Federal Register Vol. 81, No.249,

Federal Register Volume 81, Issue 249 (December 28, 2016)

Page Range95397-95851
FR Document

Current View
Page and SubjectPDF
81 FR 95849 - Supporting New American Service Members, Veterans, and Their FamiliesPDF
81 FR 95729 - Sunshine Act Meetings; Unified Carrier Registration Plan Board of DirectorsPDF
81 FR 95630 - Renewal of Approved Information Collection; OMB Control No. 1004-0132PDF
81 FR 95574 - Applications for New Awards; Magnet Schools Assistance Program; CorrectionPDF
81 FR 95555 - Notice of Request for Renewal and Revision of an Information Collection; Commercial Transportation of Equines for SlaughterPDF
81 FR 95562 - Proposed Information Collection; Comment Request; 2017 National Survey of Children's HealthPDF
81 FR 95471 - United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in the Active Conduct of a Trade or Business; CorrectionPDF
81 FR 95561 - Proposed Information Collection; Comment Request; 2018 End-to-End Census Test-Post-Enumeration Survey Independent Listing OperationPDF
81 FR 95557 - Notice of Request for Extension of a Currently Approved Information CollectionPDF
81 FR 95558 - MeetingsPDF
81 FR 95617 - Postmarket Management of Cybersecurity in Medical Devices; Guidance for Industry and Food and Drug Administration; AvailabilityPDF
81 FR 95731 - Ford Motor Company, Receipt of Petition for Decision of Inconsequential NoncompliancePDF
81 FR 95653 - Information Collection: Reporting of Defects and NoncompliancePDF
81 FR 95492 - Fisheries of the Northeastern United States; Northeast Multispecies Fishery; Possession and Trip Limit Modifications for the Common Pool FisheryPDF
81 FR 95565 - Foreign-Trade Zone (FTZ) 279-Terrebonne Parish, Louisiana; Authorization of Production Activity; Gulf Island Shipyards, LLC; (Shipbuilding); Houma, LouisianaPDF
81 FR 95592 - Notice of Request for Comment on the Exposure Draft Titled Budget and Accrual Reconciliation: Amending Statement of Federal Financial Accounting Standards (SFFAS) 7, SFFAS 22, and SFFAS 24PDF
81 FR 95571 - Consumer Advisory Board and Councils Solicitation of Applications for MembershipPDF
81 FR 95625 - Information Collection Request to Office of Management and Budget; OMB Control Number: 1625-0025PDF
81 FR 95622 - Statement of Organization, Functions and Delegations of AuthorityPDF
81 FR 95623 - Closed-Circuit Escape Respirators; Guidance for Industry; AvailabilityPDF
81 FR 95494 - Fisheries of the Northeastern United States; Atlantic Herring Fishery; Adjustments to 2017 Management Area Annual Catch LimitsPDF
81 FR 95620 - Pharmaceutical Science and Clinical Pharmacology Advisory Committee; Notice of Meeting; CorrectionPDF
81 FR 95592 - Proposed Collection; Comment RequestPDF
81 FR 95648 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Request for State or Federal Workers' Compensation InformationPDF
81 FR 95596 - Proposed Collection; Comment RequestPDF
81 FR 95649 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Medical Travel Refund RequestPDF
81 FR 95650 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Survivor's Form for Benefits Under the Black Lung Benefits ActPDF
81 FR 95593 - Proposed Collection; Comment RequestPDF
81 FR 95595 - Privacy Act of 1974; System of RecordsPDF
81 FR 95722 - 2017 Special 301 Review: Identification of Countries Under Section 182 of the Trade Act of 1974; Request for Public Comment and Notice of Public HearingPDF
81 FR 95591 - Notice of Federal Accounting Standards Advisory Board 2017 Meeting SchedulePDF
81 FR 95654 - ZionSolutions, LLC; Zion Nuclear Power Station, Units 1 and 2PDF
81 FR 95572 - SES Performance Review BoardPDF
81 FR 95655 - Aquatic Environmental Studies for Nuclear Power StationsPDF
81 FR 95631 - Notice of Resource Advisory Council Meeting for the Dominguez-Escalante National Conservation Area Advisory CouncilPDF
81 FR 95410 - Rulemaking Activities Being Discontinued by the NRCPDF
81 FR 95612 - Regulation Q; Regulatory Capital Rules: Risk-Based Capital Surcharges for Global Systemically Important Bank Holding CompaniesPDF
81 FR 95631 - Notice Of Public Meeting: Resource Advisory Council (RAC) to the Boise District, Bureau of Land Management, U.S. Department of the InteriorPDF
81 FR 95470 - United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in the Active Conduct of a Trade or Business; CorrectionPDF
81 FR 95613 - Formations of, Acquisitions by, and Mergers of Bank Holding CompaniesPDF
81 FR 95612 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding CompanyPDF
81 FR 95541 - United States Property Held by Controlled Foreign Corporations Through Partnerships With Special Allocations; CorrectionPDF
81 FR 95612 - Petition of the Coalition for Fair Port Practices for Rulemaking; Notice of Filing and Request for CommentsPDF
81 FR 95566 - Multilayered Wood Flooring From the People's Republic of China; Preliminary Results and Partial Rescission of Antidumping Duty New Shipper Reviews; 2014-2015PDF
81 FR 95620 - Agency Information Collection Activities: Submission to OMB for Review and Approval; Public Comment Request; Evaluation and Assessment of HRSA Teaching Health CentersPDF
81 FR 95724 - Public Comments and Hearing Regarding Request To Reinstate Action Taken in Connection With the European Union's Measures Concerning Meat and Meat ProductsPDF
81 FR 95650 - Nationally Recongized Testing Laboratory Program Regulation; Revision of the Office of Management and Budget's (OMB) Approval of Information Collection (Paperwork) RequirementsPDF
81 FR 95639 - Hearings of the Judicial Conference Advisory Committee on the Federal Rules of Appellate ProcedurePDF
81 FR 95578 - City of Azusa, California; Notice of FilingPDF
81 FR 95577 - North Snake Ground Water District, Magic Valley Ground Water District, American Falls-Aberdeen Ground Water District, Bingham Ground Water District and Southwest Irrigation District (Districts); Notice of Application Accepted for Filing, Soliciting Comments, Motions To Intervene, and ProtestsPDF
81 FR 95584 - City of Colton, California; Notice of FilingPDF
81 FR 95579 - FPL Energy MH50, L.P.; Notice of Institution of Section 206 Proceeding and Refund Effective DatePDF
81 FR 95580 - Notice of Effectiveness of Exempt Wholesale Generator StatusPDF
81 FR 95580 - Kinder Morgan Louisiana Pipeline, LLC; Notice of ApplicationPDF
81 FR 95575 - Texas Eastern Transmission, LP; Notice of Intent To Prepare an Environmental Assessment for the Proposed Idle Line 1 Abandonment Project, and Request for Comments on Environmental IssuesPDF
81 FR 95584 - Combined Notice of Filings #2PDF
81 FR 95581 - Salt Lake City Corporation; Notice of Preliminary Determination of a Qualifying Conduit Hydropower Facility and Soliciting Comments and Motions To IntervenePDF
81 FR 95578 - Combined Notice of Filings #1PDF
81 FR 95575 - Notice of Filing of Self-Certification of Coal Capability Under the Powerplant and Industrial Fuel Use ActPDF
81 FR 95639 - Iron Construction Castings From Brazil, Canada, and ChinaPDF
81 FR 95729 - Reports, Forms and Record Keeping RequirementsPDF
81 FR 95477 - Approval and Promulgation of Implementation Plans; Louisiana; State BoardsPDF
81 FR 95550 - Approval and Promulgation of Implementation Plans; Louisiana; State BoardsPDF
81 FR 95729 - Agency Request for Renewal of a Previously Approved Information Collection: Requirements for Establishing U.S. Citizenship-46 CFR 355PDF
81 FR 95569 - New England Fishery Management Council; Public MeetingPDF
81 FR 95570 - New England Fishery Management Council; Public MeetingPDF
81 FR 95568 - Pacific Fishery Management Council; Public Meetings and HearingsPDF
81 FR 95571 - New England Fishery Management Council; Public MeetingPDF
81 FR 95656 - Information Collection: NRC Form 850A, “Request for NRC Contractor Building Access Authorization” NRC Form 850B, “Request for NRC Contractor Information Technology Access Authorization” NRC Form 850C, “Request for NRC Contractor Security Clearance”PDF
81 FR 95733 - Financial Crimes Enforcement Network; Bank Secrecy Act Advisory Group; Solicitation of Application for MembershipPDF
81 FR 95618 - Determination of Regulatory Review Period for Purposes of Patent Extension; IMLYGICPDF
81 FR 95721 - Notice of Determinations; Culturally Significant Objects Imported for Exhibition Determinations: “East of the Mississippi: Nineteenth-Century American Landscape Photography” ExhibitionPDF
81 FR 95721 - Notice of Determinations; Culturally Significant Objects Imported for Exhibition Determinations: “Lygia Pape” ExhibitionPDF
81 FR 95721 - Notice of Determinations; Culturally Significant Objects Imported for Exhibition Determinations: “Thomas Annan: Photographer of Glasgow” ExhibitionPDF
81 FR 95734 - Agency Information Collection Activity: (Knee and Lower Leg Conditions Disability Benefits Questionnaire (VA Form 21-0960M-9))PDF
81 FR 95734 - Agency Information Collection Activity: (Elbow and Forearm Conditions Disability Benefits Questionnaire (VA Form 21-0960M-4))PDF
81 FR 95735 - Agency Information Collection Activity: (Hip and Thigh Conditions Disability Benefits Questionnaire (VA Form 21-0960M-8))PDF
81 FR 95626 - Information Collection Request Sent to the Office of Management and Budget (OMB) for Approval; Electronic Duck Stamp ProgramPDF
81 FR 95669 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of an Advance Notice To Implement a Change to the Methodology Used in the MBSD VaR ModelPDF
81 FR 95664 - Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Require That an Issuer of Securities Listed Under Chapter 16 Notify IEX About Certain Changes to the Index, Portfolio, or Reference Asset Underlying the SecurityPDF
81 FR 95691 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Modifying the NYSE Amex Options Fee SchedulePDF
81 FR 95666 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Administrative Charges for Distributors of Proprietary Data Feed ProductsPDF
81 FR 95705 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules To Conform to the Commission's Proposed Amendment to Commission Rule 15c6-1(a) and the Industry-Led Initiative To Shorten the Standard Settlement Cycle for Most Broker-Dealer Transactions From T+3 to T+2PDF
81 FR 95713 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Rule 3220, Disruptive Quoting and Trading Activity Prohibited and Rule 12160, Expedited Suspension ProceedingPDF
81 FR 95679 - Self-Regulatory Organizations; NYSE MKT LLC; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Changes To Extend the Time Within Which a Member, Member Organization, an ATP Holder, an OTP Holder, or an OTP Firm Must File a Uniform Termination Notice for Securities Industry Registration (“Form U5”) and Any Amendments TheretoPDF
81 FR 95710 - Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adjust Qualifying Tier Thresholds and Fees and RebatesPDF
81 FR 95719 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 123D-Equities and the Listed Company ManualPDF
81 FR 95703 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay the Implementation of the Limit Order ProtectionPDF
81 FR 95699 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To (1) Change How Orders Would Be Processed When the Protected Best Bid (“PBB”) Is Higher Than the Protected Best Offer (“PBO”) (The “PBBO”) in Certain Circumstances, and (2) Adopt a Limit Order Price Protection MechanismPDF
81 FR 95676 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a Trading License Fee for Calendar Year 2017PDF
81 FR 95658 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to (1) Change How Orders Would be Processed When the Protected Best Bid (“PBB”) Is Higher Than the Protected Best Offer (“PBO”) (The “PBBO”) in Certain Circumstances, and (2) Adopt a Limit Order Price Protection MechanismPDF
81 FR 95677 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 123D and the Listed Company ManualPDF
81 FR 95693 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Market Data Section of Its Fee Schedule To Adopt Fees for BZX Summary Depth and Amend Fees for BZX DepthPDF
81 FR 95657 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delay the Implementation of the Limit Order Protection for Members Accessing PSXPDF
81 FR 95582 - Proposed Consolidated Information Collection Activities [FERC-725A(1B) and FERC-725Z]; Comment RequestPDF
81 FR 95432 - Civil Monetary Penalty Adjustments for InflationPDF
81 FR 95419 - Small Business Investment Companies: Passive Business Expansion and Technical ClarificationsPDF
81 FR 95663 - Transamerica Funds, et al.; Notice of ApplicationPDF
81 FR 95680 - Ares Capital Corporation, et al.; Notice of ApplicationPDF
81 FR 95690 - Virtus Alternative Solutions Trust, et al.; Notice of ApplicationPDF
81 FR 95573 - Proposed Collection; Comment RequestPDF
81 FR 95458 - Changes to Exchange Act Registration Requirements To Implement Title V and Title VI of the JOBS Act; CorrectionPDF
81 FR 95644 - Bulk Manufacturer of Controlled Substances Application: Cayman Chemical CompanyPDF
81 FR 95639 - Bulk Manufacturer of Controlled Substances Application: AMRI Rensselaer, Inc.PDF
81 FR 95647 - Bulk Manufacturer of Controlled Substances Application: Johnson Matthey Inc.PDF
81 FR 95640 - Bulk Manufacturer of Controlled Substances Application: Navinta LLCPDF
81 FR 95640 - Importer of Controlled Substances Application: Noramco, Inc.PDF
81 FR 95641 - Bulk Manufacturer of Controlled Substances RegistrationPDF
81 FR 95641 - Bulk Manufacturer of Controlled Substances Application: Synthcon, LLCPDF
81 FR 95570 - Meeting of the Columbia Basin Partnership Task Force of the Marine Fisheries Advisory CommitteePDF
81 FR 95560 - Agenda and Notice of Public Meeting of the Wyoming Advisory CommitteePDF
81 FR 95559 - Agenda and Notice of Public Meeting of the New Mexico Advisory CommitteePDF
81 FR 95558 - Agenda and Notice of Public Meeting of the Colorado Advisory CommitteePDF
81 FR 95560 - Notice of Public Meeting of the Minnesota Advisory Committee To Continue Preparations for a Public Hearing To Gather Testimony Regarding Civil Rights and Policing Practices in MinnesotaPDF
81 FR 95647 - Importer of Controlled Substances RegistrationPDF
81 FR 95644 - Importer of Controlled Substances Application: Wildlife Laboratories, Inc.PDF
81 FR 95644 - Bulk Manufacturer of Controlled Substances Application: Cambridge Isotope LaboratoriesPDF
81 FR 95632 - Notice of Proposed Addition of Thermal Features Within Valles Caldera National Preserve to the Geothermal Steam Act List of Significant Thermal Features Within Units of the National Park SystemPDF
81 FR 95652 - Submission for OMB Review; Comment RequestPDF
81 FR 95480 - State of Kentucky Underground Injection Control (UIC) Class II Program; Primacy ApprovalPDF
81 FR 95484 - State of Kentucky Underground Injection Control (UIC) Class II Program; Withdrawal of Primacy ApprovalPDF
81 FR 95614 - 2017 Privately Owned Vehicle (POV) Mileage Reimbursement Rates; 2017 Standard Mileage Rate for Moving PurposesPDF
81 FR 95722 - Projects Approved for Consumptive Uses of WaterPDF
81 FR 95551 - Change the RFS Point of Obligation; Extension of Comment PeriodPDF
81 FR 95556 - 2017 Rate Changes for the Basetime, Overtime, Holiday, and Laboratory Services RatesPDF
81 FR 95621 - Agency Information Collection Activities: Proposed Collection: Public Comment Request; Small Health Care Provider Quality Improvement ProgramPDF
81 FR 95628 - Endangered Species; Marine Mammals; Issuance of PermitsPDF
81 FR 95628 - Endangered Species; Marine Mammals; Receipt of Applications for PermitPDF
81 FR 95412 - Rules of Practice and ProcedurePDF
81 FR 95585 - Applicability Determination Index (ADI) Data System Recent Posting: Agency Applicability Determinations, Alternative Monitoring Decisions, and Regulatory Interpretations Pertaining to Standards of Performance for New Stationary Sources, National Emission Standards for Hazardous Air Pollutants, and the Stratospheric Ozone Protection ProgramPDF
81 FR 95738 - Notice of Proposed Withdrawal; California Desert Conservation Area and Notice of Intent To Prepare an Environmental Impact Statement; CaliforniaPDF
81 FR 95550 - Air Plan Approval; Illinois; Volatile Organic Compounds DefinitionPDF
81 FR 95475 - Air Plan Approval; Illinois; Volatile Organic Compounds DefinitionPDF
81 FR 95472 - Approval of California Air Plan Revisions, South Coast Air Quality Management DistrictPDF
81 FR 95473 - Approval of California Air Plan Revisions, Great Basin Unified Air Pollution Control DistrictPDF
81 FR 95485 - Methyl Isobutyrate and Isobutyl Isobutyrate; Exemption From the Requirement of a TolerancePDF
81 FR 95397 - Access to Federal Employees Health Benefits (FEHB) for Employees of Certain Indian Tribal EmployersPDF
81 FR 95615 - Agency Information Collection Activities: Submission for OMB Review; Comment RequestPDF
81 FR 95614 - Agency Information Collection Activities: Proposed Collection; Comment RequestPDF
81 FR 95551 - Solicitation of New Safe Harbors and Special Fraud AlertsPDF
81 FR 95553 - Corporate Average Fuel Economy Standards; CreditsPDF
81 FR 95489 - Civil PenaltiesPDF
81 FR 95435 - Fisheries of the Exclusive Economic Zone Off Alaska; Allow the Use of Longline Pot Gear in the Gulf of Alaska Sablefish Individual Fishing Quota Fishery; Amendment 101PDF
81 FR 95542 - Presidential RecordsPDF
81 FR 95547 - Office of Government Information ServicesPDF
81 FR 95496 - Recordkeeping Requirements for Qualified Financial ContractsPDF
81 FR 95459 - Definitions and Reporting Requirements for Shareholders of Passive Foreign Investment CompaniesPDF
81 FR 95430 - Amendment of Class E Airspace, Kahului, HIPDF
81 FR 95428 - Amendment of Class E Airspace, Blue Mesa, COPDF
81 FR 95431 - Amendment of Class E Airspace; Cedar City, UTPDF
81 FR 95427 - Establishment of Class E Airspace, Healy, AKPDF
81 FR 95810 - National Emission Standards for Hazardous Air Pollutants: Nutritional Yeast Manufacturing Risk and Technology ReviewPDF
81 FR 95538 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 95531 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 95536 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 95528 - Airworthiness Directives; M7 Aerospace LLC AirplanesPDF
81 FR 95425 - Airworthiness Directives; Sikorsky Aircraft CorporationPDF
81 FR 95758 - Energy Conservation Program: Test Procedure for Walk-in Coolers and Walk-in FreezersPDF

Issue

81 249 Wednesday, December 28, 2016 Contents Agriculture Agriculture Department See

Animal and Plant Health Inspection Service

See

Food Safety and Inspection Service

See

Rural Housing Service

Animal Animal and Plant Health Inspection Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Commercial Transportation of Equines for Slaughter, 95555-95556 2016-31416 Architectural Architectural and Transportation Barriers Compliance Board NOTICES Meetings, 95558 2016-31407 Army Army Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95573 2016-31254 Consumer Financial Protection Bureau of Consumer Financial Protection NOTICES Requests for Nominations: Consumer Advisory Board and Councils, 95571-95572 2016-31396 Census Bureau Census Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: 2017 National Survey of Children's Health, 95562-95565 2016-31414 2018 End-to-End Census Test: Post-Enumeration Survey Independent Listing Operation, 95561-95562 2016-31410 Centers Medicare Centers for Medicare & Medicaid Services NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95614-95616 2016-31183 2016-31185 Civil Rights Civil Rights Commission NOTICES Meetings: Colorado Advisory Committee, 95558-95559 2016-31275 Minnesota Advisory Committee, 95560-95561 2016-31274 New Mexico Advisory Committee, 95559-95560 2016-31276 Wyoming Advisory Committee, 95560 2016-31277 Coast Guard Coast Guard NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95625-95626 2016-31395 Commerce Commerce Department See

Census Bureau

See

Foreign-Trade Zones Board

See

International Trade Administration

See

National Oceanic and Atmospheric Administration

RULES Civil Monetary Penalty Adjustments for Inflation, 95432-95435 2016-31292
Court Court Services and Offender Supervision Agency for the District of Columbia NOTICES Senior Executive Service Performance Review Board, 95572-95573 2016-31376 Defense Department Defense Department See

Army Department

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95573-95574 2016-31287
Drug Drug Enforcement Administration NOTICES Bulk Manufacturers of Controlled Substances; Applications: AMRI Rensselaer, Inc., 95639-95640 2016-31284 Cambridge Isotope Laboratories, 95644 2016-31271 Cayman Chemical Co., 95644-95647 2016-31285 Johnson Matthey, Inc., 95647-95648 2016-31283 Navinta, LLC, 95640-95641 2016-31282 Synthcon, LLC, 95641-95644 2016-31279 Wildlife Laboratories, Inc., 95644 2016-31272 Bulk Manufacturers of Controlled Substances; Registrations: National Center for Natural Products Research, Cambrex Charles City, Chemtos, LLC, et al., 95641 2016-31280 Importers of Controlled Substances; Applications: Noramco, Inc., 95640 2016-31281 Importers of Controlled Substances; Registrations Rhodes Technologies, Bellwyck Clinical Services, Cerilliant Corp., et al., 95647 2016-31273 Education Department Education Department NOTICES Applications for New Awards: Magnet Schools Assistance Program, 95574-95575 2016-31418 Energy Department Energy Department See

Federal Energy Regulatory Commission

RULES Energy Conservation Programs: Test Procedure for Walk-in Coolers and Walk-in Freezers, 95758-95807 2016-29708 NOTICES Self-Certification of Coal Capability under Powerplant and Industrial Fuel Use Act, 95575 2016-31336
Environmental Protection Environmental Protection Agency RULES Air Quality State Implementation Plans; Approvals and Promulgations: California; Air Plan Revisions, Great Basin Unified Air Pollution Control District, 95473-95475 2016-31225 California; Air Plan Revisions, South Coast Air Quality Management District, 95472-95473 2016-31226 Illinois; Volatile Organic Compounds Definition, 95475-95477 2016-31227 Louisiana; State Boards, 95477-95480 2016-31332 Pesticide Tolerances; Exemptions: Methyl Isobutyrate and Isobutyl Isobutyrate, 95485-95489 2016-31215 Primacy Approvals: State of Kentucky Underground Injection Control Class II Program, 95480-95484 2016-31268 State of Kentucky Underground Injection Control Class II Program; Withdrawal, 95484 2016-31267 PROPOSED RULES Air Quality State Implementation Plans; Approvals and Promulgations: Illinois; Volatile Organic Compounds Definition, 95550 2016-31230 Louisiana; State Boards, 95550-95551 2016-31331 Change RFS Point of Obligation, 95551 2016-31259 National Emission Standards: Hazardous Air Pollutants; Nutritional Yeast Manufacturing Risk and Technology Review, 95810-95846 2016-30645 NOTICES Applicability Determination Index Data System: Agency Applicability Determinations, Alternative Monitoring Decisions, and Regulatory Interpretations Pertaining to Standards of Performance, etc., 95585-95591 2016-31235 Federal Accounting Federal Accounting Standards Advisory Board NOTICES Exposure Drafts: Budget and Accrual Reconciliation: Amending Statement of Federal Financial Accounting Standards 7, 22, and 24, 95592 2016-31399 Meetings: Schedule for 2017, 95591-95592 2016-31378 Federal Aviation Federal Aviation Administration RULES Airworthiness Directives: Sikorsky Aircraft Corporation, 95425-95427 2016-30282 Class E Airspace, Amendments: Cedar City, UT, 95431-95432 2016-30649 Class E Airspace; Amendments: Blue Mesa, CO, 95428-95430 2016-30651 Kahului, HI, 95430-95431 2016-30655 Class E Airspace; Establishments: Healy, AK, 95427-95428 2016-30648 PROPOSED RULES Airworthiness Directives: Airbus Airplanes, 95531-95536, 95538-95541 2016-30610 2016-30611 M7 Aerospace LLC Airplanes, 95528-95531 2016-30292 The Boeing Company Airplanes, 95536-95538 2016-30419 Federal Deposit Federal Deposit Insurance Corporation RULES Rules of Practice and Procedure, 95412-95419 2016-31240 PROPOSED RULES Recordkeeping Requirements for Qualified Financial Contracts, 95496-95528 2016-30734 Federal Energy Federal Energy Regulatory Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95582-95584 2016-31294 Applications: Kinder Morgan Louisiana Pipeline, LLC, 95580 2016-31342 Combined Filings, 95578-95579, 95584 2016-31338 2016-31340 Effectiveness of Exempt Wholesale Generator Status: Pioneer Wind Park I, LLC; Cimarron Bend WindProject II, LLC; et al., 95580-95581 2016-31343 Environmental Assessments; Availability, etc.: Texas Eastern Transmission, LP; Idle Line 1 Abandonment Project, 95575-95577 2016-31341 Filings: City of Azusa, CA, 95578 2016-31347 City of Colton, CA, 95584 2016-31345 Hydroelectric Applications: North Snake Ground Water District, Magic Valley Ground Water District, American Falls-Aberdeen Ground Water District, Bingham Ground Water District and Southwest Irrigation District, 95577-95578 2016-31346 Qualifying Conduit Hydropower Facilities: Salt Lake City Corp., 95581-95582 2016-31339 Refund Effective Dates: FPL Energy MH50, L.P., 95579-95580 2016-31344 Federal Housing Finance Agency Federal Housing Finance Agency NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95592-95612 2016-31383 2016-31386 2016-31389 Privacy Act; Systems of Records, 95595-95596 2016-31381 Federal Maritime Federal Maritime Commission NOTICES Petitions: Coalition for Fair Port Practices, 95612 2016-31356 Federal Motor Federal Motor Carrier Safety Administration NOTICES Meetings; Sunshine Act, 95729 2016-31551 Federal Reserve Federal Reserve System NOTICES Changes in Bank Control: Acquisitions of Shares of a Bank or Bank Holding Company, 95612 2016-31360 Formations of, Acquisitions by, and Mergers of Bank Holding Companies, 95613-95614 2016-31361 Regulatory Capital Rules: Risk-Based Capital Surcharges for Global Systemically Important Bank Holding Companies, 95612-95613 2016-31371 Financial Crimes Financial Crimes Enforcement Network NOTICES Requests for Nominations: Bank Secrecy Act Advisory Group, 95733-95734 2016-31323 Fish Fish and Wildlife Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Electronic Duck Stamp Program, 95626-95628 2016-31313 Permit Applications: Endangered Species; Marine Mammals, 95628-95630 2016-31241 2016-31242 Food and Drug Food and Drug Administration NOTICES Determinations of Regulatory Review Periods for Purposes of Patent Extensions: IMLYGIC, 95618-95620 2016-31322 Guidance: Postmarket Management of Cybersecurity in Medical Devices, 95617-95618 2016-31406 Meetings: Pharmaceutical Science and Clinical Pharmacology Advisory Committee; Correction, 95620 2016-31391 Food Safety Food Safety and Inspection Service NOTICES 2017 Rate Changes for Basetime, Overtime, Holiday, and Laboratory Services Rates, 95556-95557 2016-31255 Foreign Trade Foreign-Trade Zones Board NOTICES Production Activities: Gulf Island Shipyards, LLC (Shipbuilding) Houma, LA; Foreign-Trade Zone 279, Terrebonne Parish, LA, 95565-95566 2016-31402 General Services General Services Administration NOTICES 2017 Privately Owned Vehicle Mileage Reimbursement Rates: Standard Mileage Rate for Moving Purposes, 95614 2016-31264 Health and Human Health and Human Services Department See

Centers for Medicare & Medicaid Services

See

Food and Drug Administration

See

Health Resources and Services Administration

See

Inspector General Office, Health and Human Services Department

NOTICES Guidance: Closed-Circuit Escape Respirators, 95623-95625 2016-31393 Statement of Organization, Functions and Delegations of Authority, 95622-95623 2016-31394
Health Resources Health Resources and Services Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Evaluation and Assessment of HRSA Teaching Health Centers, 95620-95621 2016-31353 Small Health Care Provider Quality Improvement Program, 95621-95622 2016-31253 Homeland Homeland Security Department See

Coast Guard

Inspector General Health Inspector General Office, Health and Human Services Department PROPOSED RULES Solicitation of New Safe Harbors and Special Fraud Alerts, 95551-95553 2016-31170 Interior Interior Department See

Fish and Wildlife Service

See

Land Management Bureau

See

National Park Service

Internal Revenue Internal Revenue Service RULES Definitions and Reporting Requirements for Shareholders of Passive Foreign Investment Companies, 95459-95470 2016-30712 United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in Active Conduct of Trade or Business, 95470-95471 2016-31364 United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in Active Conduct of Trade or Business: Correction, 95471-95472 2016-31411 PROPOSED RULES United States Property Held by Controlled Foreign Corporations through Partnerships with Special Allocations: Correction, 95541-95542 2016-31358 International Trade Adm International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Multilayered Wood Flooring from People's Republic of China; Preliminary Results and Partial Rescission of Antidumping Duty New Shipper Reviews; 2014-2015, 95566-95568 2016-31354 International Trade Com International Trade Commission NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Iron Construction Castings from Brazil, Canada, and China, 95639 2016-31335 Judicial Conference Judicial Conference of the United States NOTICES Hearings: Advisory Committee on Federal Rules of Appellate Procedure; Cancellation, 95639 2016-31349 Justice Department Justice Department See

Drug Enforcement Administration

Labor Department Labor Department See

Occupational Safety and Health Administration

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Medical Travel Refund Request, 95649-95650 2016-31385 Request for State or Federal Workers' Compensation Information, 95648-95649 2016-31387 Survivor's Form for Benefits under Black Lung Benefits Act, 95650 2016-31384
Land Land Management Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95630-95631 2016-31419 Meetings: Dominguez-Escalante National Conservation Area Advisory Council, 95631-95632 2016-31374 Resource Advisory Council to Boise District, 95631 2016-31369 Proposed Withdrawals of Public Lands: California Desert Conservation Area, 95738-95755 2016-31231 Maritime Maritime Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Requirements for Establishing U.S. Citizenship, 95729 2016-31330 National Archives National Archives and Records Administration See

Office of Government Information Services

PROPOSED RULES Presidential Records, 95542-95547 2016-31011
National Credit National Credit Union Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 95652-95653 2016-31269 National Highway National Highway Traffic Safety Administration RULES Civil Penalties, 95489-95492 2016-31136 PROPOSED RULES Corporate Average Fuel Economy Standards; Credits, 95553-95554 2016-31140 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Reports, Forms and Record Keeping Requirements, 95729-95731 2016-31333 Petitions for Decisions of Inconsequential Noncompliance: Ford Motor Co., 95731-95733 2016-31405 National Oceanic National Oceanic and Atmospheric Administration RULES Fisheries of the Exclusive Economic Zone Off Alaska: Allowable Use of Longline Pot Gear in Gulf of Alaska Sablefish Individual Fishing Quota Fishery; Amendment 101, 95435-95458 2016-31057 Fisheries of the Northeastern United States: Atlantic Herring Fishery; Adjustments to 2017 Management Area Annual Catch Limits, 95494-95495 2016-31392 Northeast Multispecies Fishery; Possession and Trip Limit Modifications for the Common Pool Fishery, 95492-95493 2016-31403 NOTICES Meetings: Marine Fisheries Advisory Committee Columbia Basin Partnership Task Force, 95570 2016-31278 New England Fishery Management Council, 95569-95571 2016-31325 2016-31327 2016-31328 Pacific Fishery Management Council, 95568-95569 2016-31326 National Park National Park Service NOTICES Thermal Features; Proposed Additions: Valles Caldera National Preserve to Geothermal Steam Act List of Significant Thermal Features within Units of National Park System, 95632-95639 2016-31270 Nuclear Regulatory Nuclear Regulatory Commission RULES Rulemaking Activities Being Discontinued by NRC, 95410-95412 2016-31372 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Reporting of Defects and Noncompliance, 95653-95654 2016-31404 Request for NRC Contractor Building Access Authorization; Request for NRC Contractor Information Technology Access Authorization; Request for NRC Contractor Security Clearance, 95656-95657 2016-31324 Environmental Assessments; Availability, etc.: ZionSolutions, LLC, Zion Nuclear Power Station, Units 1 and 2, 95654-95655 2016-31377 Guidance: Aquatic Environmental Studies for Nuclear Power Stations, 95655-95656 2016-31375 Occupational Safety Health Adm Occupational Safety and Health Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Nationally Recognized Testing Laboratory Program, 95650-95652 2016-31351 OGIS Office of Government Information Services PROPOSED RULES Office of Government Information Services, 95547-95550 2016-31010 Personnel Personnel Management Office RULES Federal Employees Health Benefits Program: Employees of Certain Indian Tribal Employers, 95397-95410 2016-31195 Presidential Documents Presidential Documents ADMINISTRATIVE ORDERS Committees; Establishment, Renewal, Termination, etc.: Supporting New American Service Members, Veterans, and Their Families, 95847-95851 2016-31690 Rural Housing Service Rural Housing Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Community Facility Loans, 95557-95558 2016-31409 Securities Securities and Exchange Commission RULES Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of JOBS Act: Technical Correction, 95458 2016-31286 NOTICES Applications: Ares Capital Corp., et al., 95680-95690 2016-31289 Transamerica Funds, et al., 95663-95664 2016-31290 Virtus Alternative Solutions Trust, et al., 95690-95691 2016-31288 Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc., 95693-95699 2016-31298 BOX Options Exchange, LLC, 95713-95719 2016-31307 Financial Industry Regulatory Authority, Inc., 95705-95710 2016-31308 Fixed Income Clearing Corp., 95669-95676 2016-31312 Investors Exchange, LLC, 95664-95666 2016-31311 ISE Gemini, LLC, 95710-95713 2016-31305 NASDAQ PHLX, LLC, 95657-95658 2016-31297 NASDAQ Stock Market, LLC, 95666-95669, 95703-95704 2016-31303 2016-31309 New York Stock Exchange, LLC, 95658-95663, 95676-95679 2016-31299 2016-31300 2016-31301 NYSE MKT, LLC, 95691-95693, 95699-95703, 95719-95721 2016-31302 2016-31304 2016-31310 NYSE MKT, LLC; NYSE Arca, Inc., 95679-95680 2016-31306 Small Business Small Business Administration RULES Small Business Investment Companies: Passive Business Expansion and Technical Clarifications, 95419-95425 2016-31291 State Department State Department NOTICES Culturally Significant Objects Imported for Exhibition: East of Mississippi: Nineteenth-Century American Landscape Photography, 95721 2016-31321 Lygia Pape, 95721 2016-31320 Thomas Annan: Photographer of Glasgow, 95721 2016-31319 Susquehanna Susquehanna River Basin Commission NOTICES Projects Approved for Consumptive Uses of Water, 95722 2016-31260 Trade Representative Trade Representative, Office of United States NOTICES Meetings: 2017 Special 301 Review: Identification of Countries under Section 182 of Trade Act of 1974, 95722-95724 2016-31379 Regarding Request to Reinstate Action Taken in Connection with European Union's Measures Concerning Meat and Meat Products, 95724-95729 2016-31352 Transportation Department Transportation Department See

Federal Aviation Administration

See

Federal Motor Carrier Safety Administration

See

Maritime Administration

See

National Highway Traffic Safety Administration

Treasury Treasury Department See

Financial Crimes Enforcement Network

See

Internal Revenue Service

Veteran Affairs Veterans Affairs Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Elbow and Forearm Conditions Disability Benefits Questionnaire, 95734-95735 2016-31317 Hip and Thigh Conditions Disability Benefits Questionnaire, 95735 2016-31316 Knee and Lower Leg Conditions Disability Benefits Questionnaire, 95734 2016-31318 Separate Parts In This Issue Part II Interior Department, Land Management Bureau, 95738-95755 2016-31231 Part III Energy Department, 95758-95807 2016-29708 Part IV Environmental Protection Agency, 95810-95846 2016-30645 Part V Presidential Documents, 95847-95851 2016-31690 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.

To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription.

81 249 Wednesday, December 28, 2016 Rules and Regulations OFFICE OF PERSONNEL MANAGEMENT 5 CFR Part 890 RIN 3206-AM40 Access to Federal Employees Health Benefits (FEHB) for Employees of Certain Indian Tribal Employers AGENCY:

Office of Personnel Management.

