifies four bulk drug substances that FDA has considered and proposes not to include on the list. Additional substances nominated by the public for inclusion on this list are currently under consideration and will be the subject of a future rulemaking.

    DATES:

    Submit either electronic or written comments on the bulk drug substances list by March 16, 2017. See section VI for the proposed effective date of a final rule based on this proposed rule.

    ADDRESSES:

    You may submit comments as follows:

    Electronic Submissions

    Submit electronic comments in the following way:

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Comments submitted electronically, including attachments, to http://www.regulations.gov will be posted to the docket unchanged. Because your comment will be made public, you are solely responsible for ensuring that your comment does not include any confidential information that you or a third party may not wish to be posted, such as medical information, your or anyone else's Social Security number, or confidential business information, such as a manufacturing process. Please note that if you include your name, contact information, or other information that identifies you in the body of your comments, that information will be posted on http://www.regulations.gov.

    • If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).

    Written/Paper Submissions

    Submit written/paper submissions as follows:

    Mail/Hand delivery/Courier (for written/paper submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.

    • For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”

    Instructions: All submissions received must include the Docket No. FDA-2016-N-3464 for “List of Bulk Drug Substances That Can Be Used To Compound Drug Products in Accordance With Section 503A of the Federal Food, Drug, and Cosmetic Act.” Received comments will be placed in the docket and, except for those submitted as “Confidential Submissions,” publicly viewable at http://www.regulations.gov or at the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday.

    • Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on http://www.regulations.gov. Submit both copies to the Division of Dockets Management. If you do not wish your name and contact information to be made publicly available, you can provide this information on the cover sheet and not in the body of your comments and you must identify this information as “confidential.” Any information marked as “confidential” will not be disclosed except in accordance with 21 CFR 10.20 and other applicable disclosure law. For more information about FDA's posting of comments to public dockets, see 80 FR 56469, September 18, 2015, or access the information at: http://www.fda.gov/regulatoryinformation/dockets/default.htm.

    Docket: For access to the docket to read background documents or the electronic and written/paper comments received, go to http://www.regulations.gov and insert the docket number, found in brackets in the heading of this document, into the “Search” box and follow the prompts and/or go to the Division of Dockets Management, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.

    FOR FURTHER INFORMATION CONTACT:

    James Flahive, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 5108, Silver Spring, MD 20993-0002, 301-796-9293.

    SUPPLEMENTARY INFORMATION:

    Table of Contents I. Executive Summary A. Purpose of the Proposed Rule B. Summary of the Major Provisions of the Proposed Rule C. Legal Authority D. Costs and Benefits II. Table of Abbreviations and Acronyms Commonly Used in This Document III. Background A. Statutory and Regulatory Background B. Regulatory History of the 503A Bulks List C. Requests for Nominations IV. Legal Authority V. Description of the Proposed Rule A. Criteria for Evaluating Bulk Drug Substances for the 503A Bulks List B. Methodology for Developing the 503A Bulks List C. Substances Proposed for Inclusion on the 503A Bulks List D. Substances Considered and Not Proposed for Inclusion on the 503A Bulks List VI. Proposed Effective Date VII. Analysis of Environmental Impact VIII. Economic Analysis of Impacts A. Summary of the Costs of the Rule B. Summary of the Benefits of the Rule C. Summary of the Impact on Small Entities IX. Paperwork Reduction Act of 1995 X. Federalism XI. References I. Executive Summary A. Purpose of the Proposed Rule

    FDA is proposing to amend its regulations to add a list of bulk drug substances that can be used in compounding under section 503A of the FD&C Act (21 U.S.C. 353a) (referred to as “the 503A Bulks List”). Bulk drug substances that appear on the 503A Bulks List can be used to compound drug products subject to the conditions of section 503A, although those substances are not the subject of a USP or NF monograph or components of approved drug products.

    B. Summary of the Major Provisions of the Proposed Rule

    FDA is proposing to establish the criteria by which bulk drug substances will be evaluated for inclusion on the 503A Bulks List. Based on the results of its evaluation of nominated bulk drug substances to date, as well as consultation with the Pharmacy Compounding Advisory Committee (PCAC), FDA is also proposing to include six bulk drug substances on the list: Brilliant Blue G, also known as Coomassie Brilliant Blue G-250; cantharidin (for topical use only); diphenylcyclopropenone (for topical use only); N-acetyl-D-glucosamine (for topical use only); squaric acid dibutyl ester (for topical use only); and thymol iodide (for topical use only) and that four other substances not be included on the list: Oxitriptan, piracetam, silver protein mild, and tranilast.