ACTION:

Final rule.

SUMMARY:

This final rule makes Federal employee health insurance accessible to employees of certain Indian tribal entities. Section 409 of the Indian Health Care Improvement Act (codified at 25 U.S.C. 1647b) authorizes Indian tribes, tribal organizations, and urban Indian organizations that carry out certain programs to purchase coverage, rights, and benefits under the Federal Employees Health Benefits (FEHB) Program for their employees. Tribal employers and tribal employees will be responsible for the full cost of benefits, plus an administrative fee.

DATES:

The final rule is effective February 27, 2017.

FOR FURTHER INFORMATION CONTACT:

Padma Shah, Senior Policy Analyst at (202) 606-0004.

SUPPLEMENTARY INFORMATION:

The Office of Personnel Management (OPM) is issuing a final rule to extend coverage, rights, and benefits under the Federal Employees Health Benefits (FEHB) Program to certain employees of certain Indian tribal employers.

Section 10221 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) incorporated, amended, and enacted the entire text of S. 1790 as reported on December 16, 2009 by the Senate Committee on Indian Affairs. Bill S. 1790 revised and extended the Indian Health Care Improvement Act (IHCIA), including adding a new section 409. Under IHCIA section 409, an Indian tribe or tribal organization carrying out programs under the Indian Self-Determination and Education Assistance Act (ISDEAA), or an urban Indian organization carrying out programs under title V of IHCIA, is entitled to purchase coverage, rights, and benefits under the FEHB Program for their employees.

In 2011 and 2012, OPM consulted with tribal groups to develop sub-regulatory guidance 1 relating to IHCIA section 409. Tribal employers began purchasing FEHB coverage, rights, and benefits for their employees on March 22, 2012, with an insurance coverage effective date of May 1, 2012.

1 Available at https://www.opm.gov/healthcare-insurance/tribal-employers/reference-materials/.

On August 31, 2016, OPM issued a Notice of Proposed Rulemaking (NPRM) (81 FR 59907) codifying previously issued guidance to adopt the FEHB Program, as set forth in 5 U.S.C. chapter 89 and its implementing regulations, for employees of certain tribal employers with slight variations to meet the needs of the tribal population (the Tribal FEHB Program). OPM proposed to amend title 5 of the Code of Federal Regulations (CFR) part 890 to add new subpart N, setting forth the conditions for coverage, rights, and benefits under the FEHB Program for employees of certain Indian tribal employers. The proposed rule had a 60 day comment period during which OPM received 2 comments. This final rule adopts subpart N, as proposed, with one clarification as noted below.

Responses to Comments on the Proposed Rule

OPM received comments from two tribal employers that have elected to participate in the FEHB Program.

One commenter expressed concern about the lack of consultation with a specific tribal entity, on the same basis as Indian tribes under Executive Order No. 13175, prior to the publication of the NPRM.

OPM has engaged in regular and meaningful consultation and collaboration with all tribal officials, including a representative from this specific tribal entity during the tribal consultative process in 2011 and 2012.

OPM published a series of policy papers 2 regarding the implementation of the Tribal FEHB Program. Tribes, tribal organizations, and urban Indian organizations were given an opportunity to provide feedback on these papers at outreach events and tribal conferences and meetings. Written feedback was also accepted.

2 Available at https://www.opm.gov/healthcare-insurance/tribal-employers/hr-personnel/outreach-documents/outreach-documents-archive/.

A Tribal Technical Workgroup 3 was established to support the implementation of the Tribal FEHB Program and was composed of tribal human resource representatives and OPM operational and policy staff. The primary purpose of the workgroup was to ensure system requirements for enrollment processing were completed according to the needs of tribal employers.

3 Available at https://www.opm.gov/healthcare-insurance/tribal-employers/hr-personnel/#url=Work-Group.

OPM representatives have attended more than 20 tribal conferences and meetings to provide information and consultation about the Tribal FEHB Program since its inception. In addition, OPM has hosted training sessions for interested tribes and tribal organizations on numerous occasions.

Tribal Benefits Administration Letters (TBAL) are released and distributed to participating tribal employers regularly, just as they are for Federal agencies. Questions following the release of a TBAL are directed to OPM's dedicated Tribal Desk. The Tribal Desk is available during regular business hours and questions are answered by OPM staff who administer the program. OPM has created direct lines of communication and fostered collaboration between tribal employers and OPM employees.

When important program changes occur, OPM issues Dear Tribal Leader Letters (DTLL) to notify tribes, tribal organizations and urban Indian organizations. An example was the DTLL 4 issued describing the revision of the original “all-or-nothing” policy. The original policy had required a tribal employer to enroll all of their billing units. Due to concerns raised by tribal employers, OPM amended that policy to allow tribal employers to select which of their billing units will receive FEHB and which will not. As a result, interest in FEHB enrollment has increased.

4 Available at https://www.opm.gov/healthcare-insurance/tribal-employers/hr-personnel/outreach-documents/tribal-leader-letter-2014.pdf.

OPM views its ongoing engagement with tribal employers, participating in the FEHB Program, as a form of consultation. OPM also considers the public comment period for the NPRM as an important consultation period. Upon publication of the NPRM, OPM sent an email message to all Tribal Benefits Officers alerting them of the publication of the proposed rule and the process for submitting formal comments. A DTLL will also be issued in tandem with the publication of this final rule. OPM will continue to provide assistance to tribal employers even after the final rule is in effect.

OPM also believes that steady enrollment increases in the Tribal FEHB Program, with an average of about 25 percent per year since the first year, is another indicator suggesting that tribal employers and employees are satisfied with current policies, now codified in this final rule.

A second commenter was generally pleased with the proposed rule, but made two recommendations. First, the commenter recommended that OPM reconsider the limitation at § 890.1407(a) prohibiting tribal employers from accessing FEHB if the tribal employer contributes toward an alternative employer-sponsored health insurance plan (e.g., tribal self-insured coverage) for tribal employees within the billing unit(s) for which the employer seeks to purchase coverage, with the exception of a collectively bargained alternative plan. The commenter noted that, in certain instances, there may be limitations in FEHB plans related to network adequacy, cultural competency, contracting issues, or other health reasons. In order to keep tribal employees' plan options and participation rules aligned with those of Federal employees and maintain the stability of the FEHB risk pool, we decline to adopt the commenter's first recommendation.

A second recommendation by the commenter was a suggestion that OPM waive FEHB co-payments for tribal employees when they are served by health programs operated by the Indian Health Service (IHS), Indian tribes, tribal organizations, and urban Indian organizations (as those terms are defined in § 1603 of the IHCIA). The commenter also requested OPM require FEHB plans pay the cost of co-payments if a tribal employee is furnished an item or service directly by the IHS, an Indian tribe, tribal organization, or urban Indian organization. To support its recommendations, the commenter references § 1402(d) of the Patient Protection and Affordable Care Act. However, this provision relates to individual coverage in the health insurance exchanges and not employer-sponsored insurance such as FEHB. Therefore, the regulatory text has not been changed.

Changes From the Proposed Rule

OPM is clarifying that different portions of a tribal employer's payment are credited in different ways. One portion of a tribal employer's payment consists of the premium payment, i.e., the sum of the tribal employer's share of premium plus the tribal employees' share of premium due for the enrollment, in the aggregate, of the tribal employer's tribal employees. A second portion of the tribal employer's payment consists of the administrative fee. OPM clarifies that only the premium payment is deposited to the Employees Health Benefits Fund. Accordingly, OPM has revised §§ 890.1403, 890.1410(f), and 890.1413(d) and (e).

OPM is also revising § 890.1407 to express existing policy more clearly: A tribal employer may neither contribute towards, nor offer, an alternative employer-sponsored health insurance plan for tribal employees within the billing unit(s) for which the employer seeks to purchase FEHB coverage, with the exception of a collectively bargained alternative plan.

OPM is also making a technical correction to § 890.1404 by moving language appearing previously in subparagraph (e)(2) to new paragraph (f).

Finally, OPM is correcting a typographical error at § 890.1411(c) by changing the term “following” to “follows.”

Provisions of the Final Rule

This final rule establishes how FEHB enrollment under the Tribal FEHB Program will be administered, including eligibility, tribal employer and tribal employee contribution to premiums, the process by which tribal employers will access the program, the process by which tribal employees will elect coverage, and circumstances for termination and cancellation of enrollment. Where practicable, this regulation provides for the administration of benefits by and for tribal employers and tribal employees in the same manner as these benefits are administered by and for Federal agencies and Federal employees. There may be some instances for which there is no established procedure in place for the Federal Government, such as the procedure and timeline by which tribal employers certify entitlement to purchase FEHB. When there are no established procedures in place, OPM has established a procedure.

Definitions

Section 890.1402 defines several terms used in the new subpart N of part 890. This section also includes a series of deemed references. Defining these terms and identifying deemed references are necessary to make clear how OPM will modify and apply existing regulations to govern tribal employers' purchase of FEHB for tribal employees.

This final rule refers to tribes, tribal organizations, and urban Indian organizations that are entitled to access insurance under IHCIA section 409 as “tribal employers.” Moreover, because the term “employee” as used in 5 U.S.C. chapter 89 is a statutorily defined term, OPM refers to a tribal employer's employees who are eligible to enroll in FEHB as “tribal employees.” 5

5 The Department of Labor has advised that a tribal employer entitled under IHCIA section 409 to purchase coverage, rights, and benefits under the FEHB Program for its employees does not “establish or maintain” an employee welfare benefit plan subject to title I of the Employee Retirement Income Security Act (ERISA) as a result of such a purchase in a manner consistent with the FEHB statute and this final rule. The Department of Labor has also advised that the enrollment of tribal employees in FEHB coverage pursuant to such a purchase does not affect the status of the FEHB as a governmental plan for purposes of the exemption from Title I of ERISA at 29 U.S.C. 1003(b)(1). In addition, the Department of the Treasury and the Internal Revenue Service have advised that such enrollment of tribal employees in FEHB coverage does not affect the status of the FEHB as a governmental plan within the meaning of 26 U.S.C. 9832(d)(2).

The new subpart N refers to and incorporates many other subparts of part 890 that govern how the FEHB Program functions. The deemed references make it clear that references to statutory terms such as “employee” and other terms used throughout part 890 will be deemed references to “tribal employee” and other terms, as appropriate, in context, to govern tribal employers' purchase of FEHB for its tribal employees.

Scope of Entitlement for Tribal Employers

Entitlement to offer FEHB coverage, rights, and benefits will be available to any tribe, tribal organization, or urban Indian organization carrying out at least one of the programs under the ISDEAA or title V of the IHCIA as specified in section 409 of the IHCIA. The terms “tribe,” “tribal organization,” and “urban Indian organization” are defined in the IHCIA. Those definitions, set forth below, are incorporated by reference in the regulatory text at § 890.1402, which defines the term “tribal employer.” The term “tribal employer” is used to refer to any of these entities that fulfill the requirements to be entitled to purchase FEHB for its employees.

A tribe is any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or group or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688) [43 U.S.C.A. 1601 et seq.], which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. 25 U.S.C. 1603(14).

A tribal organization is the recognized governing body of any Indian tribe; any legally established organization of Indians which is controlled, sanctioned, or chartered by such governing body or which is democratically elected by the adult members of the Indian community to be served by such organization and which includes the maximum participation of Indians in all phases of its activities: That in any case in which a contract is let or grant made to an organization to perform services benefiting more than one Indian tribe, the approval of each such Indian tribe shall be a prerequisite to the letting or making of such contract or grant. 25 U.S.C. 1603(26), incorporating by reference 25 U.S.C. 450b(l) (definition of “tribal organization”).

An urban Indian organization is a non-profit corporate body situated in an urban center, governed by an urban Indian controlled board of directors, and providing for the maximum participation of all interested Indian groups and individuals, which body is capable of legally cooperating with other public and private entities for the purpose of performing the activities described in section 1653(a) of this title. 25 U.S.C. 1603(29).

For purposes of this regulation, tribes and tribal organizations carrying out at least one program under the ISDEAA, and urban Indian organizations carrying out at least one program under title V of the IHCIA, are entitled to purchase FEHB for their employees. If the tribal employer ceases to carry out one of these programs, entitlement to purchase FEHB ceases at the end of the calendar year in which the tribal employer ceased to carry out one of those programs.

If OPM determines that a tribal employer is not entitled to purchase FEHB, the tribal employer may appeal that decision to OPM. OPM retains sole authority for deciding entitlement.

Eligible Tribal Employees

OPM has defined the term “tribal employee” in § 890.1402 broadly to mean a common law employee of a tribal employer. This section incorporates the regulatory standard under the Federal employment tax regulations (which, for this purpose, includes Federal Insurance Contributions Act tax and Federal income tax withholding) that generally provide that an individual is a common law employee if the tribal employer has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. This determination is based on all the facts and circumstances. The section then indicates that this determination is to be guided by a list of 20 factors 6 developed by the Internal Revenue Service (IRS), or any future guidance the IRS releases related to the common law employee relationship for Federal employment tax purposes. Because OPM expects tribal employers to treat tribal employees consistently for purposes of Federal employment taxation and access to Federal insurance, the tribal employer's determination of common law employee status for purposes of eligibility for FEHB must be consistent with any determination of common law employee status made by the tribal employer for Federal employment tax purposes.

6 See Rev. Rul. 87-41, 1987-1 C.B. 296 and reference in Joint Committee on Taxation report JCX-26-07 “Present Law and Background Relating to Worker Classification for Federal Tax Purposes,” dated May 7, 2007 http://www.irs.gov/pub/irs-utl/x-26-07.pdf.

OPM recognizes that there may be cases in which a tribal employer has determined that a worker is not a common law employee for purposes of establishing a Federal employment tax obligation, and the tribal employer meets all the requirements for relief from Federal employment taxes under § 530 of the Revenue Act of 1978 with respect to such worker. Under these circumstances, as long as the tribal employer continues to meet the requirements for such relief, OPM will defer to the tribal employer's reasonable determination that its worker is not a common law employee for purposes of eligibility to enroll in FEHB.

OPM recognizes that there may be very limited cases in which a tribal employer has determined that a worker is a common law employee but has also determined that no Federal employment taxes are due with respect to the worker. Under these circumstances, OPM will defer to the tribal employer's reasonable determination that the worker is a common law employee for purposes of eligibility to enroll in FEHB.

Each tribal employer entitled to access Federal insurance will be able to offer FEHB coverage, rights, and benefits to all of its tribal employees, not just those carrying out functions under the ISDEAA or IHCIA title V programs. OPM has determined that tribal employees (who, by definition, are common law employees) engaged in governmental or commercial operations, such as casino or hospitality operations, will be eligible to enroll in FEHB if it is purchased by their tribal employer. As discussed below, individuals who retire from employment with a tribal employer lose their status as tribal employees upon retirement and their enrollment will terminate.

A tribal employer carrying out programs under the ISDEAA or title V of the IHCIA may purchase FEHB for employees of one or more billing units carrying out programs or activities under their contract. Once a tribal employer has enrolled at least one billing unit carrying out programs or activities under ISDEAA or IHCIA, the tribal employer may enroll one or more billing units that are not carrying out programs or activities under ISDEAA or IHCIA. Section 890.1405 establishes that all eligible full-time and part-time tribal employees of each participating billing unit of a tribal employer must be offered the opportunity to enroll in FEHB. Intermittent, seasonal, and temporary tribal employees will be treated similarly to intermittent, seasonal and temporary Federal employees. However, under § 890.102(k), the tribal employer may choose not to extend coverage to certain intermittent, seasonal, and temporary employees if written notification is provided to the Director of OPM.

Tribal employers may not segment tribal employee populations by offering a different set of health benefits to different groups of tribal employees within a single billing unit. An exception to this rule is if tribal employees within a billing unit are offered alternative coverage as part of a collective bargaining agreement.

Coverage of Family Members

As described in § 890.1405(e), family members of tribal employees will be eligible for coverage in FEHB under substantially the same terms as family members of Federal employees. One exception is that former spouses of tribal employees may not enroll in FEHB under the Civil Service Retirement Spouse Equity Act. This is because Spouse Equity coverage is linked to the former spouse's entitlement to a portion of a Federal employee's annuity. Another exception is that if the tribal employee dies while employed, a surviving spouse cannot continue FEHB enrollment or enroll in his or her own right, unless the surviving spouse is also FEHB-eligible through his or her employment. This is because continuing FEHB eligibility for surviving spouses of Federal employees is linked to a survivor annuity.

Section 890.1406 states that correction of enrollment errors will take place according to the same terms as for Federal employees. Requirements for tribal employees' appeals of eligibility and enrollment decisions are described in § 890.1415.

Tribal Employer and Tribal Employee Contributions and Administrative Fee

Section 890.1403 explains that a tribal employer is entitled to purchase FEHB if premium payments are currently deposited in the Employees Health Benefits Fund, as required by the authorizing statute, and if it timely pays administrative fees. This section provides that a premium payment will be considered “currently deposited” if it is received by the Employees Health Benefits Fund before, during, or within fourteen days after the end of the calendar month covered by the premium payment. Likewise, an administrative fee will be considered “timely paid” if it is received before, during, or within fourteen days after the end of the calendar month covered by the administrative fee.

Section 890.1413 describes how payments will work for tribal employers participating in FEHB. Tribal employer and tribal employee contributions for FEHB will be handled similarly for tribal employees as for Federal employees, with the tribal employer responsible for contributing a share of premium that is at least equivalent to the share of premium that the Federal Government contributes for Federal employees. The percentage contribution requirements are described in 5 U.S.C. 8906. The FEHB contributions for part-time tribal employees working between 16 and 32 hours per week may be pro-rated in accordance with the terms applicable to part-time Federal employees. FEHB enrollment for tribal employees on unpaid leave may be continued in a manner similar to Federal employees on unpaid leave under § 890.502(b), as long as the full premium is paid.

The tribal employer's FEHB contribution percentage must equal or exceed the contribution that the Federal Government would make each month for a Federal employee for the same plan. Tribal employers may elect to pay a greater tribal employer contribution, but may not pay a lesser amount than the Federal Government contribution for each plan. There is no cap on the percentage of premium that a tribal employer may contribute. The tribal employer may vary the contribution by type of enrollment (self only, self plus one, self and family) but must treat tribal employees in a uniform manner. As an example, a tribal employer could contribute 100 percent for all tribal employees in self only or self plus one enrollments and 90 percent for all tribal employees in self and family enrollments. Tribal employers may not vary the tribal employer contribution in order to encourage or discourage enrollment in any particular plan or plan option. Tribal employers may choose to vary the contribution amounts for each billing unit, provided each billing unit meets the requirements set forth above.

In addition, the tribal employer is required to pay an administrative fee, in an amount set by OPM each year, for each tribal employee's enrollment on a monthly basis. This fee covers the costs of a paymaster to perform the collection and remittance functions that is performed for Federal employees by Federal payroll offices. The paymaster is the entity designated by OPM as responsible for receiving FEHB premiums from the tribal employer, forwarding premiums to the Employees Health Benefits Fund, and maintaining enrollment records for all participating tribal employers. Tribal employers may not charge this fee to tribal employees. The total aggregate amount for tribal employees' and tribal employer's share of the premium, and the administrative fee must be available for receipt by the paymaster on an agreed upon date set in the agreement with the tribal employer.

Tribal Employers' Entitlement and Election to Purchase FEHB

Section 890.1404 establishes a process by which tribal employers may demonstrate entitlement and elect to purchase FEHB for their tribal employees. The tribal employer must notify OPM by email or telephone of the intention to purchase FEHB. Through an agreement described in § 890.1404(b), OPM will confirm the following:

(1) The tribal employer's contact information;

(2) The date that FEHB coverage will begin;

(3) The approximate number of tribal employees eligible to enroll;

(4) The tribal employer's agreement not to make available to FEHB-eligible tribal employees alternate tribal employer-sponsored health insurance coverage concurrent with FEHB;

(5) The tribal employer is entitled to participate in FEHB by carrying out at least one program under ISDEAA or title V of IHCIA;

(6) The tribal employer's acknowledgement that participation in FEHB makes the tribal employer subject to Federal Government audit with respect to such participation and to OPM authority to direct the administration of the program;

(7) The tribal employer's agreement to establish or identify an independent dispute resolution panel to adjudicate appeals of determinations made by a tribal employer regarding an individual's status as a tribal employee;

(8) The tribal employer's agreement to supply necessary enrollment information, payment of the tribal employer and tribal employee share of premium and payment of an administrative fee to the paymaster;

(9) The tribal employer's agreement to notify OPM in the event that the tribal employer is no longer carrying out at least one program under the ISDEAA or title V of IHCIA; and

(10) The tribal employer's agreement to abide by other terms and conditions of participation.

Section 890.1404(c) allows a tribal employer to elect to purchase FEHB at any time. The election to purchase FEHB will commit the tribal employer to purchase FEHB at least through the remainder of the calendar year in which the election is made. Elections will be automatically renewable year to year unless revoked by the tribal employer or terminated by OPM. Section 890.1404(d) allows a tribal employer to revoke its election to purchase FEHB with 60 days' notice to OPM. If a tribal employer revokes an election to purchase FEHB, that tribal employer may only re-elect to purchase FEHB during the first annual open enrollment season that occurs at least twelve months after the election is revoked. If the tribal employer revokes an election to participate a second time, the tribal employer may only re-elect to purchase FEHB during the first open season that falls at least twenty-four months after the second revocation. Section 890.1404(e) states that OPM maintains final authority to determine entitlement of a tribal employer to purchase FEHB. Section 890.1404(f) states that if a tribe, tribal organization or urban Indian organization believes it has been improperly denied the entitlement to purchase FEHB, it may appeal the denial to OPM.

A tribal employer that begins to carry out a program under ISDEAA or title V of IHCIA after this rule is effective may notify OPM of its intention to purchase benefits after the entitlement is established. Section 890.1407 states that a tribal employer electing to purchase FEHB for its employees may not concurrently make contributions toward, or offer, an alternative employer-sponsored health insurance plan for tribal employees within the billing unit(s) for which the employer seeks to purchase FEHB coverage, with the exception of a collectively bargained alternative plan. A stand-alone dental, vision, or disability plan is not considered alternative health insurance. A tribal employee may have other comprehensive health care insurance coverage, as long as it is not provided by or purchased through the tribal employer.

Interaction With Other FEHB Coverage

Section 890.1405(f) establishes that eligibility to enroll in FEHB does not cause any tribal employee to be identified or characterized as a Federal employee, nor does it convey any additional rights or privileges of Federal employment. There may be circumstances in which a tribal employee is also an FEHB-eligible Federal employee. In such a case, the tribal employee may participate in FEHB through either employer. A tribal employee who is also a Federal employee cannot enroll in FEHB through both employers. FEHB enrollments may be transferred between Federal employing offices and tribal employers in a similar manner as transfer of enrollments between Federal agencies.

Initial Tribal Employee Enrollment Period, Open Season, and QLEs

Section 890.1405 describes tribal employee eligibility for enrollment in FEHB. Tribal employees will be able to enroll in FEHB after an agreement between the tribal employer and OPM is signed. The effective date of coverage will be decided by the tribal employer and OPM. A third party paymaster will handle payroll functions including remitting tribal employer and tribal employee contributions to FEHB premiums.

The enrollment process for tribal employees into FEHB is described in § 890.1407. Tribal employers must establish an initial enrollment opportunity for tribal employees. After that initial enrollment opportunity, for plan years during which a tribal employer's election to offer FEHB is in place, the FEHB enrollment period for tribal employees will be the same as for Federal employees—up to 60 days after becoming a new tribal employee or changing to an eligible position, during the annual open season, or 31 days before and up to 60 days after experiencing a qualifying life event. The effective date of enrollment for tribal employees will be the same as for Federal employees under parts 890 or 892, depending on premium conversion status. Upon enrollment in the FEHB Program, tribal employees will choose among the same nationwide and local FEHB plans that are available to Federal employees.

Section 890.1408 describes the circumstances under which a tribal employee may change enrollment type, plan, or option. These changes are allowed and will take effect under the same circumstances as for Federal employees. Changes may be restricted if the tribal employer has a premium conversion plan in effect (pre-tax treatment of premiums) and the tribal employee has elected premium conversion.

Cancellation of Coverage, Decreases in Enrollment

Section 890.1409 establishes that a tribal employee may cancel his or her FEHB coverage or decrease his or her enrollment only under the same circumstances as a Federal employee. If the tribal employee has elected premium conversion, this cancellation or change is restricted.

Termination of Enrollment

Section 890.1410 establishes that FEHB enrollment will terminate when employment with the tribal employer ends due to resignation, dismissal, or retirement, or when the tribal employer discontinues its purchase of FEHB. Termination of enrollment does not refer to a voluntary cancellation by the tribal employee during a period of continued employment. Upon termination of enrollment, the tribal employee will receive a 31-day temporary extension of coverage without premium contribution from the tribal employee or tribal employer and will have an opportunity to convert to an individual policy. Tribal employees whose FEHB enrollment terminates due to separation from tribal employment (unless the separation is for gross misconduct) are also eligible for temporary continuation of FEHB coverage (TCC), described at 5 U.S.C. 8905a and 5 CFR part 890, subpart K.

If an FEHB enrollment is terminated due to the death of the tribal employee, the tribal employee's spouse and covered children are entitled to a 31-day temporary extension of coverage and opportunity to convert to an individual policy. Covered children, if any, may elect TCC and may cover the tribal employee's surviving spouse as a member of family.

Termination Due to Non-Payment of Premiums

Section 890.1410(f) establishes that insufficient payment from the tribal employer to the paymaster can result in termination of enrollment for all of the tribal employer's tribal employees affected by the paymaster's failure to obtain current deposit. In such a case, FEHB enrollment for all affected tribal employees will be terminated according to a process determined by OPM. The FEHB enrollment of all tribal employees affected by the paymaster's failure to obtain current deposit will be terminated effective as of midnight on the last day of the month for which premium payment was received. These tribal employees will be entitled to a 31-day temporary extension of coverage without additional premium contribution and the opportunity to convert to an individual policy. In the event that a tribal employer elects to purchase FEHB and does not pay premiums for the first month in which payment is due, no 31-day temporary extension of coverage or opportunity to convert to an individual policy will be provided. Termination of enrollment due to non-payment of premiums in either case will not result in an opportunity to enroll in TCC since current tribal employees do not meet the conditions for TCC enrollment. Tribal employers will have full responsibility for communicating notice of termination of enrollment, and accompanying rights and obligations, to their tribal employees. Any outstanding premium due for coverage in arrears will be treated as a debt owed solely by the tribal employer.

Temporary Continuation of Coverage

Tribal employees and certain family members whose FEHB coverage terminates under certain circumstances can elect to purchase temporary continuation of coverage (TCC) for up to 18 or 36 months. Section 890.1411 establishes the criteria for TCC participation for tribal employees and their family members. In general, tribal employees who are enrolled in FEHB and separate from tribal employment, except for reasons of gross misconduct, may elect to purchase TCC. Certain formerly covered family members, including children or stepchildren who no longer meet the requirements of a covered family member, and former spouses, may elect TCC. The surviving spouse of a deceased enrollee who was enrolled in FEHB is not eligible to elect TCC, but may be covered by the TCC enrollment of an eligible child. The administrative fee is the same as would apply to a former Federal employee enrolled in TCC. The administrative fee described in § 890.1413(e) would not apply to a TCC enrollment of a tribal employee or family member.

Non-Pay Status, Insufficient Pay, or Change to Ineligible Position

Section 890.1412 establishes that a tribal employee in non-pay status or with insufficient pay to cover the premium costs may continue FEHB enrollment for up to 365 days. Tribal employees in non-pay status due to uniformed service are entitled to continue FEHB enrollment for up to 24 months. After termination, the tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution, and conversion to an individual policy.

Section 890.1412 also establishes that a temporary tribal employee who has insufficient pay to cover the employee share of FEHB premiums may choose a less expensive plan. If the tribal employee does not or cannot move to a less expensive plan, the FEHB enrollment will be terminated and the enrollee is entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy.

If a tribal employee moves from an FEHB-eligible to a FEHB ineligible position, the FEHB enrollment can continue if there has not been a break in service of more than 3 days. If there has been a break in service of longer than 3 days, FEHB enrollment will terminate at midnight of the last day of the pay period in which the employment status changed. Such a tribal employee will be entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy.

Responsibilities of the Tribal Employer

Section 890.1414 describes the responsibilities of the tribal employer. These include premium payment, eligibility determinations, enrollment, establishment of appeals process, communications regarding FEHB, and notification requirements.

Eligibility and Enrollment Decisions and Appeal Rights

Section 890.1415 requires that a tribal employer establish or identify an independent panel to resolve disputes about eligibility of individuals for FEHB enrollment. This panel must be authorized to adjudicate such disputes and enforce eligibility and enrollment determinations. The tribal employer must inform tribal employees of this avenue for dispute resolution. Decisions of the independent panel must be written, a record of evidence considered by the panel must be retained and available for OPM review, and the panel decisions remain subject to final OPM authority.

Filing Claims for Payment or Service; Court Review of Disputed Claims

Section 890.1416 describes the procedures for: (1) Filing claims for payment or service; and (2) invoking the provisions for court review of disputed claims. Both situations will follow the established procedures for Federal employees.

No Continuation of FEHB Enrollment Into Retirement From Employment With a Tribal Employer

Section 890.1417 states that an FEHB enrollment cannot be continued into retirement from employment with a tribal employer. This is a statutory requirement as the law entitles tribal employers to purchase FEHB for employees, but it does not extend that entitlement to permit tribal employers to purchase FEHB for retirees.

A Federal annuitant may continue FEHB into retirement and any enrollment in, or coverage as a family member under FEHB during employment with a tribal employer will count toward the “5-year rule.” The “5-year rule” generally requires 5 years of pre-retirement FEHB enrollment or coverage as a family member in order to continue FEHB into retirement. Section 890.1417 further states that a Federal annuitant who has continued FEHB into retirement and who begins post-retirement employment with a tribal employer that has elected to purchase FEHB may transfer the FEHB enrollment with his or her Federal retirement system to an enrollment with the tribal employer in a similar manner as that used for Federal annuitants re-employed by Federal agencies.

No Continuation of FEHB Enrollment for Compensationers Past 365 Days

Section 890.1418 establishes that tribal employees who are not also Federal employees, but are receiving worker's compensation benefits in leave without pay status for more than 365 days under programs run by the U.S. Department of Labor, may not be enrolled in FEHB.

Regulatory Impact Analysis

OPM has examined the impact of this final rule as required by Executive Order 12866 and Executive Order 13563, which directs 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), and based on that analysis, it has determined that it is an economically significant rule. A regulatory impact analysis must be prepared for economically significant rules.

Need for Regulatory Action

Section 10221 of the Patient Protection and Affordable Care Act incorporated and enacted S. 1790, the Indian Health Care Improvement Reauthorization and Extension Act of 2009, resulting in the addition of section 409 to the IHCIA. Section 409 allows tribes, tribal organizations and urban Indian organizations carrying out specific programs under Federal law to purchase the rights and benefits of the FEHB Program for their employees. As the administrator of the FEHB, OPM has extended eligibility to entitled tribal employees within the meaning of section 409. Federal regulations are necessary to protect the interests of all stakeholders, memorialize processes and procedures, and provide transparency.

Regulatory Baseline

The costs, benefits and transfers assessed in remaining portions of this regulatory impact analysis reflect existing FEHB coverage of tribal employees. This analysis is consistent with the guidance provided in OMB Circular A-4.

Benefits of Coverage

Health insurance coverage improves access to health care services, including preventive services, improves clinical outcomes, financial security, and decreases uncompensated care.7 Although section 409 extends FEHB to employees of tribes, tribal organizations, and urban Indian organizations regardless of their status as tribal members, the authorizing legislation for this regulation falls under 25 U.S.C. Chapter 18, which clearly outlines congressional intent to “maintain and improve the health of the Indians” and identifies providing “the resources, processes, and structure that will enable Indian tribes and tribal members to obtain the quantity and quality of health care services and opportunities that will eradicate the health disparities between Indians and the general population of the United States” as a major national goal of the United States (§ 1601). Thus, the following section discusses the benefits of extending health insurance to tribal members, rather than to tribal employees in general.

7 See Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans, Exchange Standards for Employers (CMS-9989-FWP) and Standards Related to Reinsurance, Risk Corridors and Risk Adjustment (CMS-9975-F) for a more detailed description of the benefits of health insurance.

While the exact benefits of health insurance are difficult to quantify, evidence supports that American Indians and Alaska Natives could benefit more from health insurance than the average population. According to a 2013 Kaiser Family Foundation report, American Indians and Alaska Natives were more likely than other nonelderly adult Americans to report being in fair or poor health, being overweight or obese, having diabetes and cardiovascular disease, and experiencing frequent mental distress.8 They had limited access to employer-sponsored coverage because more were unemployed or in low-wage jobs that did not offer health benefits. Almost a third of them were uninsured. More than 90 percent had incomes below 400 percent and 60 percent had incomes below 138 percent of the Federal poverty level. The infant mortality rate was 150 percent higher for Native American infants than white infants, and the suicide rate for Native Americans was two and a half times the national rate.9

8 Kaiser Family Foundation, “Health Coverage and Care for American Indians and Alaska Natives”, October 2013.

9 Then Senator Barack Obama, Indian Health Care Improvement Act Amendments of 2007 Floor Speech, U.S. Senate, January 2008.

IHS, which provides services through a network of hospitals, clinics, and health stations to about 2.2 million American Indians and Alaska Natives, has historically been underfunded. Access to services varies significantly by location and funds are insufficient to meet health care needs. According to the Federal Disparity Index, in 2010 the IHS funds covered less than 60 percent of those needed to pay for coverage equivalent to that of Federal employees.10

10 The Federal Employees Health Plan Disparity Index (hereinafter “FDI”) is an index comparing IHS funding to the cost of providing medical insurance for American Indian/Alaska Native (AI/AN) users in a mainstream health insurance plan such as that offered under the Federal Employees Health Benefits Program(FEHBP). The FDI uses actuarial methods that control for age, sex, and health status to price health benefits for Indian people using the FEHBP, which is then used to make per capita health expenditure comparisons. See http://www.nihb.org/docs/07112013/FY%202015%20IHS%20budget%20full%20report_FINAL.pdf for 2010 information.

Health services not available through direct care must be purchased through the Purchased/Referred Care (PRC) (formerly Contract Health Services) 11 program. Some estimates indicate that the PRC program has lost at least $778 million due to unfunded medical inflation and population growth between 1992 and 2008.12 This has resulted in allocating of health care services using the PRC medical priority system, in which many patients cannot receive care unless they are in a priority status. In FY 2007, this under-funding resulted in a backlog of over 300,000 health services that were not provided because there was not enough funding. Unfortunately, the denied/deferred services report understates the need of PRC resources due to data limitations and the fact that many tribes no longer report deferred or denied services because of the expense involved in tracking.

11 This program was renamed in The Consolidated Appropriations Act of 2014 to the Purchased/Referred Care program. Discussion in this regulatory impact analysis provides pre-statutory examples covering 1992-2008 and cites the 2009 budget request. Although there is currently still major unmet need, funding for this program has increased from $579 million in FY 2008 to $914 million in FY 2016. See the FY17 Congressional Budget Justification at https://www.ihs.gov/budgetformulation/includes/themes/newihstheme/documents/FY2017CongressionalJustification.pdf for more up to date information.

12 “The FY 2009 IHS Budget: Analysis and Recommendations,” p. 22, March 17, 2008, available at: www.npaihb.org.

The sources referenced above illustrate the health disparities specific to the Native American population. Expanding healthcare access to this group not only addresses this disparity and generates benefits to the individual, but also generates societal benefits in the form of decreased healthcare costs for chronic illnesses, increased employee productivity, and a healthier population that are the result of expanding access to healthcare to any group.

Costs of Coverage

In the following section, costs associated with this rule are analyzed for the following groups:

1. Tribal employers;

2. Tribal employees;

3. The Tribal Insurance Processing System (TIPS—the system used by the current paymaster);

4. OPM; and

5. FEHB carriers.

Most of the costs described below either result in a direct benefit to the individual or are transfers from one group to another. For example, costs incurred by tribal employees (premiums, deductibles, copays, etc.) result in individual benefits in the form of improved health outcomes. Costs incurred by tribal employers to cover premiums are a benefit to tribal employees. OPM has determined that the total dollar amounts do meet the threshold for this to be considered an economically significant rule.