    C. Legal Authority

    Section 503A of the FD&C Act, in conjunction with our general rulemaking authority in section 701(a) of the FD&C Act (21 U.S.C. 371(a)), serves as our principal legal authority for this proposed rule.

    D. Costs and Benefits

    FDA is proposing to place six bulk substances on the 503A Bulks List and not to place four bulk substances on the 503A Bulks List. Because we lack sufficient information to quantify the costs and benefits of this proposed rule, we include a qualitative description of potential benefits and potential costs. We expect that the rule would affect compounding pharmacies and other entities that market the affected substances or drug products made from the affected substances, consumers of drug products containing the affected drug substances, and payers that cover these drug products or alternative drug products.

    II. Table of Abbreviations and Acronyms Commonly Used in This Document 5-HTP 5-hydroxytryptophan BLA Biologics License Application CFR Code of Federal Regulations CSA Controlled Substances Act DPCP Diphenylcyclopropenone DQSA Drug Quality and Security Act FD&C Act Federal Food, Drug, and Cosmetic Act FDA Food and Drug Administration IND Investigational New Drug NAG N-acetyl-D-glucosamine NAICS North American Industry Classification System NF National Formulary NPRM Notice of Proposed Rulemaking OTC Over-The-Counter PCAC Pharmacy Compounding Advisory Committee PHS Act Public Health Service Act PRESTO Prevention of REStenosis with Tranilast and its Outcomes RFA Regulatory Flexibility Analysis SADBE Squaric acid dibutyl ester SBA Small Business Administration UGT1A1 Uridine diphosphate glucuronosyltransferase 1A1 UK United Kingdom USP United States Pharmacopeia III. Background A. Statutory and Regulatory Background

    Section 503A of the FD&C Act (21 U.S.C. 353a) describes the conditions under which a compounded drug product may qualify for an exemption from certain sections of the FD&C Act. Those conditions include that a licensed pharmacist in a State-licensed pharmacy or Federal facility or a licensed physician compounds the drug product using bulk drug substances that: (1) Comply with the standards of an applicable USP or NF monograph,1 if a monograph exists, and the USP chapter on pharmacy compounding; (2) if such a monograph does not exist, are drug substances that are components of drugs approved by the Secretary; or (3) if such a monograph does not exist and the drug substance is not a component of a drug approved by the Secretary, that appear on the 503A Bulks List. See section 503A(b)(1)(A)(i) of the FD&C Act. This proposed rule proposes criteria for evaluating substances for inclusion on the 503A Bulks List and identifies six substances the Secretary proposes to place on the list. The Agency considered four other substances and is proposing not to include those substances on the 503A Bulks List. Additional substances are under evaluation, and new substances may be added to the list through subsequent rulemaking.

    1 FDA has interpreted the statutory language “applicable USP or NF monographs” to refer to official USP or NF drug substance monographs. Therefore, a substance that is the subject of a dietary supplement monograph, but not a USP or NF drug substance monograph, does not satisfy the condition regarding bulk drug substances in section 503A(b)(1)(A)(i)(I) of the Act. Such a substance may only be used as a bulk drug substance under section 503A of the FD&C Act if it is a component of an FDA-approved drug product or is on the 503A Bulks List.

    Section 503A adopts the definition of “bulk drug substance” in FDA's drug establishment registration and listing regulations, which was codified at § 207.3(a)(4) (21 CFR 207.3(a)(4)) at the time section 503A was enacted. See section 503A(b)(1)(A) of the FD&C Act. Under the definition, bulk drug substance means any substance that is represented for use in a drug and that, when used in the manufacturing, processing, or packaging of a drug, becomes an active ingredient or a finished dosage form of the drug, but the term does not include intermediates used in the synthesis of such substances.

    On August 31, 2016, FDA published a final rule in the Federal Register to update its registration and listing regulations in part 207 (21 CFR part 207), which included minor changes to the definition of bulk drug substance and moved the definition to § 207.3 (see 81 FR 60170). This definition becomes effective on November 29, 2016. As set forth in § 207.3, “bulk drug substance,” as referenced in section 503A(b)(1)(A) of the FD&C Act, means the same as “active pharmaceutical ingredient” as defined in § 207.1(b). An “active pharmaceutical ingredient” is any substance that is intended for incorporation into a finished drug product and is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or any function of the body. Active pharmaceutical ingredient does not include intermediates used in the synthesis of the substance (§ 207.1).