OPM analyzed actual fiscal year 2015 enrollment data for the over 16,000 tribal employees then enrolled in the FEHB Program and found the annual cost of enrollment to be $168.5 million. This includes both premiums and the administrative fee added to each tribal FEHB enrollment. The administrative fee covers the costs of program administration for the paymaster.13 A per member per month (cost per month for each covered individual) cost of approximately $413 was calculated.14

13 This number does not include OPM's administrative costs to operate this program.

14 The number of enrollments was multiplied by a family factor to estimate total covered lives including family members. The family factor is calculated for the FEHB Program as a whole, not based on actual tribal enrollment. The total annual cost was then divided by the total number of covered lives, the result of this was divided by 12 to estimate the cost per member per month.

Premiums in the FEHB Program have increased between 3-6 percent each year for the last 5 years, below increases in the commercial market. As enrollment increases, total spending on premium costs will increase. However, the administrative fee will most likely decrease as administrative costs are spread among a growing number of enrollments.

Costs for Tribal Employers

To cover the cost of program administration, this final rule includes an administrative fee assessed on a per contract basis, paid by the tribal employer.15 OPM has contracted with a paymaster to develop and maintain TIPS, an online portal for the input of enrollment data and transmission to carriers.

15 This is analogous with Federal agencies that cover the cost of program administration without an additional fee to employees.

For fiscal year 2015, the administrative fee was $15.15 per contract; for fiscal year 2016 it is $12. This fee is adjusted to align with actual programmatic costs. As enrollment increases, this cost will go down as the costs of maintaining TIPS will be spread among more enrollments.

The cost of coverage for each tribal employer depends upon the number of enrollees covered, the health plans selected by those enrollees, and the portion of the premium paid by the employer.

For fiscal year 2015, the largest number of employees enrolled for one tribal employer was just under 4,000 and the smallest tribal employers have just one employee enrolled.16 The majority of participating tribal employers had fewer than 150 employees enrolled, with a program-wide median of 71 enrolled employees.

16 Based on September 2015 enrollment.

The average cost per enrollment in the program, including the administrative fee, is estimated at approximately $10,172.17

17 Total annual cost (including administrative fee) divided by number of enrollees (using September 2015 data).

Tribal employers are required by this rule to contribute to the premium for tribal employees at least the same as the Federal government does for its employees and may contribute more, up to 100 percent of the premium costs. The Federal government contribution is statutorily defined as the lesser of 72 percent of the weighted average of all premiums or 75 percent of the plan premium.18 This averages out to approximately 70 percent paid by the employer, program-wide.

18 5 U.S.C. 8906.

Based on averages for fiscal year 2015, a tribal employer may pay from just over $7,000 to over $40 million, depending on the number of tribal employees covered and percentage of premium contributed by the tribal employer. Of course, actual costs will vary based on plan selection.

Tribal employers assess the cost of participating and recognize that participation in the FEHB Program is a business decision made by the employers themselves. It often is a decision made by comparing the cost of other forms of health coverage and coverage through the FEHB Program. For those tribes that choose to participate it can be assumed that the benefits outweigh the costs of participation.

Costs for Tribal Employees

Costs for tribal employees depend upon the plan selected, enrollment type, and the percentage of premium contributed by the tribal employer. Based on FY15 data, the average cost for an annual enrollment is approximately $10,035 19 with an average annual employee contribution of approximately $3,011. The actual tribal employee contribution varies based on the tribal employer contribution towards the premium.

19 Does not include the Administrative Fee, which is covered by tribal employers.

Other costs such as co-payments, deductibles, and coinsurance are also the responsibility of the tribal employee, to the extent that such cost sharing is not otherwise prohibited by Federal law. These costs differ based on plan selection and utilization. Individual enrollment in the FEHB Program is voluntary so it can be assumed that the benefits to the individual of enrolling in tribal employer-sponsored coverage outweigh the costs of enrollment.

Administration of TIPS

Annual costs for administering TIPS, incurred by the paymaster, are described in the chart below. These costs are covered by the administrative fee paid by tribal employers.

Dates Costs May 2012 (launch date) through Sept 30, 2012 $1,096,932.00 2013 Fiscal year 1,677,293.68 2014 Fiscal year 1,653,397.93 2015 Fiscal year 1,815,660.00 Costs for OPM

Implementation of the Tribal FEHB Program began in fiscal year 2011. In addition to policy development and tribal consultation costs, OPM contracted with a paymaster to develop an electronic enrollment portal for tribal employers. Development of TIPS cost approximately $3.9 million. OPM received approximately $3 million in funds from the Department of Health and Human Services' (HHS) Health Insurance Reform Implementation Fund and covered the remaining costs from funds appropriated to OPM.

OPM continues to incur costs associated with managing the Tribal FEHB Program. These costs are not covered by the administrative fee included in each tribal enrollment. See the chart below for Full Time Equivalent (FTE) in FY2012 through FY2015.

Fiscal Year FTE FY2012 5.3 FY2013 3.5 FY2014 2.3 FY2015 1.8 FEHB Carriers

The impact on carriers is relatively small, as tribal enrollments are a very small percentage of the over 4 million FEHB enrollments. Premiums cover claims costs, administrative costs, plus a small profit known as the service charge.

Conclusion

While this rule meets the thresholds in Executive Orders 12866 and 13563 to be deemed an economically significant rule, many of the associated costs constitute transfers among involved parties. Under the provisions of this rule, participation in the FEHB Program is voluntary for both tribal employers and tribal employees. This, in conjunction with the relationship between costs incurred and the benefits of offering coverage, indicates that the benefits of this rule outweigh the costs.

Regulatory Flexibility Act

I certify that these regulations would not have a significant economic impact on a substantial number of small entities because they establish a voluntary program for certain Indian tribal employers.

Federalism

We have examined this rule in accordance with Executive Order 13132, Federalism, and have determined that this rule will not have any negative impact on the rights, roles, and responsibilities of State, local, or Tribal governments.

List of Subjects in 5 CFR Part 890

Administrative practice and procedure, Government employees, Health facilities, Health insurance, Health professions, Hostages, Iraq, Kuwait, Lebanon, Military personnel, Reporting and recordkeeping requirements, Retirement.

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

For the reasons set forth in the preamble, OPM amends 5 CFR part 890 as follows:

PART 890—FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM 1. The authority citation for Part 890 is revised to read as follows: Authority:

5 U.S.C. 8913; Sec. 890.301 also issued under sec. 311 of Pub. L. 111-03, 123 Stat. 64; Sec. 890.111 also issued under section 1622(b) of Pub. L. 104-106, 110 Stat. 521; Sec. 890.112 also issued under section 1 of Pub. L. 110-279, 122 Stat. 2604; 5 U.S.C. 8913; Sec. 890.803 also issued under 50 U.S.C. 403p, 22 U.S.C. 4069c and 4069c-1; subpart L also issued under sec. 599C of Pub. L. 101-513, 104 Stat. 2064, as amended; Sec. 890.102 also issued under sections 11202(f), 11232(e), 11246(b) and (c) of Pub. L. 105-33, 111 Stat. 251; and section 721 of Pub. L. 105-261, 112 Stat. 2061; Pub. L. 111-148, as amended by Pub. L. 111-152.

2. Add subpart N to read as follows: Subpart N—Federal Employees Health Benefits For Employees of Certain Indian Tribal Employers Sec. 890.1401 Purpose. 890.1402 Definitions and deemed references. 890.1403 Tribal employer purchase of FEHB requires current deposit of payment and timely payment of administrative fee. 890.1404 Tribal employer election and agreement to purchase FEHB. 890.1405 Tribal employees eligible for enrollment. 890.1406 Correction of enrollment errors. 890.1407 Enrollment process; effective dates. 890.1408 Change in enrollment type, plan, or option. 890.1409 Cancellation of coverage or decreases in enrollment. 890.1410 Termination of enrollment and 31-day temporary extension of coverage; and conversion to individual policy. 890.1411 Temporary Continuation of Coverage (TCC). 890.1412 Non-pay status, insufficient pay, or change to ineligible position. 890.1413 Premiums and administrative fee. 890.1414 Responsibilities of the tribal employer. 890.1415 Reconsideration of enrollment and eligibility decisions and appeal rights. 890.1416 Filing claims for payment or service and court review. 890.1417 No continuation of FEHB enrollment into retirement from employment with a tribal employer. 890.1418 No continuation of FEHB enrollment in compensationer status past 365 days. Subpart N—Federal Employees Health Benefits For Employees of Certain Indian Tribal Employers
§ 890.1401 Purpose.

This subpart sets forth the conditions for coverage, rights, and benefits under Chapter 89 of title 5, United States Code, according to the provisions of 25 U.S.C. 1647b.

§ 890.1402 Definitions and deemed references.

(a) In this subpart—

Billing unit is a subdivision of the tribal employer's workforce that aligns tribal employees for purposes of administering FEHB enrollment and collection of payment. A billing unit may be either governmental or commercial or a combination of both. So long as a tribal employer purchases FEHB for at least one billing unit that is carrying out at least one program under ISDEAA or IHCIA, the tribal employer may purchase FEHB for other billing units without regard to its programs.

Pay period is the interval of time for which a paycheck is issued by the tribal employer for work performed by the tribal employee.

Paymaster is the entity designated by OPM as responsible for receiving FEHB premiums from the tribal employer, forwarding premiums to the Employees Health Benefits Fund, and maintaining enrollment records for all participating tribal employers.

Payment is the sum of the tribal employer's share of premium plus the tribal employees' share of premium plus any administrative fees or costs required under this subpart, due for the enrollment, in the aggregate, of the tribal employer's tribal employees.

Tribal employee is a full-time or part-time common law employee of a tribal employer. An individual is a common law employee if, based on all the facts and circumstances, the tribal employer has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. This determination is based on all facts and circumstances and shall be guided by the factors described by the Internal Revenue Service in Rev. Rul. 87-41, 1987-1 C.B. 296 and referenced in Joint Committee on Taxation report JCX-26-07 Present Law and Background Relating to Worker Classification for Federal Tax Purposes, dated May 7, 2007, and the determination shall be consistent with the tribal employer's determination of common law employee status for Federal employment tax purposes, if any. For purposes of this subpart, tribal employees do not include retirees or annuitants of a tribal employer, volunteers of a tribal employer, or others who are not common law employees of a tribal employer. Categories of excluded tribal employees are described at § 890.1405(b). FEHB benefits available to tribal employees are set forth in this subpart and to the extent there exists any ambiguity or inconsistency between this subpart and other subparts of part 890, the terms of this subpart will govern FEHB benefits available to tribal employees.

Tribal employer is an Indian tribe or tribal organization (as those terms are defined in 25 U.S.C. Chapter 18, “Indian Health Care”) carrying out at least one program under the Indian Self-Determination and Education Assistance Act or an urban Indian organization (as that term is defined in 25 U.S.C. Chapter 18, “Indian Health Care”) carrying out at least one program under the title V of the Indian Health Care Improvement Act, provided that the tribe, tribal organization, or urban Indian organization certifies entitlement to purchase FEHB according to the process described in Subpart N. FEHB benefits that tribal employers are entitled to purchase for their tribal employees are set forth in this subpart and to the extent there exists any ambiguity or inconsistency between this subpart and other subparts of part 890, the terms of this subpart will govern FEHB benefits available for purchase by tribal employers.

(b) In this subpart, wherever reference is made to other subparts of part 890—

(1) A reference to employee is deemed a reference to tribal employee;

(2) A reference to employer is deemed a reference to tribal employer;

(3) A reference to enrollee is deemed a reference to a tribal employee in whose name the enrollment is carried;

(4) A reference to employing agency, employing office, or agency is deemed a reference to tribal employer, and/or if the reference involves the subject of a paymaster function, the paymaster, as appropriate;

(5) A reference to United States, Federal Government, or Government in the capacity of an employer is deemed a reference to tribal employer;

(6) A reference to Federal Service or Government Service is deemed a reference to employment with a tribal employer;

(7) A reference to annuitant, survivor annuitant, or an individual with entitlement to an annuity is deemed inapplicable in the context of this subpart; and

(8) A reference incorporated into this subpart that does not otherwise apply to tribal employees and tribal employers shall have no meaning and is deemed inapplicable in the context of this subpart.

§ 890.1403 Tribal employer purchase of FEHB requires current deposit of premium payment and timely payment of administrative fee.

(a) A tribal employer shall be entitled to purchase coverage, rights, and benefits for its tribal employees under Chapter 89 of title 5, United States Code, if premium payment for the coverage, rights, and benefits for the period of employment with such tribal employer is currently deposited in the Employees Health Benefits Fund, and if the administrative fee is timely paid to the paymaster.

(b) Premium payment will be considered currently deposited if received by the Employees Health Benefits Fund before, during, or within fourteen days after the end of the month covered by the premium payment.

(c) Administrative fee will be considered timely paid if received by the paymaster before, during, or within fourteen days after the end of the month covered by the administrative fee.

(d) Purchase of FEHB coverage by a tribal employer confers all the rights and benefits of FEHB as set forth in Subpart N to the tribal employer and tribal employee.

§ 890.1404 Tribal employer election and agreement to purchase FEHB.

(a) A tribal employer that intends to purchase FEHB for its tribal employees shall notify OPM by email or telephone.

(1) A tribal employer must purchase FEHB for at least one billing unit carrying out programs or activities under the tribal employer's ISDEAA or IHCIA contract.

(2) For so long as a tribal employer continues to purchase FEHB for at least one billing unit carrying out programs or activities under a tribal employer's ISDEAA or IHCIA contract, the tribal employer may purchase FEHB for one or more billing units without regard to whether they are carrying out programs or activities under the tribal employer's ISDEAA or IHCIA contract.

(b) A tribal employer must enter into an agreement with OPM to purchase FEHB. This agreement will include—

(1) The name, job title, and contact information of the individual responsible for health insurance coverage decisions for the tribal employer;

(2) The date on which the tribal employer will begin to purchase FEHB coverage;

(3) The approximate number of tribal employees who will be eligible to enroll;

(4) A certification that the eligible tribal employees within the enrolling billing unit will not have alternate tribal employer-sponsored health insurance coverage available concurrent with FEHB;

(5) A certification and documentation demonstrating that the tribal employer is entitled to purchase FEHB as either: An Indian tribe or tribal organization carrying out at least one program under the Indian Self-Determination and Education Assistance Act; or an urban Indian organization carrying out at least one program under title V of the Indian Health Care Improvement Act;

(6) Agreement by the tribal employer that its purchase of FEHB makes the tribal employer responsible for administering the program in accordance with this subpart, subject to Federal Government audit with respect to such purchase and administration, and subject to OPM authority to direct the administration of the program, including but not limited to the correction of errors;

(7) Agreement that the tribal employer will establish or identify an independent dispute resolution panel to adjudicate appeals of determinations made by a tribal employer regarding an individual's status as a tribal employee eligible to enroll in FEHB, eligibility of family members, and eligibility to change enrollment. This panel must have authority to enforce eligibility decisions;

(8) A certification that the tribal employer will supply necessary enrollment information and payment to the paymaster;

(9) Agreement to provide notice to OPM in the event that the tribal employer is no longer carrying out at least one program under the ISDEAA or title V of IHCIA; and

(10) Other terms and conditions as appropriate.

(c) A tribal employer may make an initial election to purchase FEHB at any time. A tribal employer purchasing FEHB shall commit to purchase FEHB for at least the remainder of the calendar year in which the agreement is signed. Elections will be automatically renewable year to year unless revoked by the tribal employer or terminated by OPM.

(d) If a tribal employer revokes the initial election, OPM must be given 60 days notice. The tribal employer may not re-elect to purchase FEHB until the first annual open season that falls at least twelve months after the revocation. If the tribal employer revokes an election to participate a second time, the tribal employer may not re-elect to purchase FEHB until the first open season that falls at least twenty-four months after the second revocation.

(e) OPM maintains final authority, in consultation with the United States Department of the Interior and the United States Department of Health and Human Services, to determine whether a tribal employer is entitled to purchase FEHB as either—

(1) An Indian tribe or tribal organization carrying out at least one program under the Indian Self-Determination and Education Assistance Act; or

(2) An urban Indian organization carrying out at least one program under title V of the Indian Health Care Improvement Act.

(f) If a tribe, tribal organization or urban Indian organization believes it has been improperly denied the entitlement to purchase FEHB, it may appeal the denial to OPM. The appeal will be given an independent level of review within OPM and the decision on review will be final.

§ 890.1405 Tribal employees eligible for enrollment.

(a) A tribal employee who is a full-time or part-time common law employee of a tribal employer is eligible to enroll in FEHB if that tribal employer has elected to purchase FEHB coverage for the tribal employees of that tribal employer's billing unit, except that a tribal employee described in paragraph (b) of this section is not eligible to enroll in FEHB.

(b) Status as a tribal employee under § 890.1402(a) for purposes of eligibility to enroll in FEHB is initially made based on a reasonable determination by the tribal employer. OPM maintains final authority to correct errors regarding FEHB enrollment as set forth at § 890.1406.

(c) Retirees, annuitants, volunteers, compensationers under Federal worker's disability programs past 365 days, and others who are not common law employees of the tribal employer are not eligible to enroll under this subpart.

(d) The following tribal employees are not eligible to enroll in FEHB—

(1) A tribal employee whose employment is limited to one year or less and who has not completed one year of continuous employment, including any break in service of 5 days or less;

(2) A tribal employee who is expected to work less than 6 months in one year;

(3) An intermittent tribal employee—a non-full-time tribal employee without a prearranged regular tour of duty;

(4) A beneficiary or patient employee in a Government or tribal hospital or home; and

(5) A tribal employee paid on a piecework basis, except one whose work schedule provides for full-time service or part-time service with a regular tour of duty.

(e) Notwithstanding paragraphs (d)(1), (2), and (3) of this section a tribal employee working on a temporary appointment, a tribal employee working on a seasonal schedule of less than 6 months in a year, or a tribal employee working on an intermittent schedule, for whom the tribal employer expects the total hours in pay status (including overtime hours) plus qualifying leave without pay hours to be at least 130 hours per calendar month, is eligible to enroll in FEHB according to terms described in § 890.102(j) unless the tribal employer provides written notification to the Director as described in § 890.102(k).

(f) The tribal employer initially determines eligibility of a tribal employee to enroll in FEHB, eligibility of family members, and eligibility of tribal employee to change enrollment. The tribal employer's initial decision may be appealed pursuant to § 890.1415.

(g) A tribal employee who is eligible and enrolls in FEHB under this subpart will have the option of enrolling in any FEHB open fee-for-service plan or health maintenance organization (HMO), consumer driven health plan (CDHP), or high deductible health plan (HDHP) available to Federal employees in the same geographic location as the tribal employee. The tribal employee will have the same choice of self only, self plus one, or self and family enrollment as is available to Federal employees.

(h) Family members of tribal employees will be covered by FEHB according to terms described at § 890.302. Children of tribal employees, whether married or not married, and whether or not dependent, are covered under a self and family enrollment or a self plus one enrollment (if the child is the designated covered family member) up to the age of 26. Former spouses of tribal employees are not former spouses as described at 5 U.S.C. 8901(10) and are not eligible to elect coverage under subpart H.

(i) Eligibility for FEHB under this subpart does not identify an individual as a Federal employee for any purpose, nor does it convey any additional rights or privileges of Federal employment.

§ 890.1406 Correction of enrollment errors.

Correction of errors regarding FEHB enrollment for tribal employees takes place according to the terms described in § 890.103.

§ 890.1407 Enrollment process; effective dates.

(a) FEHB election for tribal employers. Tribal employers may purchase FEHB coverage for their tribal employees after an agreement is accepted by OPM. Tribal employers will not be permitted to access FEHB if the tribal employer contributes toward, or offers, an alternative employer-sponsored health insurance plan for tribal employees within the billing unit(s) for which the employer seeks to purchase FEHB coverage, with the exception of a collectively bargained alternative plan. A stand-alone dental, vision, or disability plan is not considered alternative health insurance.

(b) Opportunities for tribal employees to enroll—

(1) Upon electing to purchase FEHB, a tribal employer will establish an initial enrollment opportunity for tribal employees. A tribal employee's enrollment upon an initial enrollment opportunity becomes effective as prescribed by OPM.

(2) After the initial enrollment opportunity, described in § 890.1407(b)(1), tribal employees are subject to the same initial enrollment period, belated enrollment rules, enrollment by proxy, and open season as Federal employees, as described at § 890.301(a), (b), (c), and (f).

(3) A tribal employee who enrolls after the initial enrollment opportunity and who does not elect premium conversion through his or her tribal employer's premium conversion plan, if one is available, will be subject to the enrollment and qualifying life event rules described at § 890.301 and effective dates described at § 890.301(b) and (f).

(4) A tribal employee who enrolls after the initial enrollment opportunity and who elects premium conversion through his or her tribal employer's premium conversion plan, if one is available, will be subject to the enrollment rules, qualifying life event rules and effective dates described at §§ 892.207, 892.208 and 892.210 of this chapter (together with § 890.301 as referenced therein).

§ 890.1408 Change in enrollment type, plan, or option.

(a) A tribal employee enrolled under this subpart may increase or decrease his or her enrollment, or may change enrollment from one plan or option to another, as described in § 890.301 (for tribal employees who did not elect premium conversion) or part 892 of this chapter (for tribal employees who did elect premium conversion).

(b) A change in enrollment type, plan, or option under this section becomes effective as described in § 890.301 (for tribal employees who did not elect premium conversion) or part 892 of this chapter (for tribal employees who did elect premium conversion).

§ 890.1409 Cancellation of coverage or decreases in enrollment.

(a) A tribal employee enrolled under this subpart may cancel enrollment as described at § 890.304(d) or decrease his or her enrollment as described at § 890.301. A tribal employee who does not participate in premium conversion may cancel his or her enrollment or decrease his or her enrollment at any time by request to the tribal employer, unless there is a legally binding court or administrative order requiring coverage of a child as described at § 890.301(g)(3). A tribal employee who participates in premium conversion may cancel his or her enrollment as provided by § 892.209 or decrease his or her enrollment as provided by § 892.208 of this chapter only during open season or because of and consistent with a qualifying life event.

(b) A cancellation of enrollment becomes effective as described at § 890.304(d). A decrease in enrollment becomes effective as described in § 890.301(e)(2).

(c) A tribal employee who cancels his or her enrollment under this section or decreases his or her enrollment may reenroll or increase his or her enrollment only during open season or because of and consistent with a qualifying life event.

§ 890.1410 Termination of enrollment and 31-day temporary extension of coverage; and conversion to individual policy.

(a) Tribal Employee Separation—

(1) Enrollment of a tribal employee under this subpart terminates due to separation from employment with the tribal employer for reasons of resignation, dismissal, or retirement. Termination of enrollment is effective at midnight of the last day of the pay period in which the tribal employee separates from employment.

(2) A former tribal employee who is separated under this subpart due to resignation, dismissal, or retirement and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(b) Death of tribal employee—

(1) Enrollment of a tribal employee terminates at midnight of the last day of the pay period in which the tribal employee dies.

(2) If, at the time of death, the deceased tribal employee was enrolled in self and family FEHB coverage:

(i) The surviving spouse is entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401;

(ii) The covered children of the deceased tribal employee are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(3) If, at the time of death, the deceased tribal employee was enrolled in self plus one FEHB coverage, only the designated covered family member is entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(c) Termination of family member coverage—

(1) Coverage of a family member of a tribal employee who was covered under this subpart terminates, subject to the 31-day temporary extension of coverage, for conversion, at midnight of the earlier of the following dates:

(i) The day on which he or she ceases to be a family member; or

(ii) The day the tribal employee's enrollment terminates, unless the family member is entitled to continued coverage under the enrollment of another.

(2) Family members who lose coverage under this subsection are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(d) Tribal employer loses entitlement to purchase FEHB—

(1) Coverage of a tribal employee and family members under this subpart, except TCC that is already elected and in effect, terminates at midnight of the last day of the calendar year in which a tribal employer is no longer entitled to purchase FEHB. FEHB can terminate earlier at the request of the tribal employer.

(2) Following the termination described in § 890.1410(d)(1), enrolled tribal employees and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(e) Tribal employer revokes election to purchase FEHB—

(1) If a tribal employer voluntarily revokes its election to purchase FEHB, tribal employees will be entitled to a 31-day temporary extension of coverage and may convert to an individual policy as described at § 890.401. In such a case, the FEHB enrollment terminates effective the first day for which premium payment is not received and the 31-day temporary extension of coverage, for conversion begins immediately thereafter.

(2) [Reserved]

(f) Failure to currently deposit premium payment—

(1) If premium payment is not currently deposited in the Employees Health Benefits Fund, the tribal employer's entitlement to purchase FEHB can be terminated, and all enrollments affected by the paymaster's failure to obtain current deposit of premium payment will be terminated, for non-payment.

(2) Enrollments of all of the tribal employer's tribal employees affected by the paymaster's failure to obtain current deposit of premium payment will be terminated effective midnight of the last day of the month for which payment was received.

(3) In the case of termination of enrollment due to non-payment, affected tribal employees will be entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401. The 31-day extension of coverage begins immediately upon termination of enrollment.

(4) In the event that a tribal employer elects to purchase FEHB for its tribal employees but does not currently deposit premium payment in the first month that it is due, the enrollment of tribal employees affected by the paymaster's failure to obtain current deposit of premium payment will be terminated effective midnight of the last day of the month for which premium payment was not currently deposited. Tribal employees affected by the paymaster's failure to obtain current deposit of premium payment will not be entitled to a 31-day temporary extension of coverage and may not convert to an individual policy as described at § 890.401.

(5) Any outstanding premium due for coverage in arrears will be treated as a debt owed solely by the tribal employer.

§ 890.1411 Temporary Continuation of Coverage (TCC).

(a) For purposes of this subpart, temporary continuation of coverage (TCC) is described by 5 U.S.C. 8905a and subpart K of this part. The administrative fee for TCC for tribal employees is the same as for Federal employees, with no specific tribal administrative fee as described in § 890.1413(e).

(b) A former tribal employee who is separated under this subpart due to resignation, dismissal, or retirement may elect TCC, unless the separation is due to gross misconduct as defined in § 890.1102.

(c) Eligibility for TCC for tribal employees follows procedures provided in § 890.1103 of subpart K of this part, except that former spouses of tribal employees are not eligible for TCC.

§ 890.1412 Non-pay status, insufficient pay, or change to ineligible position.

(a) Non-pay status for 365 days. Enrollment of a tribal employee and coverage of family members may continue for up to 365 days during which the tribal employee is in a non-pay status (as described at § 890.303(e)(1)) under terms described at § 890.502(b). Enrollment terminates at midnight of the last day of the pay period which includes the 365th consecutive day of nonpay status or the last day of leave under the Family and Medical Leave Act, whichever is later. The tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(b) Insufficient pay. If the pay of a non-temporary tribal employee who is enrolled in FEHB is insufficient to pay for the tribal employee's share of premiums, the tribal employer must follow the procedure described at § 890.502(b). If the enrollment is terminated due to insufficient pay, the tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(c) Insufficient pay for temporary tribal employees. If the pay of a temporary tribal employee who meets eligibility requirements described at 5 U.S.C. 8906a is insufficient to pay the tribal employee's share of premiums as described at § 890.304(a)(2), and the tribal employee does not or cannot elect a plan at a cost to him or her not in excess of the pay, the tribal employee's enrollment must be terminated as described at § 890.304(a)(2). The tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(d) Change to ineligible position. A tribal employee who moves from an FEHB eligible to a non-FEHB-eligible position at a tribal employer will be eligible to continue FEHB enrollment as described in § 890.303(b).

(e) Non-pay status due to Uniformed Service—

(1) Enrollment of a tribal employee and coverage of family members terminates at midnight of the earliest of the dates described at § 890.304(a)(1)(vi) through (viii). The tribal employee and covered family members are entitled to a 31-day temporary extension of coverage without premium contribution and may convert to an individual policy as described at § 890.401.

(2) Enrollment is reinstated on the date the tribal employee is restored to duty in an eligible position with the tribal employer upon return from Uniformed Service, pursuant to applicable law, provided that the tribal employer continues to purchase FEHB for its tribal employees in the affected tribal employee's billing unit on that date.

§ 890.1413 Premiums and administrative fee.

(a) Premium contributions and withholdings described at §§ 890.501 and 890.502 must be paid by the tribal employer and the tribal employee, except that the term OPM as used in § 890.502(c) is deemed to be a reference to the paymaster, as appropriate, for purposes of this subpart. There is no Government contribution as that term is used in 5 U.S.C. 8906.

(b) Contribution requirements. (1) A tribal employer must contribute at least the monthly equivalent of the minimum Government contribution for a specific FEHB plan as described in 5 U.S.C. 8906;

(2) There is no cap on the percentage of premium that a tribal employer may contribute, as long as the contribution and withholding arrangement is not designed to encourage or discourage enrollment in any particular plan or plan option;

(3) A tribal employer may vary the contribution amount by type of FEHB enrollment (self only, self plus one, self and family), providing it is done in a uniform manner and meets the requirements described in § 890.1413(b)(1) and (2); and

(4) A tribal employer may vary the contribution amount by billing unit, providing each billing unit meets the requirements described in § 890.1413(b)(1) through (3).

(c) A tribal employer may, but is not required to, prorate the tribal employer and tribal employee share of premium attributable to enrollment of its part-time tribal employees working between 16 and 32 hours per week by prorating shares in proportion to the percentage of time that a tribal employee in a comparable full time position is regularly scheduled to work.

(d) Tribal employee and tribal employer contributions to premiums under this subpart will be aggregated by the tribal employer. The tribal employee and tribal employer contributions must be available for receipt by the paymaster on an agreed upon date. The paymaster will receive the premium contributions together with the fee described at paragraph (e) of this section and will deposit only the premium payment into the Employees Health Benefits Fund described in 5 U.S.C. 8909.

(e) A fee determined annually by OPM will be charged in addition to premium for each enrollment of a tribal employee. The fee may be used for other purposes as determined by OPM. The fee must be paid entirely by the tribal employer as part of the payment to purchase FEHB for tribal employees, and must be available for collection by the paymaster, together with the aggregate tribal employee and tribal employer contributions.

§ 890.1414 Responsibilities of the tribal employer.

(a) The tribal employer pays premiums for tribal employees enrolled under this subpart pursuant to §§ 890.1403 and 890.1413.

(b) The tribal employer must determine the eligibility of individuals who attempt to enroll for coverage under this subpart and enroll those it finds eligible.

(c) The tribal employer must determine whether eligible tribal employees have eligible family member(s) and allow coverage under a self plus one or self and family enrollment as described in § 890.302 for those it finds eligible.

(d) The tribal employer must establish or identify an independent dispute resolution panel for reconsideration of enrollment and eligibility decisions as described in § 890.1415.

(e) The tribal employer has the following notification responsibilities. The tribal employer must—

(1) Notify OPM and tribal employees in writing of intent to revoke election to purchase FEHB at least 60 days before such revocation described at § 890.1404(d);

(2) Promptly notify tribal employees and OPM if there is a change in the tribal employer's entitlement to purchase FEHB described at § 890.1410(d);

(3) Promptly notify affected tribal employees of termination of enrollment due to non-payment, the 31-day temporary extension of coverage and its ending date described at § 890.1410(f)(2) through (3); and

(4) Promptly notify affected tribal employees of termination of enrollment due to non-payment described at § 890.1410(f)(4).

§ 890.1415 Reconsideration of enrollment and eligibility decisions and appeal rights.

(a) The tribal employer shall establish or identify an independent dispute resolution panel to adjudicate appeals of determinations made by a tribal employer denying an individual's status as a tribal employee eligible to enroll in FEHB or denying a change in the type of enrollment (i.e.: to or from self only coverage) under this subpart. Such panel shall be authorized to enforce enrollment and eligibility decisions. The tribal employer shall notify affected individuals of this panel and its functions.

(b) Under procedures set forth by the tribal employer, an individual may file a written request to the independent dispute resolution panel to reconsider an initial decision of the tribal employer under this subpart. A reconsideration decision made by the panel must be issued to the individual in writing and must fully state the findings and reasons for the findings. The panel may consider information from the tribal employer, the individual, or another source. The panel must retain a file of its documentation until December 31 of the 3rd year after the year in which the decision was made, and must provide the file to OPM upon request.

(c) If the panel determines that the individual is ineligible to enroll in FEHB as a tribal employee or to change enrollment, the individual may request that OPM reconsider the denial. Such a request must be made in writing and any decision by OPM will be binding on the tribal employer.

(d) OPM may request a panel decision file during the retention period described at paragraph (b) of this section. Panel decisions remain subject to final OPM authority to correct errors, as set forth in § 890.1406.

§ 890.1416 Filing claims for payment or service and court review.

(a) Tribal employees may file claims for payment or service as described at § 890.105.

(b) Tribal employees may invoke the provisions for court review described at § 890.107(b) through (d).

§ 890.1417 No continuation of FEHB enrollment into retirement from employment with a tribal employer.

(a) An FEHB enrollment cannot be continued into retirement from employment with a tribal employer.

(b) A Federal annuitant may continue FEHB enrollment into retirement from Federal service if the requirements of 5 U.S.C. 8905(b) for carrying FEHB coverage into retirement are satisfied through enrollment, or coverage as a family member, either through a Federal employing office or a tribal employer, or any combination thereof.

(c) A Federal annuitant who is employed after retirement by a tribal employer in an FEHB eligible position may participate in FEHB through the tribal employer. In such a case, the Federal annuitant's retirement system will transfer the FEHB enrollment to the tribal employer, in a similar manner as for a Federal annuitant who is employed by a Federal agency after retirement.

(d) A tribal employee who becomes a survivor annuitant as described in § 890.303(d)(2) is entitled to reinstatement of health benefits coverage as a Federal employee would under the same circumstances.

§ 890.1418 No continuation of FEHB enrollment in compensationer status past 365 days.

A tribal employee who is not also a Federal employee who becomes eligible for one of the Department of Labor's disability compensation programs may not continue FEHB coverage in leave without pay status past 365 days.

[FR Doc. 2016-31195 Filed 12-27-16; 8:45 am] BILLING CODE 6325-63-P
NUCLEAR REGULATORY COMMISSION 10 CFR Parts 20 and 50 [NRC-2009-0279 and NRC-2014-0044] RIN 3150-AJ29 and RIN 3150-AJ38 Rulemaking Activities Being Discontinued by the NRC AGENCY:

Nuclear Regulatory Commission.

ACTION:

Rulemaking activities; discontinuation.

SUMMARY:

The U.S. Nuclear Regulatory Commission (NRC) is discontinuing the rulemaking activities associated with potential changes to its radiation protection and reactor effluents regulations. The purpose of this action is to inform members of the public that these rulemaking activities are being discontinued and to provide a brief discussion of the NRC's decision to discontinue them. These rulemaking activities will no longer be reported in the NRC's portion of the Unified Agenda of Regulatory and Deregulatory Actions (the Unified Agenda).

DATES:

Effective December 28, 2016, the rulemaking activities discussed in this document are discontinued.

ADDRESSES:

Please refer to Docket IDs NRC-2009-0279 and NRC-2014-0044 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:

Federal Rulemaking Web site: Go to http://www.regulations.gov and search for Docket IDs NRC-2009-0279 and NRC-2014-0044. Address questions about NRC dockets to Carol Gallagher; telephone: 301-415-3463; email: [email protected]. For technical questions, contact the individuals listed in the FOR FURTHER INFORMATION CONTACT section of this document.

NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at http://www.nrc.gov/reading-rm/adams.html. To begin the search, select “ADAMS Public Documents” and then select “Begin Web-based ADAMS Search.” For problems with ADAMS, please contact the NRC's Public Document Room (PDR) reference staff at 1-800-397-4209, 301-415-4737, or by email to [email protected]. The ADAMS accession number for each document referenced in this document (if that document is available in ADAMS) is provided the first time that a document is referenced.

NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.

FOR FURTHER INFORMATION CONTACT:

Carolyn Lauron, Office of New Reactors, telephone: 301-415-2736, email: [email protected]; or Cindy Flannery, Office of Nuclear Material Safety and Safeguards, telephone: 301-415-0223, email: [email protected]. Both are staff of the U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001.