    Inactive ingredients used in compounded drug products, such as flavorings, dyes, or diluents, need not appear on the 503A Bulks List to be eligible for use in compounding drug products and will not be included on the list.

    B. Regulatory History of the 503A Bulks List

    Section 503A of the FD&C Act was enacted in 1997. In the Federal Register of April 7, 1998 (63 FR 17011), FDA invited all interested persons to nominate bulk drug substances for inclusion on the 503A Bulks List. In 1998, FDA received nominations for 41 different drug substances. Ten of these drug substances were the subject of an applicable USP or NF monograph or were components of FDA-approved drugs and did not need to go on the list to be used in compounding. After evaluating the nominated drug substances and consulting with the PCAC as required by section 503A(c)(2), FDA published a proposed rule listing 20 drug substances for potential inclusion on the initial section 503A Bulks List (64 FR 996, January 7, 1999) (the 1999 Proposed 503A Bulks List). The proposed rule also described 10 nominated drug substances that were still under consideration for the 503A Bulks List. The PCAC reconvened in May 1999 to discuss bulk drug substances included in the proposed rule, in addition to other bulk drug substances (see 64 FR 19791, April 22, 1999).

    In February 2001, the U.S. Court of Appeals for the Ninth Circuit held that certain provisions of section 503A of the FD&C Act were unconstitutional restrictions on commercial speech. (See Western States Med. Ctr. v. Shalala, 238 F.3d 1090 (9th Cir. 2001).) Furthermore, the Ninth Circuit held that the advertising and solicitation provisions could not be severed from the rest of section 503A and, as a result, found section 503A of the FD&C Act to be invalid in its entirety. In April 2002, the U.S. Supreme Court affirmed the Ninth Circuit's decision that the advertising and solicitation provisions were unconstitutional; it did not, however, rule on the severability of section 503A of the FD&C Act. (See Thompson v. Western States Med. Ctr., 535 U.S. 357 (2002).) In 2008, the U.S. Court of Appeals for the Fifth Circuit held that compounded drugs are subject to regulation by FDA, and that the advertising and solicitation provisions are severable from the rest of section 503A of the FD&C Act. (See Medical Ctr. Pharm. v. Mukasey, 536 F.3d 383 (5th Cir. 2008).)

    Following a fungal meningitis outbreak in September 2012, FDA sought legislation to, among other things, resolve the split in the Circuits to clarify that section 503A of the FD&C Act was valid nationwide. On November 27, 2013, President Obama signed the Drug Quality and Security Act (Pub. L. 113-54) (DQSA), which contains important provisions relating to the oversight of human drug product compounding. Among other things, the DQSA removed from section 503A of the FD&C Act the provisions that had been held unconstitutional by the U.S. Supreme Court in 2002. By removing these provisions, the DQSA clarified that section 503A of the FD&C Act applies nationwide.

    C. Requests for Nominations

    Because of the amount of time that had passed between the publication of the 1999 proposed rule and the enactment of the DQSA, FDA felt it was necessary to begin again to develop the 503A Bulks List. In the Federal Register of December 4, 2013 (78 FR 72841), FDA published a notice withdrawing the 1999 proposed rule and inviting all interested persons to nominate bulk drug substances for inclusion on the 503A Bulks List.

    Over 2,000 substances were nominated. However, many of those nominations were for a substance that is the subject of an applicable USP or NF monograph or a component of an FDA-approved drug, were not for substances used in compounding as active ingredients, or did not include sufficient information for FDA to evaluate whether the substances should be proposed for inclusion on the 503A Bulks List. To improve the efficiency of the process for developing the 503A Bulks List, FDA reopened the nomination process in July 2014 (79 FR 37747, July 2, 2014) and provided a more detailed description about what information should be included in a nomination to support the Agency's evaluation. FDA stated that bulk drug substances that were previously nominated would not be further considered unless they were renominated and the new nominations were adequately supported. Substances that were already eligible for use in compounding or that were not adequately supported would not be placed on the list.