SUPPLEMENTARY INFORMATION: Table of Contents I. Background II. Process for Discontinuing Rulemaking Activities III. Radiation Protection (RIN 3150-AJ29; NRC-2009-0279) IV. Reactor Effluents (RIN 3150-AJ38; NRC-2014-0044) V. Conclusion I. Background

In SECY-16-0009, “Recommendations Resulting from the Integrated Prioritization and Re-Baselining of Agency Activities,” dated January 31, 2016 (ADAMS Accession No. ML16028A208), the NRC staff requested Commission approval to implement recommendations on work to be shed, de-prioritized, or performed with fewer resources. Two of the items listed to be shed (i.e., discontinued) were the rulemakings that would have amended the radiation protection regulations in part 20 of title 10 of the Code of Federal Regulations (10 CFR), and the reactor effluents regulations in 10 CFR part 50, appendix I. In the Staff Requirements Memorandum (SRM) for SECY-16-0009, dated April 13, 2016 (ADAMS Accession No. ML16104A158), the Commission approved discontinuing the two rulemaking activities and directed the NRC staff to publish a Federal Register notice to inform the public that the rulemakings are being discontinued.

A discussion of the NRC's decision to discontinue these two rulemaking activities is provided in Sections III and IV of this document.

II. Process for Discontinuing Rulemaking Activities

When the NRC staff identifies a rulemaking activity that can be discontinued, the NRC staff requests approval from the Commission to discontinue it. The Commission provides its decision in an SRM. If the Commission approves discontinuing the rulemaking activity, the NRC staff will inform the public of the Commission's decision.

A rulemaking activity may be discontinued at any stage in the rulemaking process. For a rulemaking activity that has received public comments, the NRC staff will consider those comments before discontinuing the rulemaking activity; however, the NRC staff will not provide individual comment responses.

After Commission approval to discontinue a rulemaking activity, the NRC staff will update the next edition of the Unified Agenda to indicate that the rulemaking is discontinued. The rulemaking activity will appear in the completed actions section of that edition of the Unified Agenda but will not appear in future editions.

III. Radiation Protection (RIN 3150-AJ29; NRC-2009-0279)

The NRC staff provided an analysis of the potential need to update the radiation protection regulation in SECY-08-0197, “Options to Revise Radiation Protection Regulations and Guidance with Respect to the 2007 Recommendations of the International Commission on Radiological Protection,” dated December 18, 2008 (ADAMS Accession No. ML091310193), to the Commission. SECY-08-0197 presented the regulatory options of more closely aligning the NRC's radiation protection regulatory framework (primarily set forth in 10 CFR part 20) with the 2007 recommendations of the International Commission on Radiological Protection (ICRP) contained in ICRP Publication 103. In the SRM for SECY-08-0197, dated April 2, 2009 (ADAMS Accession No. ML090920103), the Commission approved the NRC staff's recommendation to begin engagement with stakeholders and interested parties to initiate development of the technical basis 1 for a possible revision of the NRC's radiation protection regulations, as appropriate and where scientifically justified, to achieve greater alignment with the recommendations in ICRP Publication 103.

1 The terms “technical basis” and “regulatory basis,” as used in this document, are synonymous. The NRC's Management Directive (MD) 6.3, “The Rulemaking Process” (http://www.nrc.gov/docs/ML1320/ML13205A400.pdf), explains that a regulatory basis is a detailed analysis, prepared by the NRC staff, describing why a regulation should be promulgated, amended, or repealed, and the scientific, technical, policy, and legal rationale for that potential regulatory action. If approved by the Commission, the regulatory basis will be used by the NRC staff in its development of a proposed rule.

After extensive stakeholder engagement, the NRC staff determined that an additional evaluation of the substantive policy issues was needed. This additional policy evaluation was provided as SECY-12-0064, “Recommendations for Policy and Technical Direction to Revise Radiation Protection Regulations and Guidance,” dated April 25, 2012 (ADAMS Accession No. ML121020108). The paper summarized the NRC staff's interactions with stakeholders as directed by the SRM for SECY-08-0197, and provided recommendations for potential revisions to the NRC's radiation protection regulations.

In the SRM for SECY-12-0064, dated December 17, 2012 (ADAMS Accession No. ML12352A133), the Commission approved in part and disapproved in part the NRC staff's recommendations. Specifically, the Commission approved the NRC staff's development of a draft regulatory basis for a revision to 10 CFR part 20 to align with the most recent methodology and terminology for dose assessment in ICRP Publication 103, including consideration of any conforming changes to all NRC regulations. The Commission directed the NRC staff to develop improvements in the NRC's guidance for those segments of the regulated community that would benefit from more effective implementation of the As Low As is Reasonably Achievable (ALARA) strategies and programs to comply with regulatory requirements. The Commission also directed the NRC staff to continue discussions with stakeholders regarding dose limits for the lens of the eye and the embryo/fetus.

In addition, the Commission directed the NRC staff to continue discussions with stakeholders on alternative approaches to deal with individual protection at or near the current dose limit. Finally, the Commission directed the NRC staff to improve reporting of occupational exposure by the NRC and Agreement State licensees to the NRC's Radiation Exposure Information Reporting System database. In the SRM for SECY-12-0064, the Commission disapproved the NRC staff's recommendations to develop a draft regulatory basis to reduce the occupational total effective dose equivalent from 5 rem (50 mSv) per year to 2 rem (20 mSv) per year. The Commission also disapproved the elimination of traditional or “English” dose units to measure radiation exposure from the NRC's regulations. Rather, the Commission directed the continuation of the use of both traditional and International System (SI) units in the NRC's regulations.

In response to the Commission's direction in the SRM for SECY-12-0064, the NRC staff published an advance notice of proposed rulemaking (ANPR) in the Federal Register (79 FR 43284; July 25, 2014), to obtain input from members of the public and other stakeholders on the development of a regulatory basis that would support potential changes to the NRC's current radiation protection regulations. The ANPR stated that the NRC's goal was to achieve greater alignment between the NRC's radiation protection regulations and the recommendations contained in ICRP Publication 103, primarily with respect to the recommendations concerning dose assessment methodology and terminology.

The NRC received over 90 individual comment letters and almost 3,000 form letters on the 10 CFR part 20 ANPR. Although some comments supported a potential revision of the NRC's regulations to align more closely with ICRP Publication 103 methodology and terminology for dose assessment, the majority of comments did not support revising the 10 CFR part 20 regulations. The major reasons given for not revising the NRC's regulations were the following: (1) The NRC's current regulations remain protective of both occupational workers and members of the public; (2) the ICRP Publication 103 recommendations propose measures that go beyond what is needed to provide adequate protection and are unlikely to yield a substantial increase in safety that is justified in light of its cost; (3) the industry's current operating procedures and practices protect both occupational workers and members of the public and go beyond the applicable regulatory requirements; (4) amending the applicable regulations would place significant resource burdens on licensees resulting in costly modifications to existing facilities that would result in little, if any, improvement in occupational or public radiological safety; (5) the cumulative effect of regulation (CER) resulting from the changes described in the ANPR for 10 CFR part 20, in conjunction with the prospective U.S. Department of Environmental Protection Agency's (EPA) changes to 40 CFR part 190 and to 10 CFR part 50, appendix I, will place substantial resource burdens on licensees, while yielding little or no additional protection of occupational workers or the public; and (6) the NRC actions are premature without the publication of the peer approved implementation documents for the ICRP Publication 103 recommendations.

While some commenters supported the changes described in the ANPR to more closely align with the ICRP Publication 103 methodology and terminology, these commenters also acknowledged that consideration should be given to the resource burden associated with implementation. Some commenters supported the incorporation of the ICRP Publication 103 dose methodology in the form of revisions to include the weighting factors for eight organs, which are the colon, stomach, bladder, liver, esophagus, skin, brain, and salivary glands, but did not support changes to the current NRC dose terminology. On the other hand, one commenter indicated that terminology should be adopted in order to be consistent with the terminology used by the U.S. Department of Energy, as revised in 2007, but use of the updated methodology should be delayed until the updated dose coefficients are published by ICRP. Finally, one commenter supported revision of 10 CFR part 20 to align more closely with ICRP Publication 103 methodology and terminology, but acknowledged that the realignment may result in little, if any, improvement in occupational or public safety.

As explained in SECY-16-0009, the additional resource expenditure in this area did not result in a recommendation for a revised rule. The current NRC regulatory framework continues to provide adequate protection of the health and safety of workers, the public, and the environment. In addition, a majority of the comments submitted and meeting feedback from stakeholders did not support the proposed changes. Therefore, the NRC staff believes that there is minimal adverse impact on the NRC's mission, principles, or values by discontinuing this rulemaking. In the SRM for SECY-16-0009, the Commission approved the NRC staff's recommendation to discontinue this rulemaking.

IV. Reactor Effluents (RIN 3150-AJ38; NRC-2014-0044)

The NRC published an ANPR in the Federal Register (80 FR 25237; May 4, 2015), to obtain input from members of the public and other stakeholders on the development of a regulatory basis for a potential revision to 10 CFR part 50, appendix I, the NRC's regulations for licensees of light water cooled reactors to meet the ALARA standard with respect to radioactive effluents from such reactor sites. The publication of the 10 CFR part 50, appendix I, ANPR was also in response to the Commission's direction in the SRM for SECY-12-0064, which stated that the NRC staff should, along with the development of the draft regulatory basis for the 10 CFR part 20 regulations, engage in a parallel effort to develop a draft regulatory basis for aligning the 10 CFR part 50, appendix I, design objectives with the most recent terminology and dose-related methodology published in ICRP Publication 103. In the ANPR, the NRC staff identified specific questions and issues with respect to a possible revision of 10 CFR part 50, appendix I, and related guidance. The NRC staff planned to consider public and other stakeholder input on these questions and issues to develop the regulatory basis.

The NRC received 20 comment letters on the 10 CFR part 50, appendix I, ANPR. The comments, in addition to feedback from the August 24, 2015, NRC public meeting held in Rockville, MD, included the following: (1) The potential revisions will result in intangible benefits such as transparency in the regulatory process, consistent terminology and methodology, and comparison of technologies and operations across international borders and environmental media; (2) implementation of the potential revisions will result in a resource burden; (3) the potential revisions are unlikely to be cost-beneficial with little to no incremental improvement in the health and safety of occupational workers, the public, or the environment; (4) in lieu of the potential revisions, limited changes in the NRC guidance to address changes in methodology and terminology would require fewer licensee resources; and (5) should the NRC proceed with rulemaking, consideration of on-going work on the accuracy of the effluent doses to members of the public could further inform the proposed rulemaking.

Overall, the commenters recognized a need to update the NRC's regulations based on the advances in science and technology; however, the implementation costs would be a significant burden to the industry that would not be justified by improvements in public and occupational protection. In addition, some commenters provided additional options for the NRC to consider, should it continue with rulemaking, including limited scope updates to existing NRC guidance.

As explained in SECY-16-0009, the staff recommended that this rulemaking activity be discontinued because during the development of the regulatory basis for the proposed rule change, the staff determined that the regulations do not require changes at this time. Therefore, based on this determination and consideration of the comments received, the NRC staff believes that there is minimal adverse impact on the NRC's mission, principles, or values by discontinuing this rulemaking. In the SRM for SECY-16-0009, the Commission approved the NRC staff's recommendation to discontinue this rulemaking.

V. Conclusion

The NRC is no longer pursuing the revisions to regulations in 10 CFR part 20 and 10 CFR part 50, appendix I, for the reasons discussed in this document. In the next edition of the Unified Agenda, the NRC will update the entry for these rulemaking activities and reference this document to indicate that they are no longer being pursued. These rulemaking activities will appear in the completed actions section of that edition of the Unified Agenda but will not appear in future editions. If the NRC decides to pursue similar or related rulemaking activities in the future, it will inform the public through new rulemaking entries in the Unified Agenda.

Dated at Rockville, Maryland, this 14th day of December 2016.

For the Nuclear Regulatory Commission.

Michael R. Johnson, Acting Executive Director for Operations.
[FR Doc. 2016-31372 Filed 12-27-16; 8:45 am] BILLING CODE 7590-01-P
FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 308 RIN 3064-AE52 Rules of Practice and Procedure AGENCY:

Federal Deposit Insurance Corporation.

ACTION:

Final rule.

SUMMARY:

The Federal Deposit Insurance Corporation (FDIC) is adjusting the maximum amount of each civil money penalty (CMP) within its jurisdiction to account for inflation. This action is required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Adjustment Act). The FDIC is also amending its rules of practice and procedure to correct a technical error from the previous inflation-adjustment rulemaking.

DATES:

This rule is effective on January 15, 2017.

FOR FURTHER INFORMATION CONTACT:

Seth P. Rosebrock, Supervisory Counsel, Legal Division (202) 898-6609, or Graham N. Rehrig, Senior Attorney, Legal Division (202) 898-3829.

SUPPLEMENTARY INFORMATION:

I. Policy Objectives

The Final Rule changes the maximum limit for CMPs according to inflation as mandated by Congress in the 2015 Adjustment Act.1 The intended effect of annually adjusting maximum civil money penalties in accordance with changes in the Consumer Price Index is to minimize any distortion in the real value of those maximums due to inflation, thereby promoting a more consistent deterrent effect in the structure of CMPs. The Final Rule also amends the FDIC's rules of practice and procedure under 12 CFR part 308 to remove a technical error found at 12 CFR 308.132(c).

1 Public Law 114-74, sec. 701, 129 Stat. 584.

II. Background

The FDIC assesses CMPs under section 8(i) of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1818, and a variety of other statutes.2 Congress established maximum penalties that could be assessed under these statutes. In many cases, these statutes contain multiple penalty tiers, permitting the assessment of penalties at various levels depending upon the severity of the misconduct at issue.3

2See, e.g., 12 U.S.C. 1972(2)(F) (authorizing the FDIC to impose CMPs for violations of the Bank Holding Company Act of 1970 related to prohibited tying arrangements); 15 U.S.C. 78u-2 (authorizing the FDIC to impose CMPs for violations of certain provisions of the Securities Exchange Act of 1934); 42 U.S.C. 4012a(f) (authorizing the FDIC to impose CMPs for pattern or practice violations of the Flood Disaster Protection Act).

3 For example, Section 8(i)(2) of the FDIA, 12 U.S.C. 1818(i)(2), provides for three tiers of CMPs, with the size of such CMPs increasing with the gravity of the misconduct.

In 1990, Congress determined that the assessment of CMPs plays “an important role in deterring violations and furthering the policy goals embodied in such laws and regulations” and concluded that “the impact of many civil monetary penalties has been and is diminished due to the effect of inflation.” 4 Consequently, Congress required federal agencies with authority to impose CMPs to periodically adjust by rulemaking the maximum CMPs which these agencies were authorized to impose in order to “maintain the deterrent effect of civil monetary penalties and promote compliance with the law.” 5 Under the 1990 Adjustment Act, the FDIC adjusted its CMP amounts every four years.6

4 Section 2 of the Federal Civil Penalties Inflation Adjustment Act of 1990 (1990 Adjustment Act). Public Law 101-410, 104 Stat. 890 (amended 2015) (codified as amended at 28 U.S.C. 2461 note).

5Id.

6See, e.g., 77 FR 74573 (Dec. 17, 2012).

In 2015, Congress revised the process by which federal agencies adjust applicable CMPs for inflation.7 Under the 2015 Adjustment Act, the FDIC is required to (1) adjust the CMP levels with an initial catch-up adjustment through an interim final rulemaking and (2) make subsequent annual adjustments for inflation.8 The initial and subsequent adjustments apply to all CMPs covered by the 2015 Adjustment Act.9 The FDIC published its interim final rulemaking—containing the initial catch-up adjustments—on June 29, 2016.10 The 2015 Adjustment Act requires subsequent annual adjustments to be made by January 15 of each year.11

7See Public Law 114-74, sec. 701, 129 Stat. 584.

8See id. at sec. 701(b).

9See Public Law 101-410, sec. 3(2), 104 Stat. 890 (amended 2015) (codified as amended at 28 U.S.C. 2461 note).

10 81 FR 42235. Although the FDIC was not obligated to solicit comments for the interim final rule, the FDIC asked for comments from the public and received one comment. See https://www.fdic.gov/regulations/laws/federal/2016/2016_rules_of_practice_and_procedure_3064%E2%80%93AE43.html. The comment noted that the FDIC interim final rule was issued according to a statutory mandate, but expressed disappointment that the FDIC “did not promulgate [its] interim final CMP rules pursuant to the normal administrative process, whereby interested stakeholders among the public have an opportunity to comment on a `Proposed Rule' before it is finalized.” Id. The commenter made no specific request that the final rule be amended or changed, however, but requested that the FDIC exercise its “discretion to impose CMP amounts below the maximum level in accordance with the severity of the misconduct at issue.” Id. As noted above, the FDIC followed an explicit statutory mandate in creating the interim final rule. Moreover, the FDIC intends to continue to exercise its discretion—in accordance with statutory requirements—in imposing appropriate CMP amounts. See 12 U.S.C. 1818(i)(2)(G).

11 Public Law 114-74, sec. 701(b), 129 Stat. 584.

Although the 2015 Adjustment Act increases the maximum penalty that may be assessed under each applicable statute, the FDIC possesses discretion to impose CMP amounts below the maximum level in accordance with the severity of the misconduct at issue. When making a determination as to the appropriate level of any given penalty, the FDIC is guided by statutory factors set forth in section 8(i)(2)(G) of the FDIA, 12 U.S.C. 1818(i)(2)(G), and those factors identified in the Interagency Policy Statement Regarding the Assessment of CMPs by the Federal Financial Institutions Regulatory Agencies. 12 Such factors include, but are not limited to, the gravity and duration of the misconduct, and the intent related to the misconduct.

12 63 FR 30227 (June 3, 1998).

While the 2015 Adjustment Act required the FDIC to initially adjust its maximum CMP amounts through an interim final rulemaking, for subsequent adjustments, the FDIC “shall adjust [CMPs] and shall make the adjustment notwithstanding section 553 of title 5, United States Code” (the Administrative Procedure Act).13 The FDIC, therefore, is not obligated to publish the subsequent adjustments through notice-and-comment rulemaking, and the FDIC is publishing the adjustments through a final rule.

13 Public Law 114-74, sec. 701(b), 129 Stat. 584 (emphasis added).

Moreover, the FDIC is correcting a technical error found at 12 CFR 308.132(c). During the last CMP-adjustment process, the FDIC sought to revise 12 CFR 308.132(c) to articulate the FDIC Board's authority to assess CMPs. The FDIC also intended to transfer the substance of current 12 CFR 308.132(c)(2) through 12 CFR 308.132(c)(3)(xvii) to current 12 CFR 308.132(d), and to remove the now-duplicative language of 12 CFR 308.132(c)(2) through 12 CFR 308.132(c)(3)(xvii). The Final Rule amends 12 CFR 308.132(c) accordingly by removing 12 CFR 308.132(c)(2) through 12 CFR 308.132(c)(3)(xvii) and retitling current 12 CFR 308.132(c)(1).

The FDIC believes that all of these changes are technical and ministerial in character, and therefore, the FDIC is not soliciting public comment on the changes.

III. Description and Expected Effects of the Final Rule

The Final Rule modifies the maximum limit for CMPs according to inflation as mandated by Congress in the 2015 Adjustment Act. The 2015 Adjustment Act directs federal agencies to follow guidance issued by the Office of Management and Budget (OMB) on December 16, 2016 (OMB Guidance), when calculating new maximum penalty levels.14 The adjustments are to be based on the percent change between the Consumer Price Index for all Urban Consumers (CPI-U) 15 for October 2015 and the October 2016 CPI-U.

14See OMB, Implementation of the 2017 Annual Adjustment Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, M-17-11 (Dec. 16, 2016), available at https://www.whitehouse.gov/sites/default/files/omb/memoranda/2017/m-17-11_0.pdf (noting that the applicable 2017 CMP-adjustment multiplier is 1.01636).

15 The CPI-U is compiled by the Bureau of Statistics of the Department of Labor.

Summary of the FDIC's Calculations

In keeping with the OMB Guidance, the FDIC multiplied each of its CMP amounts by the relevant inflation factor.16 After applying the multiplier, the FDIC rounded each penalty level to the nearest dollar. In making these calculations, the FDIC consulted with staff from the Office of the Comptroller of the Currency, the Board of Governors for the Federal Reserve System, the National Credit Union Administration, and the Bureau of Consumer Financial Protection to ensure that the FDIC's calculations and adjustments are consistent with those being proposed by other federal financial regulators for the same statutes.

16 Under the 1990 Adjustment Act, adjustments have been made only to CMPs that are for specific dollar amounts or maximums. CMPs that are assessed based upon a fixed percentage of an institution's total assets are not subject to adjustment.

The Adjusted CMP Amounts

The following chart displays the adjusted CMP amounts for each CMP identified in 12 CFR part 308.17 The following chart reflects the maximum CMP amounts that may be assessed after January 15, 2017—the effective date of the 2017 annual adjustment—including assessments whose associated violations occurred on or after November 2, 2015.18

17 As noted previously, the FDIC retains discretion to impose CMPs in amounts below the referenced maximums.

18See OMB Guidance at 4.

Maximum Civil Money Penalty Amounts U.S. Code citation Current maximum CMP
  • (through January 14, 2017)
  • Adjusted maximum CMP
  • (beginning January 15, 2017)
  • 12 U.S.C. 1464(v) Tier One CMP $3,787 $3,849 Tier Two CMP 37,872 38,492 Tier Three CMP 1,893,610 1,924,589 12 U.S.C. 1467(d) 9,468 9,623 12 U.S.C. 1817(a) Tier One CMP 3,787 3,849 Tier Two CMP 37,872 38,492 Tier Three CMP 1,893,610 1,924,589 12 U.S.C. 1817(c) Tier One CMP 3,462 3,519 Tier Two CMP 34,620 35,186 Tier Three CMP 1,730,990 1,759,309 12 U.S.C. 1818(i)(2) Tier One CMP 9,468 9,623 Tier Two CMP 47,340 48,114 Tier Three CMP 1,893,610 1,924,589 12 U.S.C. 1820(e)(4) 8,655 8,797 12 U.S.C. 1820(k)(6) 311,470 316,566 12 U.S.C. 1828(a)(3) 118 120 12 U.S.C. 1828(h) For assessments < 10,000 118 120 12 U.S.C. 1829b(j) 19,787 20,111 12 U.S.C. 1832(c) 2,750 2,795 12 U.S.C. 1884 275 279 12 U.S.C. 1972(2)(F) Tier One CMP 9,468 9,623 Tier Two CMP 47,340 48,114 Tier Three CMP 1,893,610 1,924,589 12 U.S.C. 3909(d) 2,355 2,394 15 U.S.C. 78u-2 Tier One CMP (individuals) 8,908 9,054 Tier One CMP (others) 89,078 90,535 Tier Two CMP (individuals) 89,078 90,535 Tier Two CMP (others) 445,390 452,677 Tier Three CMP (individuals) 178,156 181,071 Tier Three penalty (others) 890,780 905,353 15 U.S.C. 1639e(k) First violation 10,875 11,053 Subsequent violations 21,749 22,105 31 U.S.C. 3802 10,781 10,957 42 U.S.C. 4012a(f) 2,056 2,090
    CFR citation Current maximum amount
  • (through January 14, 2017)
  • New maximum amount
  • (beginning January 15, 2017)
  • 12 CFR 308.132(c)—Late or Misleading Reports of Condition and Income (Call Reports) First Offense 25 million or more assets 1 to 15 days late $519 $527 16 or more days late 1,039 1,056 Less than 25 million assets 1 to 15 days late 173 176 16 or more days late 346 352 Subsequent Offenses 25 million or more assets 1 to 15 days late 865 879 16 or more days late 1,731 1,759
    The Expected Effects of the CMP Adjustments

    The CMP Adjustments are expected to more precisely adjust CMP maximums relative to inflation. These adjustments are expected to minimize any year-to-year distortions in the real value of the CMP maximums. These adjustments will promote a more consistent deterrent effect in the structure of CMPs. As previously noted, the FDIC retains discretion to impose CMP amounts below the maximum level. The actual number and size of CMPs assessed in the future will depend on the propensity and severity of the violations committed by banks and institution-affiliated parties, as well as the particular statute that is at issue. Such future violations cannot be reliably forecast. It is expected that the FDIC will continue to exercise its discretion to impose CMPs that are appropriate to their severity.

    The 2015 Adjustment Act will likely result in a minimal increase in administrative costs for the FDIC in order to establish new inflation-adjusted maximum CMPs each year. Because these calculations are relatively simple, the number of labor hours necessary to perform this task is likely to be insignificant relative to total enforcement labor hours for the Corporation.

    IV. Alternatives Considered

    The 2015 Adjustment Act mandates the frequency of the inflation adjustment and the measure of inflation to be used in making these adjustments. This statute also provides that the FDIC is not required to proceed through notice-and-comment rulemaking under the Administrative Procedure Act in making annual CMP adjustments. Therefore, the FDIC has not considered alternatives to the CMP Adjustments.

    V. Request for Comment

    The 2015 Adjustment Act requires the FDIC to adjust its maximum CMP amounts “notwithstanding section 553 of title 5, United States Code,” 19 and provides the specific adjustments to be made. Moreover, the CMP Adjustments and the revisions to the CFR are ministerial and technical; therefore, the FDIC is not required to complete a notice-and-comment rulemaking process prior to making the adjustments.

    19 Public Law 114-74, sec. 701(b), 129 Stat. 584.

    VI. Regulatory Analysis Riegle Community Development and Regulatory Improvement Act

    Section 302 of the Riegle Community Development and Regulatory Improvement Act 20 generally requires that regulations prescribed by federal banking agencies which impose additional reporting, disclosures, or other new requirements on insured depository institutions take effect on the first day of a calendar quarter unless the regulation is required to take effect on another date pursuant to another act of Congress or the agency determines for good cause that the regulation should become effective on an earlier date.

    20 12 U.S.C. 4802.

    This Final Rule does not impose any new or additional reporting, disclosures, or other requirements on insured depository institutions. Therefore, the Final Rule is not subject to the requirements of this statute.

    Regulatory Flexibility Act

    An initial regulatory flexibility analysis under the Regulatory Flexibility Act 21 (RFA) is required only when an agency must publish a general notice of proposed rulemaking. As noted above, the FDIC determined that publication of a notice of proposed rulemaking is not necessary for the Final Rule. Accordingly, the RFA does not require an initial regulatory flexibility analysis. Nevertheless, the FDIC considered the likely impact of Final Rule on small entities. From 2011 through 2015, on average, only 1.6 percent of FDIC-supervised institutions were ordered to pay a CMP each year. Accordingly, the FDIC believes that the Final Rule will not have a significant impact on a substantial number of small entities.

    21 5 U.S.C. 603.

    Small Business Regulatory Enforcement Fairness Act

    The OMB has determined that the Final Rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement Act of 1996 (SBREFA).22 As required by SBREFA, the FDIC will submit the Final Rule and other appropriate reports to Congress and the Government Accountability Office for review.

    22 5 U.S.C. 801 et seq.

    The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999: Assessment of Federal Regulations and Policies on Families

    The FDIC determined that the Final Rule will not affect family wellbeing within the meaning of section 654 of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999.23

    23 Public Law 105-277, 112 Stat. 2681 (1998).

    Paperwork Reduction Act

    The Final Rule does not create any new, or revise any existing, collections of information under section 3504(h) of the Paperwork Reduction Act of 1980.24 Consequently, no information collection request will be submitted to the OMB for review.

    24 44 U.S.C. 3501 et seq.

    Plain Language Act

    Section 722 of the Gramm-Leach-Bliley Act requires the FDIC to use plain language in all proposed and final rules published after January 1, 2000.25 Accordingly, the FDIC has attempted to write the Final Rule in clear and comprehensible language.

    25 Public Law 106-102, 113 Stat. 1338 (Nov. 12, 1999).

    List of Subjects in 12 CFR Part 308

    Administrative practice and procedure, Banks, Banking, Claims, Crime, Equal access to justice, Ex parte communications, Hearing procedure, Lawyers, Penalties, State nonmember banks.

    For the reasons set forth in the preamble, the FDIC amends 12 CFR part 308 as follows:

    PART 308—RULES OF PRACTICE AND PROCEDURE 1. The authority citation for part 308 continues to read as follows: Authority:

    5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 1464, 1467(d), 1467a, 1468, 1815(e), 1817, 1818, 1819, 1820, 1828, 1829, 1829(b), 1831i, 1831m(g)(4), 1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717, 5412(b)(2)(C), 5414(b)(3); 15 U.S.C. 78(h) and (i), 78o(c)(4), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31 U.S.C. 330, 5321; 42 U.S.C. 4012a; Pub. L. 104-134, sec. 31001(s), 110 Stat. 1321; Pub. L. 109-351, 120 Stat. 1966; Pub. L. 111-203, 124 Stat. 1376; Pub. L. 114-74, sec. 701, 129 Stat. 584.

    2. Revise § 308.116(b)(4) to read as follows:
    §  308.116 Assessment of penalties.

    (b) * * *

    (4) Adjustment of civil money penalties by the rate of inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. After January 15, 2017, for violations that occurred on or after November 2, 2015:

    (i) Any person who has engaged in a violation as set forth in paragraph (b)(1) of this section shall forfeit and pay a civil money penalty of not more than $9,623 for each day the violation continued.

    (ii) Any person who has engaged in a violation, unsafe or unsound practice or breach of fiduciary duty, as set forth in paragraph (b)(2) of this section, shall forfeit and pay a civil money penalty of not more than $48,114 for each day such violation, practice or breach continued.

    (iii) Any person who has knowingly engaged in a violation, unsafe or unsound practice or breach of fiduciary duty, as set forth in paragraph (b)(3) of this section, shall forfeit and pay a civil money penalty not to exceed:

    (A) In the case of a person other than a depository institution—$1,924,589 per day for each day the violation, practice or breach continued; or

    (B) In the case of a depository institution—an amount not to exceed the lesser of $1,924,589 or one percent of the total assets of such institution for each day the violation, practice or breach continued.

    3. Revise § 308.132(c) and (d) to read as follows:
    § 308.132 Assessment of penalties.

    (c) Authority of the Board of Directors. The Board of Directors or its designee may assess civil money penalties under section 8(i) of the FDIA (12 U.S.C. 1818(i)), and § 308.1(e) of the Uniform Rules (this part).

    (d) Maximum civil money penalty amounts. Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, after January 15, 2017, for violations that occurred on or after November 2, 2015, the Board of Directors or its designee may assess civil money penalties in the maximum amounts as follows:

    (1) Civil money penalties assessed pursuant to 12 U.S.C. 1464(v) for late filing or the submission of false or misleading certified statements by State savings associations. Pursuant to section 5(v) of the Home Owners' Loan Act (12 U.S.C. 1464(v)), the Board of Directors or its designee may assess civil money penalties as follows:

    (i) Late filing—Tier One penalties. In cases in which an institution fails to make or publish its Report of Condition and Income (Call Report) within the appropriate time periods, a civil money penalty of not more than $3,849 per day may be assessed where the institution maintains procedures in place reasonably adapted to avoid inadvertent error and the late filing occurred unintentionally and as a result of such error; or the institution inadvertently transmitted a Call Report that is minimally late. For penalties assessed after January 15, 2017, for violations of this paragraph (d)(3)(i) that occurred on or after November 2, 2015, the following maximum Tier One penalty amounts contained in paragraphs (d)(1)(i)(A) and (B) of this section shall apply for each day that the violation continues.

    (A) First offense. Generally, in such cases, the amount assessed shall be $527 per day for each of the first 15 days for which the failure continues, and $1,056 per day for each subsequent day the failure continues, beginning on the sixteenth day. For institutions with less than $25,000,000 in assets, the amount assessed shall be the greater of $176 per day or 1/1000th of the institution's total assets (1/10th of a basis point) for each of the first 15 days for which the failure continues, and $352 or 1/500th of the institution's total assets, 1/5 of a basis point) for each subsequent day the failure continues, beginning on the sixteenth day.

    (B) Subsequent offense. Where the institution has been delinquent in making or publishing its Call Report within the preceding five quarters, the amount assessed for the most current failure shall generally be $879 per day for each of the first 15 days for which the failure continues, and $1,759 per day for each subsequent day the failure continues, beginning on the sixteenth day. For institutions with less than $25,000,000 in assets, those amounts, respectively, shall be 1/500th of the bank's total assets and 1/250th of the institution's total assets.

    (C) Lengthy or repeated violations. The amounts set forth in this paragraph (d)(1)(i) will be assessed on a case by case basis where the amount of time of the institution's delinquency is lengthy or the institution has been delinquent repeatedly in making or publishing its Call Reports.

    (D) Waiver. Absent extraordinary circumstances outside the control of the institution, penalties assessed for late filing shall not be waived.

    (ii) Late-filing—Tier Two penalties. Where an institution fails to make or publish its Call Report within the appropriate time period, the Board of Directors or its designee may assess a civil money penalty of not more than $38,492 per day for each day the failure continues.

    (iii) False or misleading reports or information—(A) Tier One penalties. In cases in which an institution submits or publishes any false or misleading Call Report or information, the Board of Directors or its designee may assess a civil money penalty of not more than $3,849 per day for each day the information is not corrected, where the institution maintains procedures in place reasonably adapted to avoid inadvertent error and the violation occurred unintentionally and as a result of such error; or the institution inadvertently transmits a Call Report or information that is false or misleading.

    (B) Tier Two penalties. Where an institution submits or publishes any false or misleading Call Report or other information, the Board of Directors or its designee may assess a civil money penalty of not more than $38,492 per day for each day the information is not corrected.

    (C) Tier Three penalties. Where an institution knowingly or with reckless disregard for the accuracy of any Call Report or information submits or publishes any false or misleading Call Report or other information, the Board of Directors or its designee may assess a civil money penalty of not more than the lesser of $1,924,589 or 1 percent of the institution's total assets per day for each day the information is not corrected.

    (iv) Mitigating factors. The amounts set forth in this paragraph (d)(1) may be reduced based upon the factors set forth in paragraph (b) of this section.

    (2) Civil money penalties assessed pursuant to 12 U.S.C. 1467(d) for refusal by an affiliate of a State savings association to allow examination or to provide required information during an examination. Pursuant to section 9(d) of the Home Owners' Loan Act (12 U.S.C. 1467(d)), civil money penalties may be assessed against any State savings association if an affiliate of such an institution refuses to permit a duly-appointed examiner to conduct an examination or refuses to provide information during the course of an examination as set forth 12 U.S.C. 1467(d), in an amount not to exceed $9,623 for each day the refusal continues.

    (3) Civil money penalties assessed pursuant to 12 U.S.C. 1817(a) for late filings or the submission of false or misleading reports of condition. Pursuant to section 7(a) of the FDIA (12 U.S.C. 1817(a)), the Board of Directors or its designee may assess civil money penalties as follows:

    (i) Late filing—Tier One penalties. In cases in which an institution fails to make or publish its Report of Condition and Income (Call Report) within the appropriate time periods, a civil money penalty of not more than $3,849 per day may be assessed where the institution maintains procedures in place reasonably adapted to avoid inadvertent error and the late filing occurred unintentionally and as a result of such error; or the institution inadvertently transmitted a Call Report that is minimally late. For penalties assessed after January 15, 2017, for violations of this paragraph (d)(3)(i) that occurred on or after November 2, 2015, the following maximum Tier One penalty amounts contained in paragraphs (d)(3)(i)(A) and (B) of this section shall apply for each day that the violation continues.

    (A) First offense. Generally, in such cases, the amount assessed shall be $527 per day for each of the first 15 days for which the failure continues, and $1,056 per day for each subsequent day the failure continues, beginning on the sixteenth day. For institutions with less than $25,000,000 in assets, the amount assessed shall be the greater of $176 per day or 1/1000th of the institution's total assets (1/10th of a basis point) for each of the first 15 days for which the failure continues, and $352 or 1/500th of the institution's total assets, (1/5 of a basis point) for each subsequent day the failure continues, beginning on the sixteenth day.

    (B) Subsequent offense. Where the institution has been delinquent in making or publishing its Call Report within the preceding five quarters, the amount assessed for the most current failure shall generally be $879 per day for each of the first 15 days for which the failure continues, and $1,759 per day for each subsequent day the failure continues, beginning on the sixteenth day. For institutions with less than $25,000,000 in assets, those amounts, respectively, shall be 1/500th of the bank's total assets and 1/250th of the institution's total assets.

    (C) Lengthy or repeated violations. The amounts set forth in this paragraph (d)(3)(i) will be assessed on a case by case basis where the amount of time of the institution's delinquency is lengthy or the institution has been delinquent repeatedly in making or publishing its Call Reports.

    (D) Waiver. Absent extraordinary circumstances outside the control of the institution, penalties assessed for late filing shall not be waived.

    (ii) Late-filing—Tier Two penalties. Where an institution fails to make or publish its Call Report within the appropriate time period, the Board of Directors or its designee may assess a civil money penalty of not more than $38,492 per day for each day the failure continues.