    In response to that solicitation, approximately 740 unique substances were nominated. Of those substances, approximately 315 are components of an FDA-approved drug product or the subject of an applicable USP or NF monograph. Such substances can be used in compounding under section 503A(b)(1)(A)(i)(I) and (II) of the FD&C Act and, therefore, are not eligible for inclusion on the 503A Bulks List.

    At least one of the nominated substances is a finished drug product that was nominated by its brand name. Finished drug products are not eligible for the 503A Bulks List because they do not meet the definition of a bulk drug substance in § 207.3(4).

    At least one of the nominated substances is a biological product subject to approval in a biologics license application (BLA) under section 351 of the Public Health Service (PHS) Act (42 U.S.C. 262) when used for the indication proposed in the nomination. This substance is not eligible for the 503A Bulks List because biological products subject to approval in a BLA under section 351 of the PHS Act are not eligible for the exemptions in section 503A of the FD&C Act. No biological products subject to approval in a BLA will be considered for the 503A Bulks List.

    At least four of the nominated substances appear on the list published by FDA of substances that have been withdrawn or removed from the market because the drug products or components of the drug products have been found to be unsafe or not effective (section 503A(b)(1)(C) of the FD&C Act) (Withdrawn or Removed List). Such substances cannot be used in compounding under section 503A of the FD&C Act, and therefore, are not eligible for inclusion on the 503A Bulks List.

    One of the nominated substances has no currently accepted medical use and is included on Schedule I of the Controlled Substances Act (CSA) (21 U.S.C. 812(c)). The CSA does not allow possession or distribution of Schedule I substances (see 21 U.S.C. 841(a)(1) and 829), except for research purposes (see 21 U.S.C. 823(f)), and Schedule I substances will not be considered for the 503A Bulks List. Those desiring to do research on a Schedule I substance may apply to do so under an investigational new drug (IND) application.

    Of the substances that are not components of an approved drug product or the subject of an applicable USP or NF monograph, finished drug products, biological products subject to licensure in a BLA, and do not appear on the Withdrawn or Removed List or Schedule I of the CSA, about 350 substances were nominated with insufficient supporting evidence for FDA to evaluate them.

    The remaining substances may be eligible for inclusion on the 503A Bulks List and were nominated with sufficient supporting information for FDA to evaluate them. Ten of those substances have been evaluated and are discussed in section V. The rest will be discussed in future notices of proposed rulemaking (NPRMs) after they have been evaluated. Once the Agency completes its review of the substances that were nominated for the 503A Bulks List with adequate supporting information under the July 2, 2014, request for nominations, FDA will consider additional substances nominated for inclusion on the list if they are eligible and adequate supporting information is submitted to permit FDA to meaningfully evaluate them (see section III).

    With regard to the substances nominated with sufficient supporting information for FDA to evaluate them, including the 10 nominated substances discussed in this proposed rule, FDA generally does not intend to take regulatory action against a State-licensed pharmacy, Federal facility, or licensed physician for compounding a drug product using a bulk drug substance that is not the subject of an applicable USP or NF monograph or a component of an FDA-approved drug product, provided that the other conditions in section 503A and the FD&C Act are met, until the substance is addressed in a final rule. FDA is not applying this interim policy to a nominated substance however, if the Agency has identified the substance as posing a significant safety risk,2 or if the substance was nominated without adequate support. For further information on this subject, see the guidance for industry entitled “Interim Policy on Compounding Using Bulk Drug Substances Under Section 503A of the Federal Food, Drug, and Cosmetic Act” (Ref. 1). As described in the guidance, the following categories of bulk drug substances are identified on FDA's Web site at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/UCM467373.pdf: (1) The substances nominated with sufficient supporting information that are under evaluation, (2) the substances nominated with sufficient supporting information but with which FDA has identified significant safety risks relating to the use of these bulk drug substances in compounding, and (3) the substances nominated with insufficient supporting evidence for FDA to evaluate them.

    2 This is not a determination regarding whether the substances will be added to the 503A Bulks list. FDA intends to make that determination after notice and comment rulemaking, as set forth in this proposal.