    (iii) False or misleading reports or information—(A) Tier One penalties. In cases in which an institution submits or publishes any false or misleading Call Report or information, the Board of Directors or its designee may assess a civil money penalty of not more than $3,849 per day for each day the information is not corrected, where the institution maintains procedures in place reasonably adapted to avoid inadvertent error and the violation occurred unintentionally and as a result of such error; or the institution inadvertently transmits a Call Report or information that is false or misleading.

    (B) Tier Two penalties. Where an institution submits or publishes any false or misleading Call Report or other information, the Board of Directors or its designee may assess a civil money penalty of not more than $38,492 per day for each day the information is not corrected.

    (C) Tier Three penalties. Where an institution knowingly or with reckless disregard for the accuracy of any Call Report or information submits or publishes any false or misleading Call Report or other information, the Board of Directors or its designee may assess a civil money penalty of not more than the lesser of $1,924,589 or 1 percent of the institution's total assets per day for each day the information is not corrected.

    (iv) Mitigating factors. The amounts set forth in this paragraph (d)(3) may be reduced based upon the factors set forth in paragraph (b) of this section.

    (4) Civil money penalties assessed pursuant to 12 U.S.C. 1817(c) for late filing or the submission of false or misleading certified statements. Tier One civil money penalties may be assessed pursuant to section 7(c)(4)(A) of the FDIA (12 U.S.C. 1817(c)(4)(A)) in an amount not to exceed $3,519 for each day during which the failure to file continues or the false or misleading information is not corrected. Tier Two civil money penalties may be assessed pursuant to section 7(c)(4)(B) of the FDIA (12 U.S.C. 1817(c)(4)(B)) in an amount not to exceed $35,186 for each day during which the failure to file continues or the false or misleading information is not corrected. Tier Three civil money penalties may be assessed pursuant to section 7(c)(4)(C) in an amount not to exceed the lesser of $1,759,309 or 1 percent of the total assets of the institution for each day during which the failure to file continues or the false or misleading information is not corrected.

    (5) Civil money penalties assessed pursuant to section 8(i)(2) of the FDIA. Tier One civil money penalties may be assessed pursuant to section 8(i)(2)(A) of the FDIA (12 U.S.C. 1818(i)(2)(A)) in an amount not to exceed $9,623 for each day during which the violation continues. Tier Two civil money penalties may be assessed pursuant to section 8(i)(2)(B) of the FDIA (12 U.S.C. 1818(i)(2)(B)) in an amount not to exceed $48,114 for each day during which the violation, practice or breach continues. Tier Three civil money penalties may be assessed pursuant to section 8(i)(2)(C) (12 U.S.C. 1818(i)(2)(C)) in an amount not to exceed, in the case of any person other than an insured depository institution $1,924,589 or, in the case of any insured depository institution, an amount not to exceed the lesser of $1,924,589 or 1 percent of the total assets of such institution for each day during which the violation, practice, or breach continues.

    (i) Pursuant to 7(j)(16) of the FDIA (12 U.S.C. 1817(j)(16)), a civil money penalty may be assessed for violations of change in control of insured depository institution provisions pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)) in the amounts set forth in this paragraph (d)(5).

    (ii) Pursuant to the International Banking Act of 1978 (IBA) (12 U.S.C. 3108(b)), civil money penalties may be assessed for failure to comply with the requirements of the IBA pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)), in the amounts set forth in this paragraph (d)(5).

    (iii) Pursuant to section 1120(b) of the Financial Institutions Recovery, Reform, and Enforcement Act of 1989 (FIRREA) (12 U.S.C. 3349(b)), where a financial institution seeks, obtains, or gives any other thing of value in exchange for the performance of an appraisal by a person that the institution knows is not a state certified or licensed appraiser in connection with a federally related transaction, a civil money penalty may be assessed pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)) in the amounts set forth in this paragraph (d)(5).

    (iv) Pursuant to the Community Development Banking and Financial Institution Act (Community Development Banking Act) (12 U.S.C. 4717(b)) a civil money penalty may be assessed for violations of the Community Development Banking Act pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)), in the amount set forth in this paragraph (d)(5).

    (v) Civil money penalties may be assessed pursuant to section 8(i)(2) of the FDIA in the amounts set forth in this paragraph (d)(5) for violations of various consumer laws, including, but not limited to, the Home Mortgage Disclosure Act (12 U.S.C. 2804 et seq. and 12 CFR 203.6), the Expedited Funds Availability Act (12 U.S.C. 4001 et seq.), the Truth in Savings Act (12 U.S.C. 4301 et seq.), the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.), the Truth in Lending Act (15 U.S.C. 1601 et seq.), the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.), the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.), the Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.), the Electronic Funds Transfer Act (15 U.S.C. 1693 et seq.) and the Fair Housing Act (42 U.S.C. 3601 et seq.).

    (6) Civil money penalties assessed pursuant to 12 U.S.C. 1820(e) for refusal to allow examination or to provide required information during an examination. Pursuant to section 10(e)(4) of the FDIA (12 U.S.C. 1820(e)(4)), civil money penalties may be assessed against any affiliate of an insured depository institution that refuses to permit a duly-appointed examiner to conduct an examination or to provide information during the course of an examination as set forth in section 20(b) of the FDIA (12 U.S.C. 1820(b)), in an amount not to exceed $8,797 for each day the refusal continues.

    (7) Civil money penalties assessed pursuant to 12 U.S.C. 1820(k) for violation of one-year restriction on Federal examiners of financial institutions. Pursuant to section 10(k) of the FDIA (12 U.S.C. 1820(k)), the Board of Directors or its designee may assess a civil money penalty of up to $316,566 against any covered former Federal examiner of a financial institution who, in violation of section 10(k) of the FDIA (12 U.S.C. 1820(k)) and within the one-year period following termination of government service as an employee, serves as an officer, director, or consultant of a financial or depository institution, a holding company, or of any other entity listed in section 10(k) of the FDIA (12 U.S.C. 1820(k)), without the written waiver or permission by the appropriate Federal banking agency or authority under section 10(k)(5) of the FDIA (12 U.S.C. 1820(k)(5)).

    (8) Civil money penalties assessed pursuant to 12 U.S.C. 1828(a) for incorrect display of insurance logo. Pursuant to section 18(a)(3) of the FDIA (12 U.S.C. 1828(a)(3)), civil money penalties may be assessed against an insured depository institution that fails to correctly display its insurance logo pursuant to that section, in an amount not to exceed $120 for each day the violation continues.

    (9) Civil money penalties assessed pursuant to 12 U.S.C. 1828(h) for failure to timely pay assessment—(i) In general. Subject to paragraph (d)(9)(iii) of this section, any insured depository institution that fails or refuses to pay any assessment shall be subject to a penalty in an amount of not more than 1 percent of the amount of the assessment due for each day that such violation continues.

    (ii) Exception in case of dispute. Paragraph (d)(9)(i) of this section shall not apply if—

    (A) The failure to pay an assessment is due to a dispute between the insured depository institution and the Corporation over the amount of such assessment; and

    (B) The insured depository institution deposits security satisfactory to the Corporation for payment upon final determination of the issue.

    (iii) Special rule for small assessment amounts. If the amount of the assessment that an insured depository institution fails or refuses to pay is less than $10,000 at the time of such failure or refusal, the amount of any penalty to which such institution is subject under paragraph (d)(9)(i) of this section shall not exceed $120 for each day that such violation continues.

    (iv) Authority to modify or remit penalty. The Corporation, in the sole discretion of the Corporation, may compromise, modify, or remit any penalty that the Corporation may assess or has already assessed under paragraph (d)(9)(i) of this section upon a finding that good cause prevented the timely payment of an assessment.

    (10) Civil money penalties assessed pursuant to 12 U.S.C. 1829b(j) for recordkeeping violations. Pursuant to section 19b(j) of the FDIA (12 U.S.C. 1829b(j)), civil money penalties may be assessed against an insured depository institution and any director, officer or employee thereof who willfully or through gross negligence violates or causes a violation of the recordkeeping requirements of that section or its implementing regulations in an amount not to exceed $20,111 per violation.

    (11) Civil money penalties pursuant to 12 U.S.C. 1832(c) for violation of provisions regarding interest-bearing demand deposit accounts. Pursuant to 12 U.S.C. 1832(c), any depository institution that violates the prohibition regarding interest-bearing demand deposit accounts shall be subject to a fine of $2,795 per violation.

    (12) Civil penalties for violations of security measure requirements under 12 U.S.C. 1884. Pursuant to 12 U.S.C. 1884, an institution that violates a rule establishing minimum security requirements as set forth in 12 U.S.C. 1882, shall be subject to a civil penalty not to exceed $279 for each day of the violation.

    (13) Civil money penalties assessed pursuant to 12 U.S.C. 1972(2)(F) for prohibited tying arrangements. Pursuant to the Bank Holding Company Act of 1970, Tier One civil money penalties may be assessed pursuant to 12 U.S.C. 1972(2)(F)(i) in an amount not to exceed $9,623 for each day during which the violation continues. Tier Two civil money penalties may be assessed pursuant to 12 U.S.C. 1972(2)(F)(ii) in an amount not to exceed $48,114 for each day during which the violation, practice or breach continues. Tier Three civil money penalties may be assessed pursuant to 12 U.S.C. 1972(2)(F)(iii) in an amount not to exceed, in the case of any person other than an insured depository institution $1,924,589 for each day during which the violation, practice, or breach continues or, in the case of any insured depository institution, an amount not to exceed the lesser of $1,924,589 or 1 percent of the total assets of such institution for each day during which the violation, practice, or breach continues.

    (14) Civil money penalties assessed pursuant to 12 U.S.C. 3909(d). Pursuant to the International Lending Supervision Act (ILSA) (12 U.S.C. 3909(d)), civil money penalties may be assessed against any institution or any officer, director, employee, agent or other person participating in the conduct of the affairs of such institution is an amount not to exceed $2,394 for each day a violation of the ILSA or any rule, regulation or order issued pursuant to ILSA continues.

    (15) Civil money penalties assessed for violations of 15 U.S.C. 78u-2. Pursuant to section 21B of the Securities Exchange Act of 1934 (Exchange Act) (15 U.S.C. 78u-2), civil money penalties may be assessed for violations of certain provisions of the Exchange Act, where such penalties are in the public interest. Tier One civil money penalties may be assessed pursuant to 15 U.S.C. 78u-2(b)(1) in an amount not to exceed $9,054 for a natural person or $90,535 for any other person for violations set forth in 15 U.S.C. 78u-2(a). Tier Two civil money penalties may be assessed pursuant to 15 U.S.C. 78u-2(b)(2) in an amount not to exceed—for each violation set forth in 15 U.S.C. 78u-2(a)—$90,535 for a natural person or $452,677 for any other person if the act or omission involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement. Tier Three civil money penalties may be assessed pursuant to 15 U.S.C. 78u-2(b)(3) for each violation set forth in 15 U.S.C. 78u-2(a), in an amount not to exceed $181,071 for a natural person or $905,353 for any other person, if the act or omission involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and such act or omission directly or indirectly resulted in substantial losses, or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.

    (16) Civil money penalties assessed pursuant to 15 U.S.C. 1639e(k) for appraisal independence violations. Pursuant to section 1472(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Appraisal Independence Rule) (15 U.S.C. 1639e(k)), civil money penalties may be assessed for an initial violation of the Appraisal Independence Rule in an amount not to exceed $11,053 for each day during which the violation continues and, for subsequent violations, $22,105 for each day during which the violation continues.

    (17) Civil money penalties assessed for false claims and statements pursuant to 31 U.S.C. 3802. Pursuant to the Program Fraud Civil Remedies Act (31 U.S.C. 3802), civil money penalties of not more than $10,957 per claim or statement may be assessed for violations involving false claims and statements.

    (18) Civil money penalties assessed for violations of 42 U.S.C. 4012a(f). Pursuant to the Flood Disaster Protection Act (FDPA) (42 U.S.C. 4012a(f)), civil money penalties may be assessed against any regulated lending institution that engages in a pattern or practice of violations of the FDPA in an amount not to exceed $2,090 per violation.

    Dated at Washington, DC, this 21st day of December, 2016.

    By order of the Board of Directors.

    Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary.
    [FR Doc. 2016-31240 Filed 12-27-16; 8:45 am] BILLING CODE 6714-01-P
    SMALL BUSINESS ADMINISTRATION 13 CFR Part 107 RIN 3245-AG67 Small Business Investment Companies: Passive Business Expansion and Technical Clarifications AGENCY:

    U.S. Small Business Administration.

    ACTION:

    Final rule.

    SUMMARY:

    The U.S. Small Business Administration (SBA) is revising the regulations for the Small Business Investment Company (SBIC) program to expand permitted investments in passive businesses and provide further clarification with regard to investments in such businesses. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958, as amended (Act). SBIC program regulations provide for two exceptions that allow an SBIC to structure an investment utilizing a passive small business as a pass-through. The first exception provides conditions under which an SBIC may structure an investment through up to two levels of passive entities to make an investment in a non-passive business that is a subsidiary of the passive business directly financed by the SBIC. The second exception, prior to this final rule, enabled a partnership SBIC, with SBA's prior approval, to provide financing to a small business through a passive, wholly-owned C corporation (commonly known as a blocker corporation), but only if a direct financing would cause the SBIC's investors to incur Unrelated Business Taxable Income (UBTI). This final rule clarifies several aspects of the first exception and in the second exception eliminates the prior approval requirement and expands the purposes for which a blocker corporation may be formed. The final rule also adds new reporting and other requirements for passive investments to help protect SBA's financial interests and ensure adequate oversight and makes minor technical amendments. Finally, this rule makes a conforming change to the regulations regarding the amount of leverage available to SBICs under common control. This change is necessary for consistency with the Consolidated Appropriations Act, 2016, which increased the maximum amount of such leverage to $350 million.

    DATES:

    This rule is effective January 27, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Theresa Jamerson, Office of Investment and Innovation, (202) 205-7563 or [email protected]

    SUPPLEMENTARY INFORMATION:

    I. Background Information

    The SBIC Program is an SBA financing program authorized under Title III of the Small Business Investment Act of 1958, 15 U.S.C. 681 et seq. Congress created the Small Business Investment Company (SBIC) program to “stimulate and supplement the flow of private equity capital and long-term loan funds, which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply . . . .” 15 U.S.C. 661. Congress intended that the program “be carried out in such manner as to insure the maximum participation of private financing sources.” Id. In accordance with that policy, SBA does not invest directly in small businesses. Rather, through the SBIC Program, SBA licenses and provides debenture leverage (Leverage) to SBICs. SBICs are privately-owned and professionally managed for-profit investment funds that make loans to, and investments in, qualified small businesses using a combination of privately raised capital and Leverage guaranteed by SBA. SBA will guarantee the repayment of debentures issued by an SBIC based on the amount of qualifying private capital raised by an SBIC up to a maximum amount of $150 million in Leverage.

    SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958. Prior to this final rule, the SBIC program regulations provided for the following two exceptions that allowed an SBIC to structure an investment utilizing a passive small business as a pass-through:

    A. “Holding company exception”—§ 107.720(b)(2): This exception provides conditions under which an SBIC may structure an investment through up to two levels of passive entities to make an investment in a non-passive business that is a subsidiary of the passive business directly financed by the SBIC. The regulation defines a subsidiary company as one in which the financed passive business directly or indirectly owns at least 50% of the outstanding voting securities. As an example, this exception allows an SBIC to finance ABC Holdings 1, a passive small business, with the proceeds flowing through ABC Holdings 2, another passive small business, and then to ABC Manufacturing, a non-passive small business in which ABC Holdings 1 owns directly or indirectly at least 50% of the outstanding voting securities.

    B. “Blocker corporation exception”—§ 107.720(b)(3): This exception enables a partnership SBIC, with SBA's prior approval, to provide financing to a small business through a passive, wholly-owned C corporation, but only if a direct financing would cause one or more of the SBIC's investors to incur Unrelated Business Taxable Income (UBTI). A passive C corporation formed under the second exception is commonly known as a blocker corporation.

    On October 5, 2015, SBA published a proposed rule (80 FR 60077) to further expand the permitted use of passive businesses, provide clarification with regard to investments in such businesses, and make minor technical clarifications. SBA received three comments on the proposed rule, not including one comment that generally questioned the fairness of the Act as a whole and did not provide any specific comments on the rule. The three comments pertinent to the rule are addressed in Section II.

    Section II also discusses a conforming regulatory change to implement Section 521 of the Consolidated Appropriations Act, 2016 which increased the maximum leverage available to two or more SBICs under common control from $225 million to $350 million.

    II. Section-By-Section Analysis A. Passive Business Rules Section 107.720—Small Businesses That May Be Ineligible for Financing

    1. Changes to Holding Company Exception § 107.720(b)(2): SBA proposed revisions to § 107.720(b)(2) to explicitly permit an SBIC to form and finance a passive business that will either pass the proceeds through to or use the proceeds to acquire all or part of a non-passive business. These changes were intended to codify SBA's existing interpretation of the regulations.

    SBA received 2 comments on § 107.720(b)(2) indicating that the proposed changes would be more effective if the passive business directly financed was not required to own at least 50 percent of the underlying active business. Commenters suggested that SBICs be allowed to structure investments using passive investment vehicles “irrespective of the number of parent entities involved so long as the parent entities in question directly or indirectly own or control at least 50 percent of the voting or economic interests of the active business.” SBA received similar comments as part of the rulemaking process when it last proposed expanding the permitted use of passive businesses. SBA reconsidered these previous suggestions in developing this current rule; however, in light of the additional protections added in this final rule (see the discussion of § 107.720(b)(4) in paragraph II.A.3 of this preamble), neither set of comments was adopted. Although the new § 107.720(b)(4) should help address some of SBA's credit concerns, SBA believes that controlling ownership provisions are needed to facilitate access to information and records needed to effectively monitor these transactions and to aid in the recovery of assets in the event of a default. SBA also continues to maintain its position that effective monitoring of transactions with unlimited levels of passive companies would require resources well beyond those available to the Agency. Proposed § 107.720(b)(2) is adopted without change.

    2. Changes to Blocker Corporation Exception—§ 107.720(b)(3): The proposed rule also included the following changes to § 107.720(b)(3):

    a. Removing the requirement to obtain SBA's prior approval to form a blocker corporation;

    b. Permitting an SBIC to form a blocker corporation to enable any foreign investors to avoid effectively connected income (ECI) under the Internal Revenue Code;

    c. Permitting a blocker corporation to provide financing to a second passive small business that passes the proceeds through to a non-passive small business in which it owns at least 50 percent of the outstanding voting securities (effectively permitting an investment structured with two levels of passive companies, one of which is the blocker corporation); and

    d. Removing outdated language indicating that an SBIC's ownership of a blocker corporation formed under § 107.720(b)(3) will not constitute a violation of § 107.865(a). This provision was rendered unnecessary by a rule change in 2002 (67 FR 64789) that revised § 107.865(a) to permit an SBIC to exercise control over a small business for up to seven years without SBA approval.

    SBA received comments on proposed § 107.720(b)(3) as discussed below:

    a. Regulated Investment Company (RIC) Exception. All 3 commenters asked that the regulations provide an additional exception for SBICs that are wholly owned subsidiaries of Business Development Companies (BDCs). A BDC typically elects to be taxed as a RIC pursuant to Subchapter M of the Internal Revenue Code of 1986. In general, a RIC is not subject to U.S. federal income taxes on income and gains that it distributes to stockholders, provided that it satisfies certain minimum distribution requirements. To qualify as a RIC, a BDC must satisfy certain source of income and asset-diversification tests; among other things, a RIC must generally derive at least 90% of its gross income for each taxable year from certain types of investment. In particular, the commenters explained that equity interests in pass-through tax entities generate operating income that, if received or deemed received directly by a BDC, could disqualify the BDC from maintaining RIC status, and therefore, such interests must often be held through a blocker corporation. The commenters requested that § 107.720(b)(3) be revised to permit an SBIC to form a blocker corporation to avoid adverse tax consequences to an investor that has elected to be taxed as a RIC. This final rule adopts the suggestion.

    b. Blocker Entity Form of Organization. SBA also received two comments suggesting that non-corporate forms of organization should be permitted for blocker entities. The commenters explained that these structures are often “more streamlined in terms of corporate formalities than a C corporation” and suggested the regulations allow “any entity that elects to be taxed as a corporation for Federal income tax purposes.” SBA considered this suggestion to be overly broad, but partially adopted this suggestion in the final rule by allowing a blocker entity to be structured as an LLC that elects to be taxed as a corporation.

    c. Two Level Holding Company Financing. Two commenters indicated that § 107.720(b)(3) should allow SBICs to structure a financing with a blocker entity and then two levels of passive holding companies as defined in § 107.720(b)(2). The commenters stated that the proposed rule puts an SBIC that requires a blocker entity to accommodate its investors at a disadvantage compared to other SBICs that do not require a blocker entity, since the blocker entity can only finance a single passive business entity that in turn makes an investment into an active business. For example, an SBIC with a foreign investor would not be able to participate in a financing that is structured as a two-level passive business financing under 107.720(b)(2), if they also needed a separate passive business to serve as a blocker entity in order to avoid effectively connected income. However, SBA believes that one of the other passive businesses permitted under § 107.720(b)(2) could possibly be used as a blocker. The commenters' suggestion would effectively permit up to three levels of passive businesses between the SBIC and the operating business. SBA did not adopt this suggestion because additional levels of passive businesses impose a burden on SBA as regulator and increase the Agency's credit risk. SBA believes that two levels of passive businesses under either exception should provide SBICs with sufficient flexibility to operate successfully.

    d. SBA did not receive any comments on the proposed change to § 107.720(b)(3) regarding the removal of outdated language. This rule adopts the change as proposed.

    3. Additional Passive Business Guidance—§ 107.720(b)(4): The proposed rule identified SBA's concerns with regard to passive investments, including making sure the financing dollars go to the eligible non-passive small business, fees being charged at each passive business level, and SBA's ability to access passive business financial records, especially in the case of a defaulting SBIC. To address these concerns, SBA proposed making the the following changes in new § 107.720(b)(4), which would apply to any eligible passive investment made under § 107.720(b)(2) or (b)(3):

    a. “Substantially All” Definition. Clarifying the meaning of “substantially all” in § 107.720(b)(2) and (b)(3) to mean 99 percent of the financing proceeds after deduction of actual application fees, closing fees, and expense reimbursements, which may not exceed those permitted under § 107.860.

    b. Fee Requirements. Requiring fees charged by an SBIC or its Associate under §§ 107.860 and 107.900 to not exceed those permitted if the SBIC had directly financed the eligible Small Business and requiring any such fees received by an SBIC's Associate to be paid to the SBIC in cash within 30 days of receipt.

    c. “Portfolio Concern” Clarification. Clarifying that both passive and non-passive businesses included in a financing are “Portfolio Concerns” and therefore subject to record keeping and reporting obligations with respect to any “Portfolio Concern,” defined in § 107.50 as “a Small Business Assisted by a Licensee.”

    SBA received 3 comments on proposed § 107.720(b)(4) as discussed below:

    a. “Substantially All” Definition. Commenters suggested that the definition of “substantially all” be lowered to 95 percent of the proceeds instead of 99% of the proceeds because they were concerned that the 99 percent threshold “may be too limiting and pose issues in deal structuring.” SBA did not adopt this comment. The definition already excludes allowable fees and expense reimbursements permitted under §§ 107.860 and 107.900, and SBA believes that a 95 percent threshold could result in excessive expenses being charged in the passive businesses that is diverted from the intended operating business. Although this percentage may seem inconsequential, 4% of a $20 million financing represents $800,000 that could be diverted from the operating business.

    b. Fee Requirements. Two commenters suggested removing the requirement that fees received by an Associate must be paid over in cash to the SBIC. They noted that SBIC program policy guidance known as TechNote 7a, which provides guidelines concerning allowable management expenses for leveraged SBICs (see www.sba.gov/sbicpolicy), already requires that 100% of fees collected under § 107.860 or § 107.900 must benefit the SBIC, either by being paid directly to the SBIC or (if paid to an Associate) through a corresponding reduction in the management fee paid by the SBIC, typically called a “management fee offset.” Commenters also indicated that management fee offsets have tax advantages relative to other approaches. Although SBA recognizes that management fee offsets can provide tax advantages, SBA did not adopt this suggestion because of the difficulty in monitoring investments utilizing passive businesses and identifying fees associated with each passive business in addition to those paid by the operating business.

    c. “Portfolio Concern” Clarification. Two commenters indicated that the clarification of Portfolio Concern should be revised to apply only “for the purposes of this part 107.720” to avoid any unintended effects arising from the use of the term “Portfolio Concern” in other sections of the regulations. The commenters indicated that this adjustment would still allow SBA to retain the necessary information rights contemplated by the proposed rule. A search for the term “Portfolio Concern” within the regulations identified the following instances.

    • § 107.50 defines “Portfolio Concern” as “a Small Business Assisted by a Licensee.”

    • §§ 107.600-107.660 describe record keeping and information requirements, including those for a Portfolio Concern.

    • § 107.730 discusses conflicts of interest with regards to Portfolio Concerns.

    • § 107.760 discusses how a change in size or activity affect the Licensee with regards to a Portfolio Concern.

    • § 107.850 discusses restrictions on redemption of Equity Securities of a Portfolio Concern.

    SBA believes that all of the requirements in these sections are applicable to passive business financings. Therefore, this suggestion was not adopted.

    4. Section 107.610 Required certifications for Loans and Investments. The proposed rule also added a certification requirement to § 107.610 to require an SBIC that finances a business under § 107.720(b)(3) to certify as to the qualifying basis for such financing. The certification replaces the requirement for SBA prior approval of the formation and financing of a blocker corporation.

    Although SBA received no comments on proposed § 107.610, because SBA adopted the suggestion to allow SBICs that are BDC subsidiaries to form blocker entities in order to maintain the BDC's RIC status under § 107.720 (b)(3), the language in the final rule adds compliance with this tax election as a permissible basis for a passive business formed under § 107.720(b)(3).

    B. Technical Changes

    SBA also proposed the following technical changes to the regulations.

    1. Section 107.50 Definition of terms. Changing “Associates's” to “Associate's”.

    2. Section 107.210 Minimum capital requirements for Licensees. Modifying paragraph (a) of § 107.210 to allow both Leverageable Capital and Regulatory Capital to fall below the stated minimums if the reductions are performed in accordance with an SBA-approved wind-up plan per § 107.590(c), to conform with SBA's current oversight practices.

    3. Section 107.503 Licensee's adoption of an approved valuation policy. Changing the last sentence of § 107.503(a) to indicate that valuation guidelines for SBICs may be obtained from the SBIC program's public Web site, www.sba.gov/inv.

    4. Section 107.630 Requirement for Licensees to file financial statements with SBA (Form 468). Removing current § 107.630(d), which provides a mailing address for submission of SBA Form 468, and re-designating paragraph (e) as paragraph (d). These instructions are no longer necessary because SBICs submit this information electronically using the SBA's web-based application.

    5. Section 107.1100 Types of Leverage and application procedures. Correcting the misspelling of “Yu” to “You” and removing paragraph (c) which identifies where to send Leverage applications. This paragraph is unnecessary because the application forms provide these instructions.

    None of the comments SBA received in response to the proposed rule were related to these technical changes. The final rule incorporates these changes as proposed.

    C. Increase to Maximum Leverage to SBICs Under Common Control

    Section 521 of the Consolidated Appropriations Act, 2016, Public Law 114-113, 129 Stat. 2242, (December 22, 2015) amended section 303(b)(2) of the Small Business Investment Act of 1958 to increase the maximum amount of Leverage available to two or more SBICs under Common Control from $225 million to $350 million. SBA defines Common Control to mean a condition where two or more persons, either through ownership, management, contract, or otherwise, are under the control of one group or person. Under 13 CFR 107.50, SBA presumes that two or more SBICs are under Common Control if, among other things, they have common officers, directors, or general partners. Currently, 13 CFR 107.1150(b) limits two or more SBICs under Common Control to the maximum aggregate amount of outstanding Leverage of $225 million, which amount is subject to further limitations under SBA's credit policies. Solely as a conforming change, this rule increases the maximum amount set forth in the regulation from $225 million to $350 million. This statutory change was not addressed previously because it had not yet been enacted when the rule was proposed. Now that it has, the technical change is necessary to avoid public confusion and ensure consistency between the regulations and the current law.

    Compliance With Executive Orders 12866, 12988, 13132, and 13563, 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. This is also not a “major” rule under the Congressional Review Act, 5 U.S.C. 801, et seq.

    Executive Order 12988

    This action meets 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 does not have retroactive or presumptive effect.

    Executive Order 13132

    The final rule would not have substantial direct effects on the States, or the distribution of power and responsibilities among the various levels of government. Therefore, for the purposes of Executive Order 13132, Federalism, SBA determines that this rule has no federalism implications warranting the preparation of a federalism assessment.

    Executive Order 13563

    This final rule was developed in response to comments received on previously proposed amendments to these regulations on investments in passive businesses. See 78 FR 77377 (December 23, 2013). SBA received one set of comments on that rule that suggested changes to further liberalize permitted financings to passive businesses under Sec. 107.720(b). In response to the comment, SBA indicated in the final rule (79 FR 62819) that it would further consider the suggested changes in a future rulemaking. As part of that reconsideration, SBA discussed the comments with industry representatives and solicited additional comments in the proposed rule published in October 2015 at 80 FR 60077. This final rule reflects the input received from those public outreach efforts.

    Paperwork Reduction Act, 44 U.S.C. Ch. 35

    SBA has determined that this rule would impose additional reporting and recordkeeping requirements under the Paperwork Reduction Act. In particular, this rule implements changes to the Portfolio Financing Report, SBA Form 1031 (OMB Control Number 3245-0078), to clarify information to be reported in Parts A, B, and C of the form. The changes, described in detail below, also include designating current Part D as Part F and adding new Parts D and E.

    The title, description of respondents, description of the information collection and the changes to it are discussed below with an estimate of the revised annual burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

    Title: Portfolio Financing Report, SBA Form 1031 (OMB Control Number 3245-0078).

    Summary: SBA Form 1031 is a currently approved information collection. SBA regulations, specifically § 107.640, require all SBICs to submit a Portfolio Financing Report using SBA Form 1031 for each financing that an SBIC provides to a Small Business Concern within 30 days after closing an investment. SBA uses the information provided on Form 1031 to evaluate SBIC compliance with regulatory requirements. The form is also SBA's primary source of information for compiling statistics on the SBIC program as a provider of capital to small businesses. The proposed rule (80 FR 60077) invited the public to provide comments on the following changes to SBA Form 1031:

    (1) Clarifying the SBIC should report the non-passive Small Business Concern information in the Form 1031. SBA has noted that SBICs sometimes report data on the passive Small Business Concern rather than the non-passive Small Business Concern when reporting financing information. SBA has clarified that the SBIC should report data on the non-passive Small Business Concern when reporting information on financings using passive businesses in the Form 1031 Part A—the Small Business Concern; Part B—the pre-financing data; and Part C—the financing information, with the exception of the financing dollars in Question 29. The amount of financing dollars provided by the SBIC should be the total amount of such financing, regardless of whether the dollars were provided directly or indirectly to the non-passive business concern. Example: The SBIC provides $5 million in equity to ABC Holding Corporation, which passes $4.98 million to the non-passive business, Acme Manufacturing LLC. In addition, the SBIC provides $5 million in debt directly to Acme Manufacturing LLC. The SBIC would report information on Acme Manufacturing LLC in Parts A, B, and C. However, the total financing dollars would be reported as $5 million in equity and $5 million in debt for a total of $10 million in total financing dollars.

    (2) Identifying financings using one or more passive businesses. SBA has added a question on whether the financing utilizes one or more passive businesses as part of the financing, to help SBA identify these financings.

    (3) Adding information on passive business financings to aid in regulatory compliance monitoring. SBA has also added a requirement for SBICs to upload a file in Portable Document Format (PDF) that contains the following information, which SBA will use to help assess whether the financing meets regulatory compliance:

    (a) Qualifying exception: Identification of the passive business exception under which the financing is made (i.e., § 107.720(b)(2) Exception for pass-through of proceeds to subsidiary, or § 107.720(b)(3) Exception for certain Partnership Licensees). If the SBIC indicates that the financing is made under § 107.720(b)(3), it would also indicate the qualifying basis for the financing (i.e., financing would cause an investor in the fund to incur unrelated business taxable income or effectively connected income or to receive non-qualifying income for a regulated investment company).

    (b) Passive Business Entities: Identification of the name and employer ID number for each passive business entity used within the financing. This is needed so that SBA can identify all Portfolio Concerns involved in the financing.

    (c) Financing Structure Description: A description of the financing structure, including the flow of the money between the SBIC and the non-passive Small Business Concern that receives the proceeds (including amounts and types of securities between each entity), and the ownership from the SBIC through each entity to the non-passive Small Business Concern. This information will help SBA assess that the Small Business Concern receives “substantially all” the financing dollars and the ownership percentages are in compliance with the regulations. This will also help SBA with SBICs transferred to the Office of Liquidation to identify the structure of the financing and aid in recovery of SBA leverage.

    (4) Impact Fund Policy Initiative: Finally, a new Part D, consisting of two questions concerning whether the investment is a fund-identified impact investment or SBA-identified impact investment has been added to the Form. This change provides a vehicle for SBICs licensed to participate in SBA's Impact Investment Fund (Impact SBICs to more clearly report whether they are reporting on an SBA-identified impact investment or a Fund-identified impact investment. The Impact Investment Fund was launched in April 2011 as part of President Obama's Start-Up America Initiative. See, [https://www.sba.gov/about-sba/sba-initiatives/startup-america/about-startup-america.] The initiative was amended in September 2014 to allow Impact SBICs to invest in self-identified impact investments. [https://www.sba.gov/sites/default/files/articles/SBA%20Impact%20Investment%20Fund%20Policy%20-%20September%202014_1.pdf or https://www.sba.gov/content/new-2014-expanding-sbas-impact-fund] While Impact SBICs, like all SBICS use Form 1031 to report on their financings, SBA has determined that it would be beneficial to Impact SBICs if SBA Form 1031 were to include questions specifically targeted towards impact investments.

    SBA did not receive any comments on the changes; therefore, they are adopted as proposed.

    Description of Respondents and Burden: There are approximately 299 licensed SBICs. All of these SBICs are required to submit SBA Form 1031 for each financing. The current estimated number of responses (i.e., number of financings) is 2,021 based on a recent three year period (FY 2012 through 2014). The current estimate indicates that it takes approximately 12 minutes to complete the form, for a total annual burden of 404 hours.

    Neither the number of respondents nor the number of responses per year is expected to be affected by this rule. However, SBA estimates a slight increase in the burden hour as a result of the additional reporting in new Parts D (Impact Investments) and Part E (Passive Business).

    Impact Fund Reporting. This reporting is expected to have minimal impact. The estimated eight SBICs making impact investments would complete new Part D an estimated total 56 times annually. At an estimated 2 minutes per response, this additional reporting would add 2 hours to the annual burden for Form 1031.

    Passive Business Reporting. SBA believes that the SBIC should be able to provide the passive business information since it should be readily available as part of the financing. SBA estimates that providing the information will take on average an additional 30 minutes for those financings utilizing passive businesses, with no incremental burden for those financings that do not use a passive business. SBA estimates that about 12% of the annual responses relate to passive businesses financings (based on financing data in 2014). Based on the number of SBICs reporting such financings the total estimated annual hour burden resulting from new Part E reporting would be 122.

    Therefore the total estimated annual hour burden for all SBICs submitting SBA Form 1031s in a year would be 528 hours.

    The current cost estimate for completing SBA Form 1031 uses a rate of $35 per hour for an accounting manager to fill out the form. Using that same rate, the cost per form would change from $7 per form to $9.14 per form. However, SBA has increased its estimate of an hourly rate for an accounting manager to $43 per hour (estimated using www1.salary.com/Accounting-Manager-hourly-wages.html in July 2015), which rate results in a new cost per form of $11.23 for an aggregate cost of $22,704 for the 2,021 estimated responses.

    This final rule also identifies information that an SBIC must maintain in its files to support the required changes. SBA believes that the SBICs should already be maintaining this information since a passive business by definition is a Portfolio Concern and the SBIC should be maintaining all documents needed to support each financing. The rule makes this expectation explicit. Furthermore, currently, an SBIC must maintain this information for it to effectively monitor and evaluate an investment that uses a passive business to finance a non-passive business. Therefore, SBA does not believe this recordkeeping requirement increases the burden.

    The rule also requires a certification under § 107.610 when the SBIC makes a financing using the exemption in § 107.720(b)(3). This includes maintaining records supporting the certification. Since this regulation effectively replaces the requirement for SBICs to seek prior SBA approval and maintain these records, SBA does not believe this change will increase the burden.