    IV. Legal Authority

    As described in the Background section, section 503A of the FD&C Act describes the conditions that must be satisfied for human drug products compounded by a licensed pharmacist or licensed physician to be exempt from three sections of the FD&C Act (sections 501(a)(2)(B), 502(f)(1), and 505 (21 U.S.C. 351(a)(2)(B), 352(f)(1), and 355)). One of the conditions that must be satisfied for a compounded drug to qualify for the exemptions under section 503A of the FD&C Act is that a licensed pharmacist in a State-licensed pharmacy or Federal facility or a licensed physician compounds the drug product using bulk drug substances that: (1) Comply with the standards of an applicable USP or NF monograph, if a monograph exists, and the USP chapter on pharmacy compounding; (2) if such a monograph does not exist, are drug substances that are components of drugs approved by the Secretary; or (3) if such a monograph does not exist and the drug substance is not a component of a drug approved by the Secretary, that appear on the 503A Bulks List. See section 503A(b)(1)(A)(i) of the FD&C Act. Section 503A(c)(1) of the FD&C Act also states that the Secretary shall issue regulations to implement section 503A, and that before issuing regulations to implement section 503A(b)(1)(A)(i)(III) pertaining to the 503A bulks list, among other sections, the Secretary shall convene and consult an advisory committee on compounding unless the Secretary determines that the issuance of such regulations before consultation is necessary to protect the public health. Section 503A(c)(2) of the FD&C Act requires the Secretary to issue the regulations in consultation with the USP, and to include in the regulation the criteria for such substances that shall include historical use, reports in peer reviewed journals, and any other criteria the Secretary identifies. Thus, section 503A of the FD&C Act, in conjunction with our general rulemaking authority in section 701(a) of the FD&C Act, serves as our principal legal authority for this proposed rule.

    V. Description of the Proposed Rule

    FDA is proposing to add § 216.23 to title 21 of the Code of Federal Regulations (CFR) to set forth criteria to evaluate bulk drug substances for inclusion on the 503A Bulks List. Additionally, after considering 10 bulk drug substances for the 503A Bulks List, FDA proposes to codify the initial 503A Bulks List to include 6 of the bulk drug substances that were considered and to identify 4 substances that were considered and would not be placed on the list. The criteria and the bulk drug substances considered for inclusion on the list are described in the paragraphs that follow.

    A. Criteria for Evaluating Bulk Drug Substances for the 503A Bulks List

    Section 503A(c)(2) of the FD&C Act provides that the criteria for determining which substances should appear on the 503A Bulks List shall include historical use, reports in peer reviewed medical literature, or other criteria the Secretary of Health and Human Services may identify. Consistent with the July 2, 2014, Federal Register notice (79 FR 37747) soliciting nominations for this list, and as presented to and discussed with the PCAC in February 2015 (Ref. 2), FDA proposes that the following criteria be used to evaluate the nominated substances:

    • The physical and chemical characterization of the substance;

    • Any safety issues raised by the use of the substance in compounded drug products;

    • The available evidence of effectiveness or lack of effectiveness of a drug product compounded with the substance, if any such evidence exists; and

    • Historical use of the substance in compounded drug products, including information about the medical condition(s) the substance has been used to treat and any references in peer-reviewed medical literature.

    In evaluating candidates for the 503A Bulks List under these criteria, the Agency proposes to use a balancing test. Specifically, the Agency proposes to consider each criterion in the context of the others and balance them, on a substance-by-substance basis, to decide whether a particular substance is appropriate for inclusion on the 503A Bulks List.

    Under the first criterion, the physical and chemical characterization of the substance, FDA would consider each substance's purity, identity, and quality. Based on attributes such as the substance's molecular structure, stability, melting point, appearance, likely impurities, and solubilities, FDA would determine whether the substance can be identified consistently based on its physical and chemical characteristics. If a substance cannot be well characterized chemically and physically, the Agency proposes that this criterion weigh against its inclusion on the 503A Bulks List because there can be no assurance that its properties and toxicities, when used in compounding, would be the same as the properties and toxicities reported in the literature and considered by the Agency.

    Under the second criterion, FDA would consider the safety issues raised by the use of each substance in pharmacy compounding. Based on FDA's review of the substances nominated to date, it is unlikely that candidates for the 503A Bulks List will have been thoroughly investigated in in vitro or in animal toxicology studies, or that there will be well-controlled clinical trials to substantiate their safe use in humans. Thus, in evaluating list candidates, the Agency is likely to have at its disposal very limited information, or in some cases no information, of the type and quality that is ordinarily required and evaluated as part of the drug approval process.

    To evaluate the safety of the substances then, the Agency proposes to rely on available information, including reports in peer-reviewed medical literature, about each substance's pharmacology, acute toxicity, repeat dose toxicity, mutagenicity, developmental and reproductive toxicity, and carcinogenicity. The Agency would also rely on reports and abstracts in the literature about adverse reactions the substances have caused in humans. In applying the safety criterion, FDA also proposes to consider the availability of approved drug products or drug products that follow an OTC monograph (OTC monograph products). The existence of approved drug products or OTC monograph products would likely weigh against inclusion on the proposed list when the toxicity of a particular substance appears to be significant or where there are other safety concerns associated with the use of the substance in compounded drug products.

    Under the third criterion, FDA proposes to consider the available evidence of the substance's effectiveness or lack of effectiveness for a particular use, including reports in peer-reviewed medical literature, if any such evidence exists. In the new drug approval process, applicants are required to demonstrate effectiveness under the substantial evidence standard described in section 505(d) of the FD&C Act. FDA recognizes that few, if any, of the candidates for the 503A Bulks List will have been studied in adequate and well-controlled investigations sufficient to satisfy this standard. Thus, in its balancing of the relevant criteria, the Agency would take into account whatever relevant evidence concerning effectiveness is available.

    For example, for substances that have been widely used for a long period of time, the literature may include anecdotal reports of effectiveness for a particular use or reports of one or more trials suggesting possible effectiveness. Conversely, the literature may contain anecdotal or clinical evidence that a particular bulk drug substance was not effective for a particular use (negative effectiveness data). When evaluating a bulk drug substance that is proposed for the treatment of a less serious illness, FDA would generally be more concerned about the safety of the substance than about its effectiveness. Thus, the availability of minimal effectiveness data, or the existence of mere anecdotal reports, would be less likely to preclude inclusion of the substance on the list. However, for a bulk drug substance that is proposed to treat a more serious or life-threatening disease, there may be more serious consequences associated with ineffective therapy, particularly when there are approved drug products or OTC monograph products. In those cases, the existence of approved drug products or OTC monograph products would likely weigh against inclusion on the proposed list, and the availability of minimal effectiveness data, or the presence of negative effectiveness data, would weigh more heavily against placement on the list in FDA's balancing of the relevant criteria.

    Under the fourth criterion, the historical use of the substance in pharmacy compounding, FDA proposes to consider the length of time the substance has been used in pharmacy compounding, the medical conditions it has been used to treat, how widespread its use has been, including use in other countries, and any references in peer-reviewed medical literature. The Agency proposes that the longer a substance has been used in pharmacy compounding and the broader its use, the more this criterion will weigh in favor of inclusion of the substance on the list.

    B. Methodology for Developing the 503A Bulks List

    FDA reviewed the substances addressed in this proposed rule in the context of adequately supported nominated uses. In certain circumstances, FDA also reviewed substances in the context of unnominated or inadequately supported uses because, for example, such uses appear to be widespread, are intended to treat serious conditions, or pose serious risks to patients. The information that FDA assessed to evaluate the substances addressed in this proposed rule under each of the proposed evaluation criteria was obtained from publicly available sources, including peer-reviewed medical literature. Some of this information was referenced in the nominations, and the remainder FDA gathered through independent searches of medical and pharmaceutical databases. FDA did not review raw data. The nature, quantity, and quality of the information FDA assessed varied considerably from substance to substance. In some cases, there were very little data. For other substances, reports in the literature were more plentiful and sometimes comprised hundreds or thousands of articles. In those cases, generally the Agency limited its review to a sample of the best literature sources available (e.g., review articles in widely known, peer-reviewed journals; meta-analyses; reports of randomized controlled trials).

    FDA's evaluation of the nominated substances was, necessarily, far less rigorous and less comprehensive than the Agency's review of drugs as part of the new drug approval process. The new drug approval process is conducted based on extensive data compiled and submitted with new drug and abbreviated new drug applications, which are not available for the nominated substances. Additionally, the Agency's review during the drug approval process includes premarketing evaluation of a specific drug formulation, the sponsor's chemistry and manufacturing controls, and the establishments where approved drugs will be manufactured. In contrast, these bulk drug substances will be evaluated only for possible use in compounded drugs.

    Therefore, the proposed inclusion of a drug substance on the 503A Bulks List should not, in any way, be equated with or considered an FDA approval, endorsement, or recommendation of any drug compounded using the substance. Nor should it be assumed that a drug compounded using the substances on the proposed list has been proven to be safe and effective under the standards required for Agency appro