    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, Section 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 rule would affect all SBICs, of which there are currently close to 300. SBA estimates that approximately 75 percent of these SBICs are small entities. Therefore, SBA has determined that this rule would have an impact on a substantial number of small entities. However, SBA has determined that the economic impact on entities affected by the rule would not be significant. As discussed under the Paperwork Reduction Act section, SBICs would need to provide descriptions of the transactions in the Form 1031, which based on the estimate would cost each SBIC approximately $28 per year. The changes in the passive business regulation provide SBICs with additional flexibility to employ transaction structures commonly used by private equity or venture capital funds that are not SBICs.

    SBA asserts that the economic impact of the rule, if any, would be minimal and beneficial to small SBICs. Accordingly, the Administrator of the SBA certifies that this rule would not have a significant economic impact on a substantial number of small entities.

    List of Subjects in 13 CFR Part 107

    Investment companies, Loan programs-business, Reporting and recordkeeping requirements, Small businesses.

    For the reasons stated in the preamble, the Small Business Administration amends 13 CFR part 107 as follows:

    PART 107—SMALL BUSINESS INVESTMENT COMPANIES 1. The authority citation for part 107 is revised to read as follows: Authority:

    15 U.S.C. 681, 683, 687(c), 687b, 687d, 687g, 687m.

    § 107.50 [Amended]
    2. Amend § 107.50 by removing from the definition of “Lending Institution” the term “Associates's” and adding in its place the term “Associate's”. 3. Amend § 107.210 by revising paragraph (a) introductory text to read as follows:
    § 107.210 Minimum capital requirements for Licensees.

    (a) Companies licensed on or after October 1, 1996. A company licensed on or after October 1, 1996, must have Leverageable Capital of at least $2,500,000 and must meet the applicable minimum Regulatory Capital requirement in this paragraph (a), unless lower Leverageable Capital and Regulatory Capital amounts are approved by SBA as part of a Wind-Up Plan in accordance with § 107.590(c):

    4. Amend § 107.503 by revising the last sentence of paragraph (a) to read as follows:
    § 107.503 Licensee's adoption of an approved valuation policy.

    (a) * * * These guidelines may be obtained from SBA's SBIC Web site at www.sba.gov/inv.

    5. Amend § 107.610 by adding paragraph (g) to read as follows:
    § 107.610 Required certifications for Loans and Investments.

    (g) For each passive business financed under § 107.720(b)(3), a certification by you, dated as of the closing date of the Financing, as to the basis for the qualification of the Financing under § 107.720(b)(3) and identifying one or more limited partners for which a direct Financing would cause those investors:

    (1) To incur “unrelated business taxable income” under section 511 of the Internal Revenue Code (26 U.S.C. 511);

    (2) To incur “effectively connected income” to foreign investors under sections 871 and 882 of the Internal Revenue Code (26 U.S.C. 871 and 882); or

    (3) For an investor that has elected to be taxed as a regulated investment company, to receive or be deemed to receive gross income that does not qualify under Section 851(b)(2) of the Internal Revenue Code (26 U.S.C. 851(b)(2)).

    § 107.630 [Amended]
    6. Amend § 107.630 by removing paragraph (d) and redesignating paragraph (e) as paragraph (d). 7. Amend § 107.720 by revising paragraphs (b)(2) and (3) and adding paragraph (b)(4) to read as follows:
    § 107.720 Small Businesses that may be ineligible for financing.

    (b) * * *

    (2) Exception for pass-through of proceeds to subsidiary. You may provide Financing directly to a passive business, including a passive business that you have formed, if it is a Small Business and it passes substantially all the proceeds through to (or uses substantially all the proceeds to acquire) one or more subsidiary companies, each of which is an eligible Small Business that is not passive. For the purpose of this paragraph (b)(2), “subsidiary company” means a company in which the financed passive business either:

    (i) Directly owns, or will own as a result of the Financing, at least 50 percent of the outstanding voting securities; or

    (ii) Indirectly owns, or will own as a result of the Financing, at least 50 percent of the outstanding voting securities (by directly owning the outstanding voting securities of another passive Small Business that is the direct owner of the outstanding voting securities of the subsidiary company).

    (3) Exception for certain Partnership Licensees. If you are a Partnership Licensee, you may form one or more blocker entities in accordance with this paragraph (b)(3). For the purposes of this paragraph, a “blocker entity” means a corporation or a limited liability company that elects to be taxed as a corporation for Federal income tax purposes. The sole purpose of a blocker entity must be to provide Financing to one or more eligible, unincorporated Small Businesses. You may form such blocker entities only if a direct Financing to such Small Businesses would cause any of your investors to incur “unrelated business taxable income” under section 511 of the Internal Revenue Code (26 U.S.C. 511); incur “effectively connected income” to foreign investors under sections 871 and 882 of the Internal Revenue Code (26 U.S.C. 871 and 882); or (for an investor that has elected to be taxed as a regulated investment company) receive or be deemed to receive gross income that does not qualify under section 851(b)(2) of the Internal Revenue Code (26 U.S.C. 851(b)(2)). Your ownership and investment of funds in such blocker entities will not constitute a violation of § 107.730(a). For each passive business financed under this section 107.720(b)(3), you must provide a certification to SBA as required under § 107.610(g). A blocker entity formed under this paragraph may provide Financing:

    (i) Directly to one or more eligible non-passive Small Businesses; or

    (ii) Directly to a passive Small Business that passes substantially all the proceeds directly to (or uses substantially all the proceeds to acquire) one or more eligible non-passive Small Businesses in which the passive Small Business directly owns, or will own as a result of the Financing, at least 50% of the outstanding voting securities.

    (4) Additional conditions for permitted passive business financings. Financings permitted under paragraphs (b)(2) or (b)(3) of this section must meet all of the following conditions:

    (i) For the purposes of this paragraph (b), “substantially all” means at least ninety-nine percent of the Financing proceeds after deduction of actual application fees, closing fees, and expense reimbursements, which may not exceed those permitted by § 107.860.

    (ii) If you and/or your Associate charge fees permitted by § 107.860 and/or § 107.900, the total amount of such fees charged to all passive and non-passive businesses that are part of the same Financing may not exceed the fees that would have been permitted if the Financing had been provided directly to a non-passive Small Business. Any such fees received by your Associate must be paid to you in cash within 30 days of the receipt of such fees.

    (iii) For the purposes of this part 107, each passive and non-passive business included in the Financing is a Portfolio Concern. The terms of the financing must provide SBA with access to Portfolio Concern information in compliance with this part 107, including without limitation §§ 107.600 and 107.620.

    § 107.1100 [Amended]
    8. Amend § 107.1100 by removing the term “Yu” in the second to the last sentence of paragraph (b) and adding in its place “You”, and by removing paragraph (c).
    § 107.1150 [Amended]
    9. Amend § 107.1150 by removing the term “$225 million” in the first sentence of paragraph (b) and adding in its place “$350 million”. Dated: December 20, 2016. Maria Contreras-Sweet, Administrator.
    [FR Doc. 2016-31291 Filed 12-27-16; 8:45 am] BILLING CODE 8025-01-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9537; Directorate Identifier 2016-SW-075-AD; Amendment 39-18759; AD 2016-24-51] RIN 2120-AA64 Airworthiness Directives; Sikorsky Aircraft Corporation AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are publishing a new airworthiness directive (AD) for Sikorsky Aircraft Corporation (Sikorsky) Model S-92A helicopters, which was sent previously to all known U.S. owners and operators of these helicopters. This AD requires inspecting certain bearings. This AD is prompted by a report of a failed bearing. We are issuing this AD to address the unsafe condition on these products.

    DATES:

    This AD is effective January 12, 2017 to all persons except those persons to whom it was made immediately effective by Emergency AD 2016-24-51, issued on November 16, 2016, which contains the requirements of this AD.

    We must receive comments on this AD by February 27, 2017.

    ADDRESSES:

    You may send comments by any of the following methods:

    Federal eRulemaking Docket: Go to http://www.regulations.gov. Follow the online instructions for sending your comments electronically.

    Fax: 202-493-2251.

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

    Hand Delivery: Deliver to the “Mail” address between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    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-2016-9537; 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 economic 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 service information identified in this final rule, contact Sikorsky Aircraft Corporation, Customer Service Engineering, 124 Quarry Road, Trumbull, CT 06611; telephone 1-800-Winged-S or 203-416-4299; email: [email protected] You may review the referenced service information at the FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood Pkwy, Room 6N-321, Fort Worth, TX 76177.

    FOR FURTHER INFORMATION CONTACT:

    Blaine Williams, Aerospace Engineer, Boston Aircraft Certification Office, Engine & Propeller Directorate, 1200 District Avenue, Burlington, Massachusetts 01803; telephone (781) 238-7161; email [email protected]

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, we invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. We will consider all the comments we receive and may conduct additional rulemaking based on those comments.

    Discussion

    On November 16, 2016, we issued Emergency AD 2016-24-51 to correct an unsafe condition on Sikorsky Model S-92A helicopters with a TR pitch change shaft (TRPCS) assembly part number (P/N) 92358-06303-041 or P/N 92358-06303-042. Emergency AD 2016-24-51 was sent previously to all known U.S. owners and operators of these helicopters. Emergency AD 2016-24-51 requires removing TRPCS assemblies with less than 5 hours time-in-service (TIS) since new or overhaul from service. Emergency AD 2016-24-51 also requires, for TRPCS assemblies with between 5 and 80 hours TIS since new or overhaul, borescope inspecting the TRPCS bearings and inspecting the angular contact bearing to determine whether there is free rotation, purged grease with metal particles, nicks or dents, or a cut, tear, or distortion on the bearing seal. If the bearings do not pass these inspections, Emergency AD 2016-24-51 requires replacing the TRPCS assembly.

    Emergency AD 2016-24-51 was prompted by a report of an operator losing TR control while in a hover. A preliminary investigation determined that binding in the TRPCS assembly double row angular contact bearing (bearing) resulted in reduced TR control. The investigation also found signs of excessive heat, which is an indicator of a binding bearing. Because binding will result in bearing failure rapidly, we limited Emergency AD 2016-24-51 to TRPCS assemblies with less than 80 hours time-in-service (TIS). The actions in Emergency AD 2016-24-51 are intended to detect a binding bearing and prevent loss of TR control and possible loss of control of the helicopter.

    FAA's Determination

    We are issuing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

    Related Service Information

    We reviewed Sikorsky Alert Service Bulletin 92-64-009, Basic Issue, dated November 2, 2016 (ASB 92-64-009). ASB 92-64-009 describes procedures for inspecting the TRPCS and bearing assemblies for damaged bearings and seals, purged grease with any metallic particles from the bearings, radial play in the bearings, and correct installation of the white Teflon seals, snap rings, and cotter pin.

    AD Requirements

    For helicopters with a TRPCS assembly P/N 92358-06303-041 or P/N 92358-06303-042 with less than 80 hours TIS installed, this AD requires:

    • Removing from service TRPCS assemblies with less than 5 hours TIS since new or overhaul;

    • For TRPCS assemblies with 5 or more hours TIS since new or overhaul, borescope inspecting the TRPCS bearing for damaged, incorrectly installed, or missing seals and inspecting the angular contact bearing for free rotation, purged grease with metallic particles, and damaged seals. If the TRPCS assembly has less than 10 hours TIS, performing a ground operation until the TRPCS assembly accumulates 10 hours TIS before performing the inspection on the angular contact bearing; and

    • Replacing the TRPCS assembly if there is a missing, damaged, or incorrectly installed seal, snap ring, or cotter pin or if the bearing does not rotate freely, or if there is any purged grease with metallic particles.

    This AD does not apply to helicopters with a TRPCS assembly manufactured or overhauled on or after November 3, 2016.

    Differences Between This AD and the Service Information

    ASB 92-64-009 requires operators to contact Sikorsky if there are any discrepancies, and this AD does not. ASB 92-64-009 allows 20 hours TIS to perform the visual bearing inspection if the borescope inspection has already been performed, while this AD allows 20 hours TIS for TRPCS assemblies with 15 or more hours TIS.

    Costs of Compliance

    We estimate that this AD will affect 80 helicopters of U.S. Registry.

    We estimate that operators may incur the following costs in order to comply with this AD. At an average labor rate of $85 per hour, borescope and visually inspecting the TRPCS assembly will require 16 work-hours, for a cost per helicopter of $1,360 and a cost of $108,800 for the U.S. fleet. If required, replacing a TRPCS assembly will require 16 work-hours and required parts will cost $4,000, for a cost per helicopter of $5,360.

    According to Sikorsky's service information, 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 by Sikorsky. Accordingly, we have included all costs in our cost estimate.

    FAA's Justification and Determination of the Effective Date

    Providing an opportunity for public comments prior to adopting these AD requirements would delay implementing the safety actions needed to correct this known unsafe condition. Therefore, we found and continue to find that the risk to the flying public justifies waiving notice and comment prior to the adoption of this rule because the previously described unsafe condition can result in loss of TR control and certain actions must be accomplished before further flight or within 20 hours TIS, a very short interval for these helicopters.

    Since it was found that immediate corrective action was required, notice and opportunity for prior public comments before issuing this AD were impracticable and contrary to public interest and good cause existed to make the AD effective immediately by Emergency AD 2016-24-51, issued on November 16, 2016, to all known U.S. owners and operators of these helicopters. These conditions still exists and the AD is hereby published in the Federal Register as an amendment to section 39.13 of the Federal Aviation Regulations (14 CFR 39.13) to make it effective to all persons.

    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, I certify that this AD:

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

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

    3. Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

    4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

    We prepared an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

    List of Subjects in 14 CFR Part 39

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

    Adoption of the Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-24-51 Sikorsky Aircraft Corporation: Amendment 39-18759; Docket No. FAA-2016-9537; Directorate Identifier 2016-SW-075-AD. (a) Applicability

    This AD applies to Sikorsky Aircraft Corporation (Sikorsky) Model S-92A helicopters, certificated in any category, with a tail rotor pitch change shaft (TRPCS) assembly part number (P/N) 92358-06303-041 or P/N 92358-06303-042 with less than 80 hours time-in-service (TIS) installed, except those TRPCS assemblies manufactured or overhauled on or after November 3, 2016.

    (b) Unsafe Condition

    This Emergency AD defines the unsafe condition as a binding TRPCS bearing. This condition could result in loss of tail rotor (TR) control and possible loss of control of the helicopter.

    (c) Effective Date

    This AD is effective January 12, 2017 to all persons except those persons to whom it was made immediately effective by Emergency AD 2016-24-51, issued on November 16, 2016, which contains the requirements of this AD.

    (d) Compliance

    You are responsible for performing each action required by this AD within the specified compliance time unless it has already been accomplished prior to that time.

    (e) Required Actions

    (1) For TRPCS assemblies with less than 5 hours TIS since new or overhaul, before further flight, remove the TRPCS assembly from service.

    (2) For TRPCS assemblies with between 5 and 15 hours TIS since new or overhaul, before further flight, and for TRPCS assemblies with more than 15 hours TIS, within 20 hours TIS or before reaching 80 hours TIS, whichever occurs first:

    (i) Borescope inspect the TRPCS assembly as follows, unless done within the previous 15 hours TIS.

    (A) On the TR side of the TRPCS bearing, remove the plug from the end of the TRPCS, insert the borescope into the TRPCS, and determine whether the white Teflon seal and snap ring are installed. If the white Teflon seal or snap ring is missing, or if there is a rip, tear, or heat damage on the seal or if there is no gap in the snap ring, before further flight replace the TRPCS assembly.

    (B) On the TR servo side of the TRPCS bearing, insert the borescope through the oil filler cap hole and determine whether the white Teflon seal, snap ring, and cotter pin are installed. If the white Teflon seal, snap ring, or cotter pin is missing, if there is a rip, tear, or heat damage on the seal, or if there is no gap in the snap ring, before further flight replace the TRPCS assembly.

    (ii) If the TRPCS assembly has less than 10 hours TIS, perform ground operation with the rotor turning at 105% (Nr) until the TRPCS assembly has accumulated 10 hours TIS, cycling the TR control pedals at least 10 times per hour.

    (iii) Remove the TRPCS and inspect the SB2310 angular contact bearing for free rotation, purged grease with metal particles, a nick or a dent, and any cut, tear, or distortion on the bearing seal. If the bearing does not rotate freely; the bearing sounds rough or chatters; there is any purged grease with metal particles; a nick or dent; or if there is a cut, tear, or distortion in the bearing seal, before further flight, replace the TRPCS assembly.

    (f) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Boston Aircraft Certification Office, FAA, may approve AMOCs for this AD. Send your proposal to: Blaine Williams, Aerospace Engineer, Boston Aircraft Certification Office, Engine & Propeller Directorate, 1200 District Avenue, Burlington, Massachusetts 01803; telephone (781) 238-7161; email [email protected]

    (2) For operations conducted under a 14 CFR part 119 operating certificate or under 14 CFR part 91, subpart K, we suggest that you notify your principal inspector, or lacking a principal inspector, the manager of the local flight standards district office or certificate holding district office before operating any aircraft complying with this AD through an AMOC.

    (g) Additional Information

    Sikorsky Alert Service Bulletin 92-64-009, Basic Issue, dated November 2, 2016, which is not incorporated by reference, contains additional information about the subject of this final rule. For service information identified in this final rule, contact Sikorsky Aircraft Corporation, Customer Service Engineering, 124 Quarry Road, Trumbull, CT 06611; telephone 1-800-Winged-S or 203-416-4299; email: [email protected] You may review this service information at the FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood Pkwy, Room 6N-321, Fort Worth, TX 76177.

    (h) Subject

    Joint Aircraft Service Component (JASC) Code: 6720 Tail Rotor Control System.

    Issued in Fort Worth, Texas, on December 9, 2016. Scott A. Horn, Acting Manager, Rotorcraft Directorate, Aircraft Certification Service.
    [FR Doc. 2016-30282 Filed 12-27-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2016-9159; Airspace Docket No. 13-AAL-7] Establishment of Class E Airspace, Healy, AK AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    This action establishes Class E airspace extending upward from 700 feet above the surface at Healy River Airport, Healy, AK, to support the development of Area Navigation (RNAV) Global Positioning System (GPS) Instrument Flight Rules (IFR) operations under standard instrument approach and departure procedures at the airport, and for the safety and management of controlled airspace within the National Airspace System.

    DATES:

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

    ADDRESSES:

    FAA Order 7400.11A, Airspace Designations and Reporting Points, and subsequent amendments can be viewed 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 this material 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:

    Tom Clark, Federal Aviation Administration, Operations Support Group, Western Service Center, 1601 Lind Avenue SW., Renton, WA 98057; telephone (425) 203-4511.

    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 establishes controlled airspace at Healy River Airport, Healy, AK.

    History

    On October 14, 2016, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to establish Class E airspace extending upward from 700 feet above the surface at Healy River Airport, Healy, AK. (81 FR 71017) Docket FAA-2016-9159. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. One comment was received from Greysen Harlow supporting the proposal.

    Class E airspace designations are published in paragraph 6005 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 E airspace designation 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 amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 establishes Class E airspace extending upward from 700 feet above the surface within a 3.5-mile radius of Healy River Airport, with segments extending from the 3.5-mile radius to 11.5 miles northwest of the airport, and 10.5 miles south of the airport. This airspace is established to accommodate new RNAV Global Positioning System standard instrument approach and departure procedures developed for IFR operations the airport.

    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, is non-controversial and unlikely to result in adverse or negative comments. 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, and effective September 15, 2016, is amended as follows: Paragraph 6005: Class E Airspace Areas Extending Upward from 700 feet or More Above the Surface of the Earth. AAL AK E5 Healy, AK [New] Healy River Airport, Alaska (Lat. 63°52′03″ N., long. 148°58′08″ W.)

    That airspace extending upward from 700 feet above the surface within a 3.5-mile radius of Healy River Airport, and that airspace 2 miles either side of the 333° bearing from the airport extending from the 3.5 mile radius to 11.5 miles northwest of the airport, and that airspace 0.6 miles west and 2.5 miles east of the 169° bearing from the airport extending from the 3.5 mile radius to 10.5 miles south of the airport.

    Issued in Seattle, Washington, on December 12, 2016. Tracey Johnson, Manager, Operations Support Group, Western Service Center.
    [FR Doc. 2016-30648 Filed 12-27-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2016-7043; Airspace Docket No. 16-ANM-6] Amendment of Class E Airspace, Blue Mesa, CO AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    This action amends Class E en route domestic airspace extending upward from 1,200 feet above the surface near the Blue Mesa VHF Omni-Directional Radio Range/Distance Measuring Equipment (VOR/DME), Blue Mesa, CO. The FAA has transitioned to a more accurate method of measuring, publishing, and charting airspace areas that has revealed some small areas of uncharted uncontrolled airspace. The FAA found modification of these areas of uncontrolled airspace necessary to ensure the safety of Instrument Flight Rules (IFR) operations and the efficient use of navigable airspace, including point-to-point off-airway clearances, and aircraft vectoring services.

    DATES:

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

    ADDRESSES:

    FAA Order 7400.11A, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at http://www.faa.gov/air_traffic/publications/. For further information, you can contact the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE., West Bldg Ground Floor Rm W12-140, Washington, DC 20590; Telephone: 1-800-647-5527, or 202-366-9826. 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:

    Tom Clark, Federal Aviation Administration, Operations Support Group, Western Service Center, 1601 Lind Avenue SW., Renton, WA 98057; telephone (425) 203-4511.

    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 E airspace at the Blue Mesa VOR/DME, Blue Mesa, CO.

    History

    On August 8, 2016, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to amend Class E airspace extending upward from 1,200 feet above the surface at Blue Mesa, CO (81 FR 52369) Docket FAA-2016-7043. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

    Class E airspace designations are published in paragraph 6006 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 E airspace designation 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

    The FAA is amending Title 14 Code of Federal Regulations (14 CFR) Part 71 by modifying Class E En route domestic airspace extending upward from 1,200 feet above the surface in the vicinity of the Blue Mesa VOR/DME, Blue Mesa, CO. One small airspace area northwest, near Montrose, CO, and one small airspace area southeast, near Trinidad, CO, are added for the safety and management of IFR operations, specifically point-to-point, en route operations outside of the established airway structure, and Air Traffic Control vectoring services.

    Class E airspace designations are published in paragraph 6006 of FAA Order 7400.11A, dated August, and effective September 15, 2016, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

    Regulatory Notices and Analyses

    The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. 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, and effective September 15, 2016, is amended as follows: Paragraph 6006: En Route Domestic Airspace Areas. ANM CO E6 Blue Mesa, CO [Amended] Blue Mesa VOR/DME, CO (Lat. 38°27′08″ N., long. 107°02′23″ W.)

    That airspace extending upward from 1,200 feet above the surface within an area bounded by lat. 35°39′30″ N., long. 107°25′27″ W.; to lat. 36°14′38″ N., long. 107°40′25″ W.; to lat. 37°16′00″ N., long. 108°22′00″ W.; to lat. 37°58′51″ N, long. 108°22′29″ W.; to lat. 39°01′00″ N., long. 107°47′00″ W.; to lat. 39°07′40″ N, long. 107°13′47″ W.; to lat. 39°11′48″ N., long. 106°29′16″ W.; to lat. 39°40′23″ N., long. 103°29′02″ W.; to lat. 36°59′57″ N., long. 104°18′04″ W.; to lat. 36°17′00″ N., long. 104°14′00″ W.; to lat. 36°12′53″ N., long. 104°56′21″ W.; to lat. 36°13′34″ N., long. 105°54′42″ W.; thence to the point of beginning.

    Issued in Seattle, Washington, on December 12, 2016. Tracey Johnson, Manager, Operations Support Group, Western Service Center.
    [FR Doc. 2016-30651 Filed 12-27-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2014-1068; Airspace Docket No. 14-AWP-12] Amendment of Class E Airspace, Kahului, HI AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule.

    SUMMARY:

    This action modifies Class E airspace designated as an extension to a Class C surface area, and modifies Class E airspace extending upward from 700 feet above the surface at Kahului Airport, Kahului, HI. Due to changes to the available instrument flight procedures since the last airspace review and advances in Global Positioning System (GPS) mapping accuracy, modifications are necessary to ensure the safety and management of Instrument Flight Rules (IFR) operations at the airport.

    DATES:

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

    ADDRESSES:

    FAA Order 7400.11A, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at http://www.faa.gov/air_traffic/publications/. For further information, you can contact the U.S. Department of Transportation, Docket Operations, 1200 New Jersey Avenue SE., West Bldg Ground Floor, Rm W12-140, Washington, DC 20590; Telephone: 1-800-647-5527, or 202-366-9826. 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:

    Tom Clark, Federal Aviation Administration, Operations Support Group, Western Service Center, 1601 Lind Avenue SW., Renton, WA 98057; telephone (425) 203-4511.

    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 modifies controlled airspace at Kahului Airport, Kahului, HI.

    History

    On August 12, 2016, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to modify Class E airspace at Kahului Airport, Kahului, HI (81 FR 53342) Docket No. FAA-2014-1068. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

    Class E airspace designations are published in paragraph 6003 and 6005, respectively, 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 E airspace designation 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

    The FAA is amending Title 14 Code of Federal Regulations (14 CFR) Part 71 by modifying the Kahului Airport, Kahului, HI, Class E airspace area designated as an extension to a Class C surface area, to include that area within 3 miles each side of the airport 203° bearing extending from the airport 5-mile radius to 7 miles southwest of the airport, and removing the extension to the northeast as it is no longer required.

    This action also modifies the Class E airspace area extending upward from 700 feet above the surface by slightly expanding that airspace within 3.6 miles each side of the 038° bearing from the airport extending from the 5-mile radius to 11.7 miles northeast of the airport. This modification is necessary to contain IFR arrival operations descending below 1,500 feet above the surface, and IFR departure operations below 1,200 feet above the surface. Also, the Maui VORTAC navigation aid is removed from the legal descriptions in the Class E airspace areas noted above. Changes to the available instrument flight procedures, advances in GPS mapping accuracy, and a reliance on precise geographic coordinates to define airport and airspace reference points have made this action necessary for the safety and management of Instrument Flight Rules (IFR) operations at the airport.

    Class E airspace designations are published in paragraphs 6003, and 6005, respectively, of FAA Order 7400.11A, dated August 3, 2016, and effective September 15, 2016, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

    Regulatory Notices and Analyses

    The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. 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, and effective September 15, 2016, is amended as follows: Paragraph 6003: Class E Airspace Areas Designated as an Extension to a Class C Surface Area. AWP HI E3 Kahului, HI [Modified] Kahului Airport, HI (Lat. 20°53′55″ N., long. 156°25′50″ W.)

    That airspace extending upward from the surface within 3 miles each side of the Kahului Airport 203° bearing extending from the 5-mile radius of the airport to 7 miles southwest of the airport. This Class E 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 Pacific Chart Supplement.

    Paragraph 6005: Class E Airspace Areas Extending Upward from 700 feet or More Above the Surface of the Earth. AWP HI E5 Kahului, HI [Modified] Kahului Airport, HI (Lat. 20°53′55″ N., long. 156°25′50″ W.)

    That airspace extending upward from 700 feet above the surface within a 5-mile radius of Kahului Airport, and within 3.6 miles each side of the airport 038° bearing extending from the 5-mile radius of the airport to 11.7 miles northeast of the airport, and within 2 miles each side of the airport 065° bearing extending from the 5-mile radius of the airport to 10 miles northeast of the airport, and within 3 miles each side of the airport 203° bearing extending from the 5-mile radius of the airport to 10.3 miles southwest of the airport, and within the area bounded by the airport 318° bearing clockwise to the airport 013° bearing extending from the 5-mile radius of the airport to 8.5-miles northeast of the airport.

    Issued in Seattle, Washington, on December 12, 2016. Tracey Johnson, Manager, Operations Support Group, Western Service Center.
    [FR Doc. 2016-30655 Filed 12-27-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2016-9119; Airspace Docket No. 16-ANM-15] Amendment of Class E Airspace; Cedar City, UT AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule, technical amendment.

    SUMMARY:

    This action amends the legal descriptions for Class E surface airspace and Class E airspace upward from 700 feet above the surface to correct the airport name for Cedar City Regional Airport (formerly Cedar City Municipal Airport), Cedar City, UT, and amends the airport reference point (ARP) geographic coordinates to coincide with the FAA's aeronautical database. This action also changes the name of the VHF Omnidirectional Range Distance Measuring Equipment (VOR/DME) noted in the Class E surface area airspace legal description to the Enoch VOR/DME (formerly Cedar City VOR/DME). These changes do not affect the charted boundaries or operating requirements of the airspace.

    DATES:

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

    ADDRESSES:

    FAA Order 7400.11A, Airspace Designations and Reporting Points, and subsequent amendments can be viewed 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 this material 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:

    Robert LaPlante, Federal Aviation Administration, Operations Support Group, Western Service Center, 1601 Lind Avenue SW., Renton, WA 98057; telephone (425) 203-4566.

    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 E airspace descriptions at Cedar City Regional Airport, Cedar City, UT.

    History

    The FAA identified that Cedar City Regional Airport and the geographic coordinates of the airport's ARP listed in the Class E airspace legal descriptions above are not coincidental with the FAA's aeronautical database. Also, in accordance with FAA policy, the FAA has changed the Cedar City VOR/DME name to the Enoch VOR/DME, to avoid any potential confusion resulting from an off-airport navigation aid with the same name as the associated airport.

    Class E airspace designations are published in paragraph 6002 and 6005, respectively, 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 E 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 dated August 3, 2016, and effective September 15, 2016, which is incorporated by reference in 14 CFR part 71.1. 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 the legal descriptions for Class E surface area airspace and Class E airspace upward from 700 feet above the surface to correct the airport name to Cedar City Regional Airport, Cedar City, UT, (formerly Cedar City Municipal Airport), and geographic coordinates from (lat. 37°42′06″ N., long. 113°05′53″ W.) to (lat. 37°42′03″ N., long. 113°05′56″ W.) to coincide with the FAA's aeronautical database. This action also corrects the navigation aid noted in the Class E surface area airspace legal description from the Cedar City VOR/DME to the Enoch VOR/DME. This is an administrative change and does not affect the boundaries, altitudes, or operating requirements of the airspace, therefore, notice and public procedure under 5 U.S.C. 553(b) is unnecessary.

    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, is non-controversial and unlikely to result in adverse or negative comments. 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 exists 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(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 6002. Class E Airspace Designated as Surface Areas. ANM UT E2 Cedar City, UT [Modified] Cedar City Regional Airport, UT (Lat. 37°42′03″ N., long. 113°05′56″ W.) Enoch VOR/DME (Lat. 37°47′14″ N., long. 113°04′06″ W.) Meggi LOM (Lat. 37°47′28″ N., long. 113°01′17″ W.)

    Within a 4.2-mile radius of Cedar City Regional Airport, and within 1.8 miles each side of the Enoch VOR/DME 195° radial extending from the 4.2-mile radius to the VOR/DME, and within 1.8 miles each side of Meggi LOM 214° bearing extending from the 4.2-mile radius to the LOM.

    Paragraph 6005. Class E Airspace Areas Extending Upward from 700 feet or More Above the Surface of the Earth. ANM UT E5 Cedar City, UT [Modified] Cedar City Regional Airport, UT (Lat. 37°42′03″ N., long. 113°05′56″ W.)

    That airspace extending upward from 700-feet above the surface bounded by a line beginning at lat. 38°03′00″ N., long. 113°13′30″ W.; to lat. 38°05′30″ N., long. 112°58′30″ W.; to lat. 37°58′30″ N., long. 112°45′30″ W.; to lat. 37°45′00″ N., long. 112°56′45″ W.; to lat. 37°47′30″ N., long. 113°15′00″ W.; thence to point of beginning. That airspace extending upward from 1,200-feet above the surface bounded by a line beginning at lat. 38°00′00″ N., long. 113°45′30″ W.; to lat. 38°19′00″ N., long. 112°51′30″ W.; to lat. 37°58′32″ N., long. 112°38′00″ W.; to lat. 37°37′00″ N., long. 112°53′30″ W.; to lat. 37°38′15″ N., long. 113°22′18″ W.; thence to point of origin; and excluding that airspace within Federal airways; the Midford, UT, and St. George, UT, Class E airspace areas.

    Issued in Seattle, Washington, on December 14, 2016. Tracey Johnson, Manager, Operations Support Group, Western Service Center.
    [FR Doc. 2016-30649 Filed 12-27-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF COMMERCE Office of the Secretary 15 CFR Part 6 [Docket No. 161220999-6999-01] RIN 0605-AA47 Civil Monetary Penalty Adjustments for Inflation AGENCY:

    Office of the Chief Financial Officer and Assistant Secretary for Administration, Department of Commerce.

    ACTION:

    Final rule.

    SUMMARY:

    This final rule is being issued to adjust for inflation each civil monetary penalty (CMP) provided by law within the jurisdiction of the United States Department of Commerce (Department of Commerce). The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, requires the head of each agency to adjust for inflation its CMP levels in effect as of November 2, 2015, under a revised methodology that was effective for 2016 which provided for initial catch up adjustments for inflation in 2016, and under a revised methodology for each year thereafter. The initial catch up adjustments for inflation to CMPs to the Department of Commerce's CMPs were published in the Federal Register on June 7, 2016 and became effective July 7, 2016, and, as required, did not exceed 150 percent of the amount of the CMP on the date of enactment of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (November 2, 2015). The revised methodology for agencies for 2017 and each year thereafter provides for the improvement of the effectiveness of CMPs and to maintain their deterrent effect. Effective 2017, agencies' annual adjustments for inflation to CMPs shall take effect not later than January 15. The Department of Commerce's 2017 adjustments for inflation to CMPs apply only to CMPs with a dollar amount, and will not apply to CMPs written as functions of violations. The Department of Commerce's 2017 adjustments for inflation to CMPs apply only to those CMPs, including those whose associated violation predated such adjustment, which are assessed by the Department of Commerce after the effective date of the new CMP level.

    DATES:

    This rule is effective January 15, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Stephen Kunze, Deputy Chief Financial Officer and Director for Financial Management, Office of Financial Management, at (202) 482-1207, Department of Commerce, 1401 Constitution Avenue NW., Room D200, Washington, DC 20230. The Department of Commerce's Civil Monetary Penalty Adjustments for Inflation are available for downloading from the Department of Commerce, Office of Financial Management's Web site at the following address: http://www.osec.doc.gov/ofm/OFM_Publications.html.

    SUPPLEMENTARY INFORMATION:

    Background

    The Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410; 28 U.S.C. 2461), as amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-134), provided for agencies' adjustments for inflation to CMPs to ensure that CMPs continue to maintain their deterrent value and that CMPs due to the Federal Government were properly accounted for and collected. On October 24, 1996, November 1, 2000, December 14, 2004, December 11, 2008, and December 7, 2012, the Department of Commerce published in the Federal Register a schedule of CMPs adjusted for inflation as required by law.

    A CMP is defined as any penalty, fine, or other sanction that:

    1. Is for a specific monetary amount as provided by Federal law, or has a maximum amount provided for by Federal law; and,

    2. Is assessed or enforced by an agency pursuant to Federal law; and,

    3. Is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.

    On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701 of Pub. L. 114-74) further amended the Federal Civil Penalties Inflation Adjustment Act of 1990 to improve the effectiveness of CMPs and to maintain their deterrent effect. This amendment requires agencies to: (1) Adjust the CMP levels in effect as of November 2, 2015, with initial catch up adjustments for inflation through a final rulemaking that shall take effect no later than August 1, 2016; and (2) make subsequent annual adjustments for inflation to CMPs that shall take effect not later than January 15.

    The Department of Commerce's initial catch up adjustments for inflation to CMPs were published in the Federal Register on June 7, 2016, and the new CMP levels became effective July 7, 2016.

    The Department of Commerce's 2017 adjustments for inflation to CMPs apply only to CMPs with a dollar amount, and will not apply to CMPs written as functions of violations. These 2017 adjustments for inflation to CMPs apply only to those CMPs, including those whose associated violation predated such adjustment, which are assessed by the Department of Commerce after the effective date of the new CMP level.

    This regulation adjusts for inflation CMPs that are provided by law within the jurisdiction of the Department of Commerce. The actual CMP assessed for a particular violation is dependent upon a variety of factors. For example, the National Oceanic and Atmospheric Administration's (NOAA) Policy for the Assessment of Civil Administrative Penalties and Permit Sanctions (Penalty Policy), a compilation of NOAA internal guidelines that are used when assessing CMPs for violations for most of the statutes NOAA enforces, will be interpreted in a manner consistent with this regulation to maintain the deterrent effect of the CMPs. The CMP ranges in the Penalty Policy are intended to aid enforcement attorneys in determining the appropriate CMP to assess for a particular violation. The Penalty Policy is maintained and made available to the public on NOAA's Office of the General Counsel, Enforcement Section Web site at: http://www.gc.noaa.gov/enforce-office3.html.

    The Department of Commerce's 2017 adjustments for inflation to CMPs set forth in this regulation were determined pursuant to the revised methodology prescribed by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which requires the maximum CMP, or the minimum and maximum CMP, as applicable, to be increased by the cost-of-living adjustment. The term “cost-of-living adjustment” is defined by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. For the 2017 adjustments for inflation to CMPs, the cost-of-living adjustment is the percentage for each CMP by which the Consumer Price Index for the month of October 2016 exceeds the Consumer Price Index for the month of October 2015.

    Classification

    Pursuant to 5 U.S.C. 553(b)B, there is good cause to issue this rule without prior public notice or opportunity for public comment because it would be impracticable and unnecessary. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701(b)) requires agencies, effective 2017, to make annual adjustments for inflation to CMPs notwithstanding section 553 of title 5, United States Code. Additionally, the methodology used, effective 2017, for adjusting CMPs for inflation is given by statute, with no discretion provided to agencies regarding the substance of the adjustments for inflation to CMPs. The Department of Commerce is charged only with performing ministerial computations to determine the dollar amount of adjustments for inflation to CMPs. Accordingly, prior public notice and an opportunity for public comment are not required for this rule.

    Paperwork Reduction Act

    The provisions of the Paperwork Reduction Act of 1995, Public Law 104-13, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR part 1320, do not apply to this rule because there are no new or revised recordkeeping or reporting requirements.

    Regulatory Analysis E.O. 12866, Regulatory Review

    This rule is not a significant regulatory action as that term is defined in Executive Order 12866.

    Regulatory Flexibility Act

    Because notice of proposed rulemaking and opportunity for comment are not required pursuant to 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility act (5 U.S.C. 601, et seq.) are inapplicable. Therefore, a regulatory flexibility analysis is not required and has not been prepared.

    List of Subjects in 15 CFR Part 6

    Law enforcement, Civil monetary penalties.

    Dated: December 21, 2016. Stephen Kunze, Deputy Chief Financial Officer and Director for Financial Management, Department of Commerce. Authority and Issuance For the reasons stated in the preamble, the Department of Commerce revises 15 CFR part 6 to read as follows: PART 6—CIVIL MONETARY PENALTY ADJUSTMENTS FOR INFLATION Sec. 6.1 Definitions. 6.2 Purpose and scope. 6.3 2017 Adjustments for inflation to civil monetary penalties. 6.4 Effective date of 2017 adjustments for inflation to civil monetary penalties. 6.5 Subsequent annual adjustments for inflation to civil monetary penalties. Authority:

    Pub. L. 101-410, 104 Stat. 890 (28 U.S.C. 2461 note); Pub. L. 104-134, 110 Stat. 1321 (31 U.S.C. 3701 note); Sec. 701 of Pub. L. 114-74, 129 Stat. 599 (28 U.S.C. 1 note; 28 U.S.C. 2461 note).

    § 6.1 Definitions.

    (a) The Department of Commerce means the United States Department of Commerce.

    (b) Civil Monetary Penalty means any penalty, fine, or other sanction that:

    (1) Is for a specific monetary amount as provided by Federal law, or has a maximum amount provided for by Federal law; and

    (2) Is assessed or enforced by an agency pursuant to Federal law; and

    (3) Is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.

    § 6.2 Purpose and scope.

    The purpose of this part is to make adjustments for inflation to civil monetary penalties, as required by the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410; 28 U.S.C. 2461), as amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701 of Pub. L. 114-74), of each civil monetary penalty provided by law within the jurisdiction of the United States Department of Commerce (Department of Commerce).

    § 6.3 Adjustments for inflation to civil monetary penalties.

    The civil monetary penalties provided by law within the jurisdiction of the Department of Commerce, as set forth in paragraphs (a) through (f) of this section, are hereby adjusted for inflation in 2017 in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended, from the amounts of such civil monetary penalties that were in effect as of July 7, 2016, to the amounts of such civil monetary penalties, as thus adjusted. The year stated in parenthesis represents the year that the civil monetary penalty was last set by law or adjusted by law (excluding adjustments for inflation).

    (a) United States Department of Commerce. (1) 31 U.S.C. 3802(a)(1), Program Fraud Civil Remedies Act of 1986 (1986), violation, maximum from $10,781 to $10,957.

    (2) 31 U.S.C. 3802(a)(2), Program Fraud Civil Remedies Act of 1986 (1986), violation, maximum from $10,781 to $10,957.

    (3) 31 U.S.C. 3729(a)(1)(G), False Claims Act (1986); violation, minimum from $10,781 to $10,957; maximum from $21,563 to $21,916.

    (b) Bureau of Industry and Security. (1) 15 U.S.C. 5408(b)(1), Fastener Quality Act (1990), violation, maximum from $44,539 to $45,268.

    (2) 22 U.S.C. 6761(a)(1)(A), Chemical Weapons Convention Implementation Act (1998), violation, maximum from $36,256 to $36,849.

    (3) 22 U.S.C. 6761(a)(l)(B), Chemical Weapons Convention Implementation Act (1998), violation, maximum from $7,251 to $7,370.

    (4) 50 U.S.C. 1705(b), International Emergency Economic Powers Act (2007), violation, maximum from $284,582 to $289,238.

    (5) 22 U.S.C. 8142(a), United States Additional Protocol Implementation Act (2006), violation, maximum from $29,464 to $29,946.

    (c) Census Bureau. (1) 13 U.S.C. 304, Collection of Foreign Trade Statistics (2002), each day's delinquency of a violation; total of not to exceed maximum violation, from $1,312 to $1,333; maximum per violation, from $13,118 to $13,333.

    (2) 13 U.S.C. 305(b), Collection of Foreign Trade Statistics (2002), violation, maximum from $13,118 to $13,333.

    (d) Economics and Statistics Administration. (1) 22 U.S.C. 3105(a), International Investment and Trade in Services Act (1990); failure to furnish information, minimum from $4,454 to $4,527; maximum from $44,539 to $45,268.

    (e) International Trade Administration. (1) 19 U.S.C. 81s, Foreign Trade Zone (1934), violation, maximum from $2,750 to $2,795.

    (2) 19 U.S.C. 1677f(f)(4), U.S.-Canada FTA Protective Order (1988), violation, maximum from $197,869 to $201,106.

    (f) National Oceanic and Atmospheric Administration. (1) 51 U.S.C. 60123(a), Land Remote Sensing Policy Act of 2010 (2010), violation, maximum from $10,874 to $11,052.

    (2) 51 U.S.C. 60148(c), Land Remote Sensing Policy Act of 2010 (2010), violation, maximum from $10,874 to $11,052.

    (3) 16 U.S.C. 773f(a), Northern Pacific Halibut Act of 1982 (2007), violation, maximum from $227,666 to $231,391.

    (4) 16 U.S.C. 783, Sponge Act (1914), violation, maximum from $1,625 to $1,652.

    (5) 16 U.S.C. 957(d), (e), and (f), Tuna Conventions Act of 1950 (1962):

    (i) Violation of 16 U.S.C. 957(a), maximum from $81,250 to $82,579.

    (ii) Subsequent violation of 16 U.S.C. 957(a), maximum from $175,000 to $177,863.

    (iii) Violation of 16 U.S.C. 957(b), maximum from $2,750 to $2,795.

    (iv) Subsequent violation of 16 U.S.C. 957(b), maximum from $16,250 to $16,516.

    (v) Violation of 16 U.S.C. 957(c), maximum from $350,000 to $355,726.

    (6) 16 U.S.C. 957(i), Tuna Conventions Act of 1950,1 violation, maximum from $178,156 to $181,071.

    1 This National Oceanic and Atmospheric Administration maximum civil monetary penalty, as prescribed by law, is the maximum civil penalty per 16 U.S.C. 1858(a), Magnuson-Stevens Fishery Conservation and Management Act civil monetary penalty (item (15)).

    (7) 16 U.S.C. 959, Tuna Conventions Act of 1950,2 violation, maximum from $178,156 to $181,071.

    2 See footnote 1.

    (8) 16 U.S.C. 971f(a), Atlantic Tunas Convention Act of 1975,3 violation, maximum from $178,156 to $181,071.

    3 See footnote 1.

    (9) 16 U.S.C. 973f(a), South Pacific Tuna Act of 1988 (1988), violation, maximum from $494,672 to $502,765.

    (10) 16 U.S.C. 1174(b), Fur Seal Act Amendments of 1983 (1983), violation, maximum from $23,548 to $23,933.

    (11) 16 U.S.C. 1375(a)(1), Marine Mammal Protection Act of 1972 (1972), violation, maximum from $27,500 to $27,950.

    (12) 16 U.S.C. 1385(e), Dolphin Protection Consumer Information Act,4 violation, maximum from $178,156 to $181,071.

    4 See footnote 1.

    (13) 16 U.S.C. 1437(d)(1), National Marine Sanctuaries Act (1992), violation, maximum from $167,728 to $170,472.

    (14) 16 U.S.C. 1540(a)(1), Endangered Species Act of 1973:

    (i) Violation as specified (1988), maximum from $49,467 to $50,276.

    (ii) Violation as specified (1988), maximum from $23,744 to $24,132.

    (iii) Otherwise violation (1978), maximum from $1,625 to $1,652.

    (15) 16 U.S.C. 1858(a), Magnuson-Stevens Fishery Conservation and Management Act (1990), violation, maximum from $178,156 to $181,071.

    (16) 16 U.S.C. 2437(a), Antarctic Marine Living Resources Convention Act of 1984,5 violation, maximum from $178,156 to $181,071.

    5 See footnote 1.

    (17) 16 U.S.C. 2465(a), Antarctic Protection Act of 1990,6 violation, maximum from $178,156 to $181,071.

    6 See footnote 1.

    (18) 16 U.S.C. 3373(a), Lacey Act Amendments of 1981 (1981):

    (i) 16 U.S.C. 3373(a)(1), violation, maximum from $25,464 to $25,881.

    (ii) 16 U.S.C. 3373(a)(2), violation, maximum from $637 to $647.

    (19) 16 U.S.C. 3606(b)(1), Atlantic Salmon Convention Act of 1982,7 violation, maximum from $178,156 to $181,071.

    7 See footnote 1.

    (20) 16 U.S.C. 3637(b), Pacific Salmon Treaty Act of 1985,8 violation, maximum from $178,156 to $181,071.

    8 See footnote 1.

    (21) 16 U.S.C. 4016(b)(1)(B), Fish and Seafood Promotion Act of 1986 (1986); violation, minimum from $1,078 to $1,096; maximum from $10,781 to $10,957.

    (22) 16 U.S.C. 5010, North Pacific Anadromous Stocks Act of 1992,9 violation, maximum from $178,156 to $181,071.

    9 See footnote 1.

    (23) 16 U.S.C. 5103(b)(2), Atlantic Coastal Fisheries Cooperative Management Act,10 violation, maximum from $178,156 to $181,071.

    10 See footnote 1.

    (24) 16 U.S.C. 5154(c)(1), Atlantic Striped Bass Conservation Act,11 violation, maximum from $178,156 to $181,071.

    11 See footnote 1.

    (25) 16 U.S.C. 5507(a), High Seas Fishing Compliance Act of 1995 (1995), violation, maximum from $154,742 to $157,274.

    (26) 16 U.S.C. 5606(b), Northwest Atlantic Fisheries Convention Act of 1995,12 violation, maximum from $178,156 to $181,071.

    12 See footnote 1.

    (27) 16 U.S.C. 6905(c), Western and Central Pacific Fisheries Convention Implementation Act,13 violation, maximum from $178,156 to $181,071.

    13 See footnote 1.

    (28) 16 U.S.C. 7009(c) and (d), Pacific Whiting Act of 2006,14 violation, maximum from $178,156 to $181,071.

    14 See footnote 1.

    (29) 22 U.S.C. 1978(e), Fishermen's Protective Act of 1967 (1971):

    (i) Violation, maximum from $27,500 to $27,950.

    (ii) Subsequent violation, maximum from $81,250 to $82,579.

    (30) 30 U.S.C. 1462(a), Deep Seabed Hard Mineral Resources Act (1980), violation, maximum, from $70,117 to $71,264.

    (31) 42 U.S.C. 9152(c), Ocean Thermal Energy Conversion Act of 1980 (1980), violation, maximum from $70,117 to $71,264.

    (32) 16 U.S.C. 1827a, Billfish Conservation Act of 2012,15 violation, maximum from $178,156 to $181,071.

    15 See footnote 1.

    (33) 16 U.S.C. 7407(b)(1), Port State Measures Agreement Act of 2015,16 violation, maximum from $178,156 to $181,071.

    16 See footnote 1.

    (34) 16 U.S.C. 1826g(f), High Seas Driftnet Fishing Moratorium Protection Act,17 violation, maximum from $178,156 to $181,071.

    17 See footnote 1.

    § 6.4 Effective date of adjustments for inflation to civil monetary penalties.

    The Department of Commerce's 2017 adjustments for inflation made by § 6.3, of the civil monetary penalties there specified, are effective on January 15, 2017, and said civil monetary penalties, as thus adjusted by the adjustments for inflation made by § 6.3, apply only to those civil monetary penalties, including those whose associated violation predated such adjustment, which are assessed by the Department of Commerce after the effective date of the new civil monetary penalty level, and before the effective date of any future adjustments for inflation to civil monetary penalties thereto made subsequent to January 15, 2017 as provided in § 6.5.

    § 6.5 Subsequent annual adjustments for inflation to civil monetary penalties.

    The Secretary of Commerce or his or her designee by regulation shall make subsequent adjustments for inflation to the Department of Commerce's civil monetary penalties annually, which shall take effect not later than January 15, notwithstanding section 553 of title 5, United States Code.

    [FR Doc. 2016-31292 Filed 12-27-16; 8:45 am] BILLING CODE 3510-DP-P
    DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 15 CFR Part 902 50 CFR Parts 300 and 679 [Docket No. 151001910-6999-02] RIN 0648-BF42 Fisheries of the Exclusive Economic Zone Off Alaska; Allow the Use of Longline Pot Gear in the Gulf of Alaska Sablefish Individual Fishing Quota Fishery; Amendment 101 AGENCY:

    National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.

    ACTION:

    Final rule.

    SUMMARY:

    NMFS issues regulations to implement Amendment 101 to the Fishery Management Plan for Groundfish of the Gulf of Alaska (GOA FMP) for the sablefish individual fishing quota (IFQ) fisheries in the Gulf of Alaska (GOA). This final rule authorizes the use of longline pot gear in the GOA sablefish IFQ fishery. In addition, this final rule establishes management measures to minimize potential conflicts between hook-and-line and longline pot gear used in the sablefish IFQ fisheries in the GOA. This final rule also includes regulations developed under the Northern Pacific Halibut Act of 1982 (Halibut Act) to authorize harvest of halibut IFQ caught incidentally in longline pot gear used in the GOA sablefish IFQ fishery. This final rule is necessary to improve efficiency and provide economic benefits for the sablefish IFQ fleet and minimize potential fishery interactions with whales and seabirds. This action is intended to promote the goals and objectives of the Magnuson-Stevens Fishery Conservation and Management Act, the Halibut Act, the GOA FMP, and other applicable laws.

    DATES:

    Effective January 27, 2017.

    ADDRESSES:

    Electronic copies of Amendment 101 and the Environmental Assessment (EA)/Regulatory Impact Review (RIR) prepared for this action (collectively the “Analysis”), and the Initial Regulatory Flexibility Analysis (IRFA) prepared for this action are available from www.regulations.gov or from the NMFS Alaska Region Web site at alaskafisheries.noaa.gov.

    Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this rule may be submitted by mail to NMFS Alaska Region, P.O. Box 21668, Juneau, AK 99802-1668, Attn: Ellen Sebastian, Records Officer; in person at NMFS Alaska Region, 709 West 9th Street, Room 420A, Juneau, AK; by email to [email protected]; or by fax to 202-395-5806.

    FOR FURTHER INFORMATION CONTACT:

    Rachel Baker, 907-586-7228.

    SUPPLEMENTARY INFORMATION:

    Background

    NMFS manages U.S. groundfish fisheries of the GOA under the GOA FMP. The North Pacific Fishery Management Council (Council) prepared, and the Secretary of Commerce (Secretary) approved, the GOA FMP under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), 16 U.S.C. 1801 et seq. Regulations governing U.S. fisheries and implementing the GOA FMP appear at 50 CFR parts 600 and 679. Sablefish (Anoplopoma fimbria) is managed as a groundfish species under the GOA FMP.

    The International Pacific Halibut Commission (IPHC) and NMFS manage fishing for Pacific halibut (Hippoglossus stenolepis) through regulations at 50 CFR part 300, subpart E, established under authority of the Northern Pacific Halibut Act of 1982 (Halibut Act), 16 U.S.C. 773-773k. The IPHC regulations are subject to acceptance by the Secretary of State with concurrence from the Secretary. After acceptance by the Secretary of State and the Secretary, NMFS publishes the annual management measures in the Federal Register pursuant to 50 CFR 300.62. The final rule implementing the 2016 annual management measures published March 16, 2016 (81 FR 14000). The Halibut Act, at section 773c(c), also authorizes the Council to develop halibut fishery regulations, including limited access regulations, that are in addition to, and not in conflict with, approved IPHC regulations.

    The IFQ Program was implemented in 1995 (58 FR 59375, November 9, 1993). Under the IFQ Program, access to the non-trawl sablefish and halibut fisheries is limited to those persons holding quota share. The IFQ Program allocates sablefish and halibut harvesting privileges among U.S. fishermen. NMFS manages the IFQ Program pursuant to regulations at 50 CFR part 679 and 50 CFR part 300 under the authority of section 773c of the Halibut Act and section 303(b) of the Magnuson-Stevens Act. The proposed rule to implement Amendment 101 (81 FR 55408, August 19, 2016) and Sections 3.1 and 4.5 of the Analysis (see ADDRESSES) provide additional information on the IFQ Program and the GOA sablefish IFQ fishery.

    The Council recommended Amendment 101 to amend provisions of the GOA FMP applicable to the sablefish IFQ fishery. The Council also recommended implementing regulations applicable to the sablefish IFQ fisheries. FMP amendments and regulations developed by the Council may be implemented by NMFS only after approval by the Secretary. This final rule also includes regulations developed by the Council under the Halibut Act to authorize harvest of halibut IFQ caught incidentally in longline pot gear used in the GOA sablefish IFQ fishery. Halibut fishery regulations developed by the Council may be implemented by NMFS only after approval of the Secretary in consultation with the United States Coast Guard.

    NMFS published a Notice of Availability for Amendment 101 in the Federal Register on August 8, 2016 (81 FR 52394), with comments through October 7, 2016. The Secretary approved Amendment 101 on November 4, 2016, after accounting for information, views, and comment from interested persons, and determining that Amendment 101 is consistent with the GOA FMP, the Magnuson-Stevens Act, and other applicable law. NMFS published a proposed rule to implement Amendment 101 for the sablefish IFQ fisheries and regulations to authorize harvest of halibut IFQ caught in longline pot gear used in the GOA sablefish IFQ fishery on August 19, 2016 (81 FR 55408), with comments invited through September 19, 2016. NMFS received 15 comment letters containing 29 unique substantive comments on the FMP amendment and proposed rule. NMFS summarizes and responds to these comments in the Comments and Responses section of this preamble.

    A detailed review of the provisions of Amendment 101, the proposed regulations to implement Amendment 101 and to authorize harvest of halibut IFQ caught in longline pot gear used in the GOA sablefish IFQ fishery, and the rationale for these regulations is provided in the preamble to the proposed rule (81 FR 55408, August 19, 2016) and is briefly summarized in this final rule preamble.

    Amendment 101 and this final rule apply to the sablefish IFQ fisheries in the GOA. The IFQ fisheries are prosecuted in accordance with catch limits established by regulatory area. The regulatory areas for the sablefish IFQ fishery in the GOA are the Southeast Outside District of the GOA (SEO), West Yakutat District of the GOA (WY), Central GOA (CGOA), and Western GOA (WGOA). The sablefish regulatory areas are defined and shown in Figure 14 to part 679. This preamble refers to these areas collectively as sablefish areas.

    This final rule implements provisions that affect halibut IFQ fisheries in the GOA. The halibut regulatory areas (halibut areas) are defined by the IPHC, described in Section 6 of the annual management measures (81 FR 14000, March 16, 2016), and shown in Figure 15 to part 679. The halibut areas in the GOA include Areas 2C, 3A, 3B, and part of Area 4A. All of these areas except Area 4A are completely contained in the GOA. The portion of Area 4A in waters south of the Aleutian Islands, west of Area 3B and east of 170° W. longitude, is included in the WGOA sablefish area. This area includes the western part of the WGOA sablefish area and a small strip along the eastern border (east of 170° W. longitude) of the Aleutian Islands sablefish area in the Bering Sea and Aleutian Islands Management Area (BSAI). This final rule applies to the harvest of halibut IFQ when a vessel operator is using longline pot gear to fish sablefish IFQ in all areas of the GOA. For additional information on the sablefish and halibut areas in the GOA see the proposed rule (81 FR 55408, August 19, 2016) and Figure 1 and Figure 11 in the Analysis.

    This final rule revises regulations to add longline pot gear as a new authorized gear for catcher vessels and catcher/processors participating in the GOA sablefish IFQ fishery. Prior to this final rule, § 679.2 authorized vessels in the GOA sablefish IFQ fishery to use only longline gear (e.g., hook-and-line gear). Longline pot gear is pot gear with a stationary, buoyed, and anchored line with two or more pots attached. Longline pot gear is often deployed as a series of many pots attached together in a “string” of gear. For additional information on longline gear and longline pot gear, see the definition of Authorized Fishing Gear in § 679.2. For information on the history of gear use in the sablefish fishery in the GOA, see the proposed rule (81 FR 55408, August 19, 2016) and Section 2.1.1 of the Analysis.

    Need for Amendment 101 and This Final Rule

    Beginning in 2009, the Council and NMFS received reports from sablefish IFQ fishermen that depredation was adversely impacting the sablefish IFQ fleet in the GOA. The reports indicated that whales were removing or damaging sablefish caught on hook-and-line gear (depredation) before the gear was retrieved. Depredation has been observed on sablefish longline surveys. Sperm whale depredation is most common in the SEO, WY, and CGOA sablefish areas and killer whale depredation is most common in the WGOA and BSAI. Section 3.4.1.1 of the Analysis provides the most recent information on depredation in the sablefish IFQ fishery, and Figure 17 in the Analysis shows a map of observed depredation on sablefish longline surveys.

    Participants in the GOA sablefish IFQ fishery told the Council and NMFS that authorizing longline pot gear in the GOA sablefish IFQ fishery would reduce the adverse impacts of depredation for those vessel operators who choose to switch from hook-and-line gear. Depredation negatively impacts the sablefish IFQ fleet through reduced catch rates and increased operating costs. Depredation also has negative consequences for whales through increased risk of vessel strike, gear entanglement, and altered foraging strategies. Longline pot gear prevents depredation because whales cannot remove or damage sablefish enclosed in a pot. The Council and NMFS determined that interactions with whales throughout the GOA could affect the ability of sablefish IFQ permit holders to harvest sablefish by reducing catch per unit of effort and decreasing fishing costs. Section 1.2 of the Analysis provides additional information on the Council's development and recommendation of Amendment 101 and this final rule.

    The following sections describe: (1) The sablefish IFQ fishery provisions implemented with Amendment 101 and this final rule, (2) the changes from proposed to final rule, and (3) NMFS' response to comments.

    GOA Sablefish IFQ Fishery Provisions Implemented With Amendment 101 and This Final Rule

    The objective of Amendment 101 and this final rule is to improve efficiency in harvesting sablefish IFQ and reduce adverse economic impacts on harvesters that occur from depredation. Amendment 101 and this final rule will also mitigate impacts on sablefish IFQ harvesters using hook-and-line gear by minimizing the potential for interactions between hook-and-line gear and longline pot gear. Finally, Amendment 101 and this final rule will reduce whale and seabird interactions with fishing gear in the GOA sablefish IFQ fishery.

    This final rule implements regulations for the sablefish IFQ fisheries in the GOA and regulations to authorize harvest of halibut IFQ caught incidentally in longline pot gear used in the GOA sablefish IFQ fishery.

    This final rule revises regulations at 50 CFR parts 300 and 679 to (1) authorize longline pot gear in the GOA sablefish IFQ fishery, (2) minimize the potential for gear conflicts and fishing grounds preemption, and (3) require retention of halibut IFQ caught in longline pot gear used in the GOA sablefish IFQ fishery. This final rule also includes additional regulatory revisions to facilitate the administration, monitoring, and enforcement of these provisions. This section describes the changes to current regulations implemented by this final rule.

    Authorize Longline Pot Gear

    This final rule revises §§ 300.61, 679.2, 679.24, and 679.42 to authorize longline pot gear for use in the GOA sablefish IFQ fishery. Additionally, this final rule revises the definition of “Fixed gear” under the definition of “Authorized fishing gear” at § 679.2(4)(i) to include longline pot gear as an authorized gear in the GOA sablefish IFQ fishery and as an authorized gear for halibut IFQ harvested in halibut areas in the GOA. Fixed gear is a general term that describes the multiple gear types allowed to fish sablefish IFQ and halibut IFQ under the IFQ Program and is referred to throughout 50 CFR part 679. This final rule adds § 679.42(b)(1)(i) to further clarify that trawl gear is not authorized for use in the sablefish and halibut IFQ fisheries in the GOA and the BSAI. This final rule also adds § 679.42(b)(1)(ii) to clarify that pot-and-line gear is not authorized for use in the GOA sablefish IFQ fishery. Pot-and-line gear is pot gear with a stationary, buoyed line with a single pot attached.

    This final rule revises the definition of “Fishing” at § 300.61 to specify that the use of longline pot gear in any halibut area in the GOA to harvest halibut IFQ will be subject to halibut regulations at part 300. This final rule also revises the definition of “IFQ halibut” at § 300.61 to specify that halibut IFQ may be harvested with longline pot gear while commercial fishing in any halibut area in the GOA. As described in the Require Retention of Halibut IFQ Caught in Longline Pot Gear Used in the GOA Sablefish IFQ Fishery section below, this final rule also adds § 679.42(l)(6) to require a vessel operator using longline pot gear in the GOA sablefish IFQ fishery to retain legal size (32 inches or greater) halibut caught incidentally if any IFQ permit holder on board has sufficient halibut IFQ pounds for the retained halibut for that halibut area.

    This final rule revises Table 15 to part 679 to specify that authorized gear for sablefish IFQ harvested from any GOA reporting area includes longline pot gear in addition to all longline gear (i.e., hook-and-line, jig, troll, and handline). This final rule also revises the table to specify that authorized gear for halibut harvest in the GOA is fishing gear composed of lines with hooks attached and longline pot gear.

    Minimize Potential Gear Conflicts and Grounds Preemption

    This final rule adds provisions at § 679.42(l) to minimize the potential for gear conflicts and grounds preemption and to create general requirements for using longline pot gear in the GOA sablefish IFQ fishery.

    This final rule establishes pot limits in each GOA sablefish area at § 679.42(l)(5) and requirements for vessel operators to request pot tags from NMFS at § 679.42(l)(3). Under this final rule, a vessel operator must annually request pot tags from NMFS by submitting a complete IFQ Sablefish Longline Pot Gear: Vessel Registration and Request for Pot Gear Tags form, which will be available on the NMFS Alaska Region Web site at https://alaskafisheries.noaa.gov/. NMFS will issue the number of requested tags up to the pot limit authorized at § 679.42(l)(5)(ii) in a sablefish area. The vessel owner requesting pot tags must specify the vessel to which NMFS will assign the pot tags. Pot tags must be assigned to only one vessel each year. A valid pot tag that is assigned to the vessel must be attached to each pot on board the vessel before the vessel departs port to fish in the GOA sablefish IFQ fishery.

    This final rule adds specific requirements for longline pot gear deployment and retrieval in the GOA sablefish IFQ fishery. This final rule implements § 679.24(a)(3) to require a vessel operator to mark each end of a set of longline pot gear with a cluster of four or more marker buoys, including one hard buoy marked with the capital letters “LP,” a flag mounted on a pole, and a radar reflector. This requirement is in addition to current requirements at § 679.24(a)(1) and (2) for all hook-and-line, longline pot, and pot-and-line marker buoys to be marked with the vessel's Federal Fisheries Permit (FFP) number or Alaska Department of Fish and Game (ADF&G) vessel registration number.

    Under this final rule, a vessel operator may deploy longline pot gear in the GOA sablefish IFQ fishery only during the sablefish fishing period specified in § 679.23(g)(1). NMFS annually establishes the sablefish fishing period to correspond with the halibut fishing period established by the IPHC. Prior to this final rule, regulations at § 679.23(g)(2) authorized an IFQ permit holder to retain sablefish outside of the established fishing period if the permit holder had unused IFQ for the specified sablefish area. This final rule revises § 679.23(g)(2) to specify that IFQ permit holders using longline pot gear in the GOA are not authorized to retain sablefish outside of the established fishing period even if the IFQ permit holder has unused IFQ.

    This final rule adds § 679.42(l)(5)(iii) to establish gear retrieval requirements for longline pot gear in each GOA sablefish area. This final rule requires a vessel operator using longline pot gear to redeploy longline pot gear within a certain amount of time after being deployed, or to remove the gear from the fishing grounds when making a sablefish landing.

    This final rule allows multiple vessels to use the same longline pot gear during one fishing season but prevents use of the same longline pot gear simultaneously. To prevent use of the same longline pot gear simultaneously, this final rule adds § 679.42(l)(5)(iv) to require a vessel operator to: (1) Remove longline pot gear assigned to the vessel and deployed to fish sablefish IFQ from the fishing grounds, (2) return the gear to port, and (3) remove the pot tags that are assigned to that vessel from each pot before the gear may be used on another vessel. The operator of the second vessel is required to attach pot tags assigned to his or her vessel to each pot before deploying the gear to fish for GOA sablefish IFQ. This final rule requires that only one set of the appropriate vessel-specific pot tags may be attached to the pots at any time.

    Require Retention of Halibut IFQ Caught in Longline Pot Gear Used in the GOA Sablefish IFQ Fishery

    This final rule revises the definition of “IFQ halibut” in § 679.2 to specify that halibut IFQ may be harvested with longline pot gear while commercial fishing in any halibut area in the GOA. Additionally, this rule adds § 679.42(l)(6) to require a vessel operator using longline pot gear in the GOA sablefish IFQ fishery to retain legal size halibut caught incidentally if any IFQ permit holder on board has sufficient halibut IFQ pounds for the retained halibut for that halibut area. Additionally, this final rule revises § 679.7(a)(13) to specify the requirements for handling and release of halibut that apply to vessels using longline pot gear in the GOA sablefish IFQ fishery.

    Recordkeeping and Reporting

    This final rule adds § 679.42(l)(7) to require a vessel operator using longline pot gear in the GOA sablefish IFQ fishery to comply with logbook reporting requirements at § 679.5(c) and vessel monitoring system (VMS) requirements at § 679.42(k).

    The following table describes the revisions to § 679.5.

    Table 1—Description of Revisions to § 679.5 Paragraph in § 679.5 Revision (a)(4)(i) Require the operator of a vessel less than 60 feet (18.3 m) length overall (LOA) using longline pot gear in the GOA sablefish IFQ fishery to complete a logbook. (c)(1)(vi)(B) Clarify table footnote. (c)(2)(iii)(A) Add missing word. (c)(3)(i)(B) Revise paragraphs (1) and (2) and add paragraphs (3) through (5) to specify logbook reporting requirements for vessels in the GOA and BSAI. (c)(3)(ii)(A) and (B) Clarify tables describing current logbook reporting requirements. (c)(3)(iv)(A)(2) and (B)(2) Require the operator of a vessel using longline pot gear to record specific information in a Daily Fishing Logbook or Daily Cumulative Production Logbook each day the vessel is active in the GOA sablefish IFQ fishery. (c)(3)(v)(G) • Require the operator of a vessel using longline pot gear in the GOA or the BSAI fishery to record the length of a longline pot set, the size of the pot, and spacing of pots.
  • • Clarify logbook reporting requirements for gear information for all vessels using longline and pot gear.
  • (l)(1)(iii) Add paragraphs (H) and (I) to require the operator of a vessel using longline pot gear in the GOA sablefish IFQ fishery to record in the Prior Notice of Landing the gear type used, number of pots set, number of pots lost, and number of pots left on the fishing grounds still fishing in addition to the other information required under current regulations.
    Monitoring and Enforcement

    This final rule revises § 679.7(a)(6) to prohibit deployment of longline pot gear in the GOA outside of the sablefish fishing period. Additionally, this final rule revises § 679.7(a)(6)(i) to clarify that vessels in the halibut IFQ fishery are subject to gear deployment requirements specified by the IPHC in the annual management measures pursuant to § 300.62.

    This final rule prohibits a vessel operator in the GOA from using longline pot gear to harvest sablefish IFQ or halibut IFQ in the GOA sablefish areas without having an operating VMS on board the vessel. Additionally, this final rule revises § 679.42(k)(2)(ii) to require a vessel operator using longline pot gear to fish sablefish IFQ in the GOA to contact NMFS to confirm that VMS transmissions are being received from the vessel. The vessel operator is required to receive a VMS confirmation number from NMFS before fishing in the sablefish IFQ fishery.

    Other Revisions

    This final rule revises § 679.20(a)(4) to replace an incorrect reference to the sablefish total allowable catch (TAC) allocation to hook-and-line gear with the correct reference to fixed gear, as defined at § 679.2, which includes hook-and-line and longline pot gear. This final rule does not change the percent of the TAC allocated to the sablefish IFQ fishery in the GOA. NMFS will continue to allocate 95 percent of the sablefish TAC in the Eastern GOA sablefish area, which includes the SEO and WY, to vessels using fixed gear, and allocate 80 percent of the sablefish TACs in each of the CGOA and WGOA sablefish areas to vessels using fixed gear.

    This final rule revises § 679.42(b)(2) to specify that an operator of a vessel using hook-and-line gear to harvest sablefish IFQ, halibut IFQ, or halibut Community Development Quota (CDQ) must comply with seabird avoidance measures set forth in § 679.24(e). This final rule clarifies that vessel operators using longline pot gear in the GOA sablefish IFQ fishery are not required to comply with seabird avoidance measures under this final rule.

    This final rule revises § 679.51(a), which contains requirements for vessels in the partial coverage category of the North Pacific Groundfish and Halibut Observer Program. This final rule removes a specific reference to hook-and-line gear for vessels fishing for halibut. This revision is needed because this final rule authorizes the retention of halibut IFQ by vessels using longline pot gear in the GOA. It is not necessary to specify authorized gear for halibut IFQ in § 679.51(a) because § 679.50(a)(3) currently states that, for purposes of subpart E, when the term halibut is used it refers to both halibut IFQ and halibut CDQ, and the authorized gear for halibut is specified in § 679.2.

    Changes From Proposed to Final Rule

    NMFS made four changes to this final rule. The first change is in response to comments received on the proposed rule. NMFS added § 679.42(l)(5)(i)(C) to specify that the gear retrieval requirements in § 679.42 (l)(5)(iii) and (iv) apply to all longline pot gear that is assigned to a vessel and deployed to fish sablefish IFQ and to all other fishing equipment attached to longline pot gear that is deployed in the water by the vessel to fish sablefish IFQ. This final rule also specifies that “all other fishing equipment attached to longline pot gear” includes, but is not limited to, equipment used to mark longline pot gear as required in this final rule at § 679.24(a)(3). This change is described in more detail in the response to Comment 23 in the Comments and Responses section below.

    The second change clarifies the definition of Authorized Fishing Gear at § 679.2 (4)(iv) to specify that this final rule authorizes a person using longline pot gear to retain halibut in the GOA if the vessel operator is fishing for IFQ sablefish in accordance with the provisions established at § 679.42(l) for the use of longline pot gear. These provisions establish area-specific pot limits and gear retrieval requirements in addition to requirements for using pot tags and marking longline pot gear on the fishing grounds. This change clarifies that authorization of longline pot gear for halibut is limited to longline pot gear used in the GOA sablefish IFQ fishery in accordance with § 679.42(l) and does not apply to other groundfish fisheries in the GOA.

    The third change clarifies § 679.42(l)(6)(i)(A) to specify that a vessel operator using longline pot gear in the GOA sablefish IFQ fishery must retain legal size halibut if the halibut is caught in the GOA sablefish IFQ fishery in accordance with the provisions established at § 679.42(l) for the use of longline pot gear and an IFQ permit holder on board the vessel has unused halibut IFQ for the appropriate regulatory area and vessel category. As described for the second change to this final rule in the previous paragraph, this change clarifies that the requirement to retain halibut caught in longline pot gear used in the GOA sablefish IFQ fishery in accordance with § 679.42(l) is limited to the GOA sablefish IFQ fishery and does not apply to other groundfish fisheries in the GOA.

    The fourth change replaces “and” with “or” in § 679.7(f)(18)(i) in this final rule. This change clarifies that it is prohibited for a vessel operator to deploy, conduct fishing with, retrieve, or retain IFQ sablefish or IFQ halibut from longline pot gear in the GOA either in excess of the pot limits specified in § 679.42(l)(5)(ii) or without a pot tag attached to each pot in accordance with § 679.42(l)(4). The proposed rule incorrectly specified that a vessel operator would be in violation of § 679.7(f)(18) only if he or she deployed, conducted fishing with, or retrieved longline pot gear in the GOA in excess of the pot limits specified and without a pot tag attached to each pot. Changing “and” to “or” in § 679.7(f)(18)(i) in this final rule is necessary to implement the Council's and NMFS' intent that vessel operators are required to comply with both the pot limit and pot tag requirements, and that failure to comply with either of these requirements would be a violation of the regulations.

    Comments and Responses

    NMFS received 15 comment letters containing 29 specific comments, which are summarized and responded to below. The commenters consisted of individuals, sablefish IFQ fishery participants and industry groups representing fishermen using hook-and-line gear in the GOA, and an environmental organization.

    Comment 1: I do not support this action because sablefish is being overharvested and this is having negative impacts on marine mammals. NMFS should ban all fishing in this area and cut the sablefish quota to zero.

    Response: NMFS disagrees. Sablefish is not subject to overfishing, is not overfished, and TACs are set in a precautionary manner. The current harvest specifications process and authorities for in-season management prevent overfishing and provide for the GOA sablefish IFQ fishery to achieve optimum yield on a continuing basis. As described in the proposed rule and Section 3.1.1.2 of the Analysis, under Amendment 101 and this final rule, harvest of sablefish IFQ will be authorized only during the sablefish fishing period specified at § 679.23(g)(1) and established by the Council and NMFS through the annual harvest specifications (81 FR 14740, March 18, 2016). Amendment 101 and this final rule do not change conservation and management of the GOA sablefish fishery.

    Section 3.4 of the Analysis describes that the current GOA groundfish fisheries, which includes the sablefish IFQ fishery, do not have an adverse impact on marine mammals. The Council and NMFS considered the impacts of Amendment 101 and this final rule on marine mammals and determined that they do not have an effect on marine mammals beyond those already expected from the GOA groundfish fisheries (see the response to Comment 2).

    Comment 2: NMFS should prepare an environmental impact statement (EIS) for Amendment 101 because of its potential effect on humpback whales and North Pacific right whales. The draft EA is inadequate because it fails to analyze potential impacts of sablefish pot gear in the GOA on marine mammals that are listed as endangered under the Endangered Species Act (ESA), specifically humpback whales (Megaptera novaeangliae) and North Pacific right whales (Eubalaena japonica).

    Response: NMFS prepared a draft EA to determine whether the environmental impact of the proposed action was significant. Section 3.4 of the draft EA discussed the impact of the proposed action on marine mammals. In response to this comment, NMFS has revised this section of the EA to provide additional information on North Pacific right whales and humpback whales. Based on the analysis in the final EA, NMFS continues to conclude that Amendment 101 and this final rule will not have a significant impact on the human environment, including humpback whales and North Pacific right whales. Therefore, NMFS is not required to prepare an EIS under the requirements of the National Environmental Policy Act.

    Comment 3: There is evidence of pot fishing gear entangling Atlantic right whales and humpback whales. NMFS should consider using entanglement information from other fisheries outside of Alaska as a proxy for potential impacts of the proposed action on North Pacific right whales.

    Response: Section 3.4 of the EA presents information on observations of marine mammal entanglements in Alaska. NMFS considered entanglement information from similar fisheries using pot gear in the GOA and Bering Sea as these fisheries are likely more analogous to the GOA sablefish IFQ longline pot gear fishery than fisheries in other regions where potential interactions between fisheries and marine mammal species may differ from interactions in Alaska. Species distribution and abundance information from the GOA provides more informative indications as to the probability of fishery interactions with marine mammals than data from other regions or oceans. While fishery interactions and entanglements of right whales are known to occur in the North Atlantic, no North Pacific right whale interactions are known to have occurred in the North Pacific fisheries despite considerable fishing effort. Therefore, NMFS disagrees that the North Atlantic data are a more reasonable proxy than the best available data on fishery interactions with North Pacific right whales in the North Pacific fisheries.

    Comment 4: NMFS must consult under section 7 of the ESA and publish a biological opinion including an incidental take statement for ESA-listed species likely to interact with longline pot gear in the GOA sablefish fishery. The commenter states that due to the absence of a biological opinion on the effect of the proposed action on ESA-listed species, the draft EA does not provide the public with a complete documentation of the environmental impacts associated with this action. The commenter states that NMFS should reopen the public comment period if this consultation, or any other ongoing analysis that may affect NMFS' decision-making process, adds critical new information to the record.

    Response: NMFS revised Section 3.4 of the EA to summarize information on ESA section 7 consultations (consultations) that have been conducted to assess the effects of the GOA groundfish fisheries on ESA-listed species. Although the EA describes these consultations, the results of these consultations have been publicly available on the NMFS Alaska Region Web site at: www.alaskafisheries.noaa.gov. Amendment 101 and this final rule do not modify the GOA groundfish fisheries in a manner that will cause effects on listed species or designated critical habitat that have not been considered in previous consultations. Based on the information in section 3.4.1.2 of the analysis, the overall likelihood of entanglement of listed marine mammals in longline pot gear is no greater than the likelihood of listed marine mammal entanglement in the hook-and-line gear currently used in the sablefish IFQ fishery.

    The summary of information available in Section 3.4 of the EA does not affect NMFS' decision-making process or add critical new information to the record that would require NMFS to publish a new proposed rule or extend the public comment period.

    Comment 5: NMFS should analyze whether a negligible impact determination (NID) is appropriate for the GOA sablefish IFQ longline pot gear fishery under the Marine Mammal Protection Act (MMPA) because of its similarity to the sablefish pot fishery along the west coast of the United States (California, Oregon, and Washington).

    Response: NMFS publishes an annual List of Fisheries (LOF) in which all commercial fisheries in the United States are categorized according to the level of serious injury and mortality to marine mammals relative to the health of each marine mammal stock. Category I fisheries are considered to have the greatest impact on a marine mammal stock's health, Category II fisheries have some impact on a marine mammal stock's health, and Category III fisheries have the least impact. These categories are used to make management decisions, as needed, to monitor and adjust fisheries' impacts on marine mammal populations. Under MMPA section 118, participants in Category I through III commercial fisheries are granted an exemption from the MMPA prohibition on incidental takes of marine mammal not listed as threatened or endangered under the ESA. NMFS will include the GOA sablefish IFQ longline pot gear fishery in the 2018 LOF analysis to place this fishery in the appropriate LOF category. In the meantime, once this final rule becomes effective, the new GOA sablefish IFQ logline pot gear fishery will be automatically considered a Category II fishery, as directed by regulation (50 CFR 229.2).

    Permits authorizing the incidental take of ESA-listed species in U.S. commercial fisheries may be granted under MMPA section 101(a)(5)(E). One criterion required to issue such permits is a NID. A NID is issued if NMFS determines that all commercial fisheries identified in the annual LOF, collectively, have a negligible impact on any ESA-listed marine mammal stock for which a take permit is proposed to be issued. A negligible impact is defined (50 CFR 216.103) as an impact resulting from the specified activity that cannot be reasonably expected to, and is not reasonably likely to, adversely affect the species or stock through effects on annual rates of recruitment or survival.

    NMFS issued a NID for fishery impacts on marine mammals in Alaska on June 23, 2016, and NMFS issued permits under the authority of section 101(a)(5)(E) of the MMPA for the incidental taking of ESA-listed species effective for a three-year period (June 23, 2016, 81 FR 40870). Because the new GOA sablefish IFQ longline pot gear fishery has not yet commenced, information is not available to make a NID on the impacts of this fishery on ESA-listed marine mammals in Alaska. The use of the U.S. west coast sablefish pot fishery as a surrogate for the GOA sablefish IFQ longline pot gear fishery in a NID, as suggested by the comment, would be inappropriate due to differences in geography, fishery operations, and marine mammal species distribution. Information on marine mammal interactions with the new GOA sablefish IFQ longline pot gear fishery will be incorporated and considered when NMFS begins analysis during the review of the current NID applicable to Alaskan fisheries.

    Comment 6: The commenter urges NMFS to set aside areas in the GOA where pot gear is prohibited in order to protect the North Pacific right whale from entanglement. The commenter states that the North Pacific right whale population is estimated to be very low, and that any serious injury or mortality would have population level effects. The commenter urged NMFS to close North Pacific right whale critical habitat in the GOA to minimize the extent of fishing gear interactions.

    Response: As summarized in Section 3.4 of the EA, NMFS has concluded that this action is not likely to affect the North Pacific right whale or its designated critical habitat in a manner or to an extent not already considered in prior ESA section 7 consultations on the GOA groundfish fisheries. In 2006, NMFS determined that the GOA groundfish fisheries are not likely to adversely affect right whales. NMFS reaffirmed this determination when critical habitat was designated for the North Pacific right whale in 2008. There are no recorded instances of North Pacific right whale entanglements with hook-and-line gear or longline pot gear in the Alaska groundfish fishery. Section 3.4.1.2 of the EA analyzes the potential overlap of the sablefish fishery with areas of known North Pacific right whale observations and critical habitat. The analysis found that the sablefish fishery occurs at depths much deeper than designated North Pacific right whale critical habitat, so neither the hook-and-line gear nor the longline pot gear sablefish fishery is likely to adversely affect North Pacific right whales or the designated critical habitat. Based on this analysis, NMFS concludes that there is likely to be no overlap between GOA sablefish longline pot gear and North Pacific right whale critical habitat. The commenter's proposal to close North Pacific right whale critical habitat to longline pot gear in the GOA sablefish IFQ fishery to protect North Pacific right whales from entanglement is not supported by the available data.

    Comment 7: The use of pot gear in the GOA sablefish fishery is likely to entangle humpback whales based on comparisons to the sablefish pot fisheries operating off the west coast of the U.S. and in the BSAI. The EA must consider entanglement of humpback whales in the analysis of cumulative impacts. The use of sablefish pot gear in the GOA is likely to increase entanglements for the Hawaii, Mexico, and western North Pacific humpback whale ESA-listed distinct population segments and moderately reduce population size or growth rate.

    Response: NMFS revised Section 3.4 of the EA to describe the anticipated effects of longline pot gear in the GOA sablefish IFQ fishery, including entanglement of marine mammals, in response to this comment. The analysis shows there were no documented marine mammal interactions in the Bering Sea IFQ sablefish longline pot fishery or the BSAI Pacific cod longline pot fishery from 2008 through 2012. Based on this best available data for longline pot gear in the BSAI sablefish IFQ pot fishery and in other existing longline pot fisheries in the GOA, NMFS determines that the longline pot gear that may be deployed under the final rule in lieu of hook-and-line gear is not likely to increase the risk of entanglements of humpback whales relative to status quo. Based on the information in the analysis, NMFS determined that the GOA groundfish fisheries are not likely to have population-level effects on humpback whales.

    Comment 8: The biological opinions prepared for the west coast sablefish pot fishery include terms and conditions to mitigate potential entanglement with whales that should be required by NMFS for the GOA sablefish pot fishery. These terms and conditions include electronic monitoring and logbook reporting requirements to report lost gear, a database to track fishery effort, analysis on the magnitude of lost pot gear and factors that may influence loss, and analysis of gear deployment and overlap with large whale migrations of aggregations.

    Response: Many of the monitoring requirements and analyses referenced by the commenter in the biological opinions assessing the west coast sablefish pot fishery are addressed through existing regulations, or are required under this final rule. This final rule also includes additional monitoring provisions.

    This final rule requires the use of logbooks to record data on pot gear deployment and loss at § 679.5(c). Specifically, a vessel operator using longline pot gear in the GOA must record the length of a longline pot set, the size of the pot, the spacing of pots, number of pots set, number of pots lost, and number of pots left on the fishing grounds still fishing, in addition to the other information required under current regulations. Additionally, this final rule at § 679.42(k) requires a vessel operator to use a VMS while using longline pot gear to fish for sablefish in the GOA. VMS monitors the location and movement of commercial fishing vessels in Federal fisheries off Alaska. Further, a vessel operator using longline pot gear in the GOA is subject to observer coverage under the North Pacific Groundfish and Halibut Observer Program.

    NMFS has developed analytical tools and databases to analyze all fishery data that NMFS collects, including the new data collected under this final rule. NMFS is able to assess the amount of catch, effort, and areas where longline pot gear is deployed in the GOA sablefish IFQ fishery with existing analytic methods. NMFS will have the fishery data necessary to compare longline pot gear deployment with available information on areas of large whale migrations. The Council and NMFS are currently analyzing the use of electronic monitoring for pot gear. Under a separate analytical and regulatory process, the Council and NMFS may consider the use of electronic monitoring for vessels using longline pot gear in the GOA sablefish IFQ fishery.

    Comment 9: Measures to protect Atlantic right whales from entanglement by pot gear have been recommended by the Marine Mammal Commission, and those should be considered by NMFS for the GOA sablefish pot fishery. These measures include gear marking requirements, and closing areas likely to be used by Atlantic right whales. NMFS also should consider the applicability of mitigation measures suggested in the Atlantic Large Whale Take Reduction Plan to the GOA sablefish pot fishery.

    Response: This final rule implements additional gear marking requirements for vessels using longline pot gear in the GOA sablefish IFQ fishery. Under this final rule at § 679.24(a), each vessel operator must attach a cluster of four or more marker buoys, a flag mounted on a pole, and a radar reflector to each end of a longline pot set. This final rule requires vessel operators to add the initials “LP” for “Longline Pot” to one hard buoy in the buoy cluster in addition to the FFP number of the vessel deploying the gear, or the ADF&G vessel registration number. This will distinguish buoys for hook-and-line gear from buoys for longline pot gear. As stated in the response to Comment 6, closing areas to the use of longline pot gear in the GOA sablefish IFQ fishery is unnecessary. Section 3.4 of the EA summarizes the history of ESA section 7 consultations conducted for GOA groundfish fisheries. Based on these conclusions, additional management measures such as those described by the Atlantic Large Whale Take Reduction Plan do not appear to be applicable or warranted. However, if information becomes available that indicates whales are interacting with this fishery, NMFS will take appropriate measures pursuant to the MMPA and, for listed whales, the ESA.

    Comment 10: NMFS should prohibit the use of hook-and-line gear in the sablefish fishery in favor of longline pot gear. NMFS should not allow fishermen to continue to use the gear just because they have made economic investments in using that harvesting method. NMFS must achieve maximum sustainable yield from the sablefish fishery with the greatest harvesting efficiency and lowest impact to the environment, and hook-and-line gear does not achieve this due to current levels of depredation and interactions with whales and seabirds. Furthermore, hook-and-line gear is inefficient from a fuel and manpower perspective because it requires constantly retrieving the lines. Longline pot gear allows pots to soak on the fishing grounds and provides for more efficient catch of fish because smaller fish can swim out of the pot and whales cannot get to the sablefish inside the pots. More efficient harvest benefits the end consumer because they can purchase fish at lower cost.

    Response: Amendment 101 and this final rule are intended to balance multiple objectives: Improve harvesting efficiency and reduce adverse economic impacts from depredation to harvesters in the sablefish IFQ fishery, mitigate impacts on sablefish IFQ fishermen using hook-and-line gear by minimizing the potential for interactions between hook-and-line gear and longline pot gear, and reduce sablefish IFQ fishery whale and seabird interactions with fishing gear. Amendment 101 and this final rule balance these objectives consistent with the requirements of the Magnuson-Stevens Act.

    Amendment 101 and this final rule are consistent with National Standard 1 of the Magnuson-Stevens Act, which requires conservation and management measures to prevent overfishing while achieving optimum yield on a continuing basis (section 301(a) of the Magnuson-Stevens Act). Optimum yield is based on maximum sustainable yield, reduced as appropriate for social and economic factors for the relevant fishery (81 FR 71858, October 18, 2016). The Council and NMFS achieve optimum yield in the GOA sablefish IFQ fishery by establishing annual catch limits at sustainable levels and establishing management measures for the fishery that meet a number of social and economic goals, including maintaining a diverse fleet of fishing vessels and a broad distribution of economic benefits to fishermen, processors, and communities that participate in the fishery (see Sections 3.1 and 4.5 of the Analysis). As described in the response to Comment 1, Amendment 101 and this final rule do not change the current process for establishing annual catch limits or the management measures that have been established to meet specific social and economic goals for the GOA sablefish IFQ fishery.

    As described in the response to Comment 1, the proposed rule, and Sections 3.4 and 3.5 of the Analysis, the Council and NMFS have determined that the current GOA sablefish IFQ fishery prosecuted with hook-and-line gear does not adversely affect whales and seabirds. Amendment 101 and this final rule do not change the management measures established for the hook-and-line sablefish IFQ fishery in the GOA that are intended to reduce fishery interactions with whales and seabirds.

    The proposed rule and Section 2.1.1 of the Analysis describe that sablefish can be caught efficiently with hook-and-line and pot gear. In recommending Amendment 101 and this final rule, the Council and NMFS recognized that hook-and-line gear will continue to be an effective harvesting method for many vessels in the sablefish IFQ fishery. Authorizing fishermen to use longline pot or hook-and-line gear in the GOA sablefish IFQ fishery provides each vessel operator with the choice to determine which type of gear is appropriate for their operation and gives them the flexibility to determine the most cost effective method for harvesting sablefish IFQ. The proposed rule and Section 4.9.2 of the Analysis describe that the costs of converting to longline pot gear can be substantial, and some vessels in the sablefish IFQ fishery will not be able to convert because of vessel length or other factors. Amendment 101 and this final rule balance the needs of sablefish IFQ fishery participants by providing vessel operators with the opportunity to use longline pot gear if it would benefit their harvesting operation by reducing interactions with whales.

    NMFS acknowledges that while the costs of harvesting operations could impact the price that consumers pay for sablefish in the market, fishing gear is just one cost component for a harvesting operation. NMFS does not have information indicating the sablefish harvested with longline pot gear will result in reduced consumer prices relative to sablefish caught with hook-and-line gear.

    Comment 11: NMFS received comments that provided general support for Amendment 101, but noted specific concerns about the proposed rule. One commenter supported the authorization of longline pot gear in the GOA sablefish IFQ fishery to improve efficiency in harvesting sablefish, reduce adverse economic impacts on harvesters that occur from depredation, and reduce fishery interactions with whales. The commenter stated that a large number of vessels in the sablefish IFQ fleet will not be able to use the gear because the economic cost of converting to pots is uncertain and potentially substantial. The commenter stated that vessels that are 50 feet LOA or less generally cannot use longline pot gear because they cannot safely carry, deploy, and retrieve pots. The commenter expressed concern that the introduction of longline pot gear could result in gear conflicts and grounds preemption and disadvantage vessels that continue to use hook-and-line gear by reducing the amount of available fishing grounds and increasing the costs of harvesting sablefish IFQ for these vessels.

    One commenter acknowledged that the use of longline pot gear likely would reduce depredation, but opposed the reintroduction of longline pot gear to the GOA sablefish fishing grounds, particularly in the SEO and WY. The commenter stated that the potential negative impacts of introducing longline pot gear on vessel operators that continue to use hook-and-line gear would outweigh the benefits because the proposed rule did not contain adequate measures to mitigate the negative impacts of introducing longline pot gear to the GOA sablefish IFQ fishery.

    Response: NMFS acknowledges the general support for Amendment 101. As described in the response to Comment 10, Amendment 101 and this final rule are intended to balance multiple objectives: Improve harvesting efficiency and reduce adverse economic impacts from depredation to harvesters in the sablefish IFQ fishery, mitigate impacts on sablefish IFQ fishermen using hook-and-line gear by minimizing the potential for interactions between hook-and-line gear and longline pot gear, and reduce sablefish IFQ fishery whale and seabird interactions with fishing gear.

    The proposed rule (81 FR 55408, August 19, 2016) and the Analysis (see ADDRESSES) describe that the Council and NMFS considered the impacts of this action on vessels that continue to use hook-and-line gear. Although it is not possible to know how many sablefish fishermen will choose to use longline pot gear instead of hook-and-line gear in the GOA, the Council and NMFS considered information in the Analysis and public testimony to determine that the likelihood of gear conflicts and grounds preemption under Amendment 101 and this final rule is low.

    Section 4.10 of the Analysis indicates that the Council recognized that pot gear had previously been permitted in the GOA sablefish fishery but was prohibited in 1985 by Amendment 14 to the GOA FMP (50 FR 43193, October 24, 1985). During deliberation on Amendment 101 and this final rule, the Council noted that its decision to prohibit pot gear in Amendment 14 was based on fishery data and scientific information on depredation that is not reflective of the present fishery. Reports and observations of depredation of hook-and-line gear have increased since 1985 (see Section 3.4 of the Analysis), and the fishery has been managed under the Halibut and Sablefish IFQ Program since 1995. The existing management program for the fishery provides substantially more flexibility on when and where to harvest sablefish and allows for coordination and cooperation within the fleet. In addition, all fishermen have an economic incentive to avoid gear conflicts on the fishing grounds because these conflicts can result in costs through lost gear and lost fishing time (see Section 4.10 of the Analysis).

    In spite of these factors mitigating the potential for gear conflicts, the Council and NMFS received public testimony noting the potential negative impacts of authorizing longline pot gear on vessels that continue to use hook-and-line gear. As a result, the Council recommended and NMFS included area-specific management measures in this final rule to address these concerns. These management measures are discussed in detail in the proposed rule, and in Sections 4.9.3, 4.9.4, and 4.9.5 of the Analysis. These area-specific management measures were developed with input from the Sablefish Gear Committee that included participants in the sablefish IFQ fishery. Input from the Sablefish Gear Committee, the Council's advisory bodies, public testimony, and the Analysis were used to develop the area-specific management measures implemented in this final rule to meet the Council's objective to provide an opportunity for fishermen to use longline pot gear while minimizing the potential for negative impacts on vessels that use hook-and-line gear.

    The proposed rule and Section 4.9.2 of the Analysis describe that it is highly likely that a portion of the existing GOA sablefish IFQ fleet will continue to use hook-and-line gear, due to cost constraints, vessel size constraints, or both. NMFS agrees with the commenters that the costs of reconfiguration likely will be prohibitive for many vessel operators and this outcome is supported by the proposed rule and Section 4.9.8.1 of the Analysis. The proposed rule and the Analysis also describe the feasibility of converting to longline pot gear with respect to vessel size. Section 4.9.8.1 of the Analysis notes that based on information from other groundfish pot fisheries, vessels less than 50 feet LOA may be less likely to use longline pot gear in the GOA sablefish IFQ fishery than larger vessels. After considering this information, the Council determined and NMFS agrees that the number of vessels that convert to longline pot gear is likely to be small in comparison to those that will continue using hook-and-line gear, which will reduce the potential for gear conflicts and grounds preemption under Amendment 101 and this final rule.

    The proposed rule and Section 4.10 of the Analysis describe that in recommending Amendment 101 and this final rule the Council expressed its intent to monitor the use of longline pot gear in the GOA sablefish IFQ fishery to determine if Amendment 101 and this final rule are meeting its objectives. The Council requested that NMFS provide an annual report on the use of longline pot gear in the GOA sablefish IFQ fishery following implementation of this final rule. The Council also indicated that it will conduct a review of the effects of authorizing longline pot gear three years following implementation of this final rule. The Council stated that the intent of the review is to evaluate the impacts of this action on sablefish harvesting, depredation, and vessels that continue to harvest sablefish with hook-and-line gear. During deliberation on Amendment 101 and this final rule, the Council specifically noted that its three-year review will evaluate whether the use of longline pot gear has impacted fishing community participation in the fishery or prices of sablefish quota share that might adversely affect new entrants or small-scale operators looking to grow their business. This review will provide the Council and NMFS the opportunity to assess potential gear conflicts under this final rule. Nothing in Amendment 101 or this final rule would preclude the Council and NMFS from considering action to further reduce gear conflicts through a subsequent action if the review indicates that such action is necessary.

    Comment 12: We think there is substantial risk for conflicts between longline pot and hook-and-line gear under Amendment 101 and the proposed rule. There is widespread evidence of past gear conflicts based on previous Council actions to prohibit longline pot gear as described in the proposed rule preamble. Although these conflicts occurred before the IFQ Program was implemented, they also occurred when the sablefish season was open throughout the spring and summer in the early 1980s.

    The foreign fishing fleets (active prior to the 1980s) lost or abandoned a substantial amount of pot gear in the SEO many years ago and despite continued efforts by the fishing fleet to remove it from the fishing grounds, the lost and abandoned pot gear continues to preempt grounds off Sitka. Longline gear set near these lost pots still on occasion drift to tangle with the lost pots. Attempts to retrieve gear tangled with these pots are dangerous, with tremendous strain on the boat trying to haul the gear, and the end result is more lost gear and lost fish.

    Letters submitted to the Pacific Fishery Management Council provide evidence of present gear conflicts, safety issues, and grounds preemption driven by the entrance of three boats using longline pot gear in what has historically been hook-and-line grounds. This issue is clearly important because the Council's Sablefish Gear Committee spent most of its time talking about gear conflicts and how to minimize anticipated conflicts.

    Response: The Council and NMFS carefully considered the impacts of gear conflicts and grounds preemption when developing Amendment 101 and this final rule, including input from the Council's Sablefish Gear Committee, its advisory bodies, and public testimony. Section 2.1.1 of the Analysis and the final rule to implement Amendment 14 to the GOA FMP (50 FR 43193, October 24, 1985) describe the issues summarized in the comment. As described in the response to Comment 11, the Council and NMFS believe that management under the IFQ Program has substantially changed the likelihood of gear conflicts, grounds preemption, and safety issues overall in the sablefish IFQ fishery, and particularly related to the introduction of longline pot gear.

    The proposed rule and Section 5.1 of the Analysis describe that the Council and NMFS carefully considered the impacts of Amendment 101 and this final rule on the safety of human life at sea, consistent with National Standard 10 of the Magnuson-Stevens Act. The impacts of Amendment 101 and this final rule on safety are also considered in Section 4 of the Analysis. While some participants in the hook-and-line fleet raised safety concerns to the Council and NMFS related to carrying longline pot gear on small vessels, the use of longline pot gear will be voluntary, not mandatory, under this final rule. Section 2.4 of the Analysis describes that the Council and NMFS considered the impacts of this action on safety in developing the requirements for vessels to use longline pot gear instead of pot-and-line gear at § 679.2 and the gear retrieval requirements at § 679.42(l)(5)(iii).

    The response to Comment 11 details the management measures included in this final rule to minimize the potential for gear conflicts and grounds preemption. This final rule limits the amount of longline pot gear that may be deployed to limit potential gear conflicts on an area-specific basis, and defines the maximum amount of time that longline pot gear may be left on the fishing grounds in the WY, CGOA and WGOA. This final rule requires vessels fishing in the SEO to remove their longline pot gear from the fishing grounds when making a delivery. In developing that recommendation for the SEO, the Council noted that SEO sablefish fishing grounds are limited relative to other areas, and allowing longline pot gear to be left on the grounds when a vessel leaves the fishing grounds to make a delivery may create safety hazards by increasing the likelihood of gear conflict relative to other areas in the GOA.

    In addition, the Council recommended and NMFS is implementing gear marking requirements in this final rule at § 679.24(a)(3) to make longline pot gear more visible on the fishing grounds to further minimize the potential for gear conflicts and grounds preemption, which promotes safety for all vessels.

    The Council recommended and this final rule implements gear deployment and retrieval requirements that balance the objectives of Amendment 101 and this final rule.

    Comment 13: We believe the Council and NMFS should not allow the use of longline pot gear throughout the GOA throughout the entire year. The Analysis repeatedly states that the impacts of allowing pots into the sablefish fishery are poorly understood. We request that the proposed rule be amended to prohibit the use of longline pot gear in the SEO and WY during April and again between August 15 and September 15 to provide two months of the year in which hook-and-line fishermen could harvest sablefish without the potential for gear conflicts or grounds preemption.

    Response: NMFS did not change this final rule in response to this comment. This final rule authorizes longline pot gear at any time during the GOA sablefish IFQ season authorized by § 679.23(g). The Council and NMFS considered and rejected a prohibition on the use of longline pot gear in the SEO during specific months of the year as part of this action. As described in Section 2.4 of the Analysis, it is likely that the prohibition will have an undetermined impact on some sablefish IFQ fishermen using longline pot or hook-and-line gear that was not considered in the development of Amendment 101 or the proposed rule. Therefore, NMFS did not change this final rule in response to this comment.

    Comment 14: We believe conservation arguments relative to whale predation have been exaggerated and our significant experience with sperm whale interactions with the sablefish fishery informs our conclusions. We think that proponents of Amendment 101 have overstated the negative impacts of depredation on the sablefish survey and on catch accounting in the sablefish fishery. The sablefish stock is neither overfished nor subject to overfishing. Studies on loss to sperm whale depredation in the commercial hook-and-line fisheries in Alaska is estimated at 2.2 percent of total groundfish catch based on visual evidence of torn or partial fish, which is likely a low estimate, but is still the best available information.

    The Analysis identifies a number of unknown potential impacts on the use of longline pot gear on both the sablefish survey (conflicts between the survey and pots have occurred in the past) and potential impacts on the sablefish stock of increased harvest with pots. The Analysis notes that sablefish length and possibly age composition information would be needed for harvests in pot gear before the stock assessment authors could evaluate the potential effects of introducing pot gear on the sablefish stock and stock assessment. These unknowns argue for a cautious, phased-in and experimental approach to allowing this new gear type.

    Response: NMFS disagrees. The Council and NMFS considered the information in Section 4.8.1 of the Analysis and public testimony to determine that depredation is negatively impacting harvesting efficiency for some vessel operators. The Council determined and NMFS agrees that allowing vessel operators to voluntarily use longline pot gear could address the negative impacts described in the Analysis and in public testimony.

    The Analysis describes that killer whale interactions are most common in the BSAI and the WGOA, while sperm whale interactions are most common in the CGOA, WY, and SEO. Section 3.4.1.1 of the Analysis provides best available information on depredation in this fishery. While depredation events are difficult to observe, fishery participants have testified to the Council that depredation continues to be a major cost to the sablefish IFQ fishery, and appears to be occurring more frequently. Industry groups have tested gear modifications to limit the impact of depredation on hook-and-line gear catch per unit effort, and reported those efforts to the Sablefish Gear Committee and the Council. Nevertheless, depredation continues to result in lost sablefish catch, increased fishing time as vessel operators wait for whales to leave the area before hauling gear, or increased time and fuel to relocate to avoid whales. Section 4.7 of the Analysis includes a summary of efforts to mitigate depredation in Alaska and elsewhere.

    NMFS agrees with the commenter that the sablefish stock is not overfished and is not subject to overfishing. The Council and NMFS considered the impacts of Amendment 101 and this final rule on the sablefish stock. The proposed rule and Section 3.1.1.2 of the Analysis describe that Amendment 101 and this final rule are not expected to have significant impacts on the sablefish stock. The Analysis describes that although some benefit likely will occur because unaccounted fishing mortality due to depredation will be reduced as sablefish IFQ fishermen voluntarily switch from hook-and-line longline gear to longline pot gear, the potential impact of reduced depredation may be difficult to measure given overall trends in sablefish recruitment.

    Section 3.1.1.2 of the Analysis notes that the sablefish stock assessment authors considered the impacts of the introduction of longline pot gear on the sablefish stock assessment. The stock assessment authors considered whether the fish size selectivity of longline pot gear would be different from hook-and-line gear using information from the BSAI, where pot gear has been authorized in the sablefish IFQ fishery since 2008 (73 FR 28733, May 19, 2008). Some evidence exists to suggest a difference in the length frequency of sablefish caught with pot gear compared to hook-and-line gear, with hook-and-line gear producing slightly larger sablefish on average (see Figure 6 in Section 3.1.1.2 of the Analysis). However, the Analysis concludes that this difference in sizes was observed at the BSAI area-wide level and the size differences likely can be attributed to differences in sablefish sizes among sub-areas of the BSAI. The Analysis also notes that longline pot and hook-and-line gear are set at similar depths in the BSAI and the sex ratio of the catch is comparable for both gears. After considering this information, the sablefish stock assessment authors determined that the difference in lengths selected by longline pot and hook-and-line gear is not significant enough to affect population recruitment. Overall, existing evidence does not suggest that the introduction of longline gear pot under Amendment 101 and this final rule will impact the annual sablefish stock assessment.

    NMFS notes that this final rule does not change observer coverage requirements for vessels fishing in the sablefish IFQ fisheries (§§ 679.50 through 679.55). Therefore, NMFS will collect information on length and age composition for sablefish caught in longline pot gear in the GOA sablefish IFQ fishery, and this information will be used in the annual assessment to determine that status of the sablefish stock.

    Comment 15: The proposed rule cites reduced catch per unit effort as a result of depredation. We note that the catch per unit effort is currently more than twice as high in the SEO as it is in the WGOA, which indicates that depredation may not be negatively impacting catch per unit effort in some areas, and authorizing longline pot gear may not be necessary in those areas.

    Response: NMFS agrees that it is not possible to determine if Amendment 101 and this final rule will increase sablefish catch per unit effort for those vessels that use longline pot gear relative to vessels that use hook-and-line gear. Section 4.9.2 of the Analysis describes that the relative benefit of using longline pot gear fishing as opposed to hook-and-line gear is either unclear or is conditional on factors that cannot be forecasted in the Analysis because longline pot gear has been prohibited in the fishery for many years. Those external factors include the local biomass distribution of sablefish in the future, changes in future product markets, and the future behavior of marine mammals, particularly depredating whales. Based on available information, the Analysis does not definitively state whether fishing with longline pot gear will generate a higher sablefish catch per unit effort in the GOA. The Analysis also notes that catch per unit effort is likely to differ across GOA management areas.

    The Council received public testimony from sablefish fishermen in all areas of the GOA indicating that depredation had reduced catch per unit effort and increased costs for their fishing operations. The Council determined and NMFS agrees that Amendment 101 and this final rule will improve harvesting efficiency and reduce adverse economic impacts from depredation to harvesters in all GOA sablefish areas (see Section 4.10 of the Analysis).

    Comment 16: The proposed rule states that groundfish bycatch and the incidental catch of seabirds may be reduced by authorizing the use of longline pot gear. The SEO sablefish hook-and-line fleet has collaborated since 2009 to reduce rockfish bycatch, and we are expanding bycatch avoidance to include other species. Bycatch in the sablefish hook-and-line fishery is primarily grenadiers and sharks, which are not target fisheries and are harvested in amounts well below the biological limits established for these species. Longline pot gear can also result in bycatch of some species, and NMFS should evaluate the potential bycatch of octopus by vessels using longline pot gear in the sablefish fishery.

    Although pots are likely to reduce seabird takes, hook-and-line fisheries in the GOA typically account for only 10 percent to 20 percent of overall incidental catch of seabirds in the BSAI and GOA groundfish fisheries. The incidental catch of seabirds has been reduced significantly by the use of streamer lines in the hook-and-line fishery.

    Response: NMFS agrees with the commenter that the sablefish IFQ fleet has taken positive steps to reduce rockfish bycatch and interactions with seabirds. As described in the response to Comment 14, Amendment 101 and this final rule do not change the observer coverage requirements for GOA sablefish IFQ fishery participants. NMFS collects information on bycatch and seabird interactions through the North Pacific Observer Program and will continue to do so for vessels participating in the GOA sablefish fishery, including vessels in the longline pot fishery, following implementation of this final rule.

    Comment 17: We believe that Amendment 101 and the proposed rule are inconsistent with National Standard 8 because they fail to provide for the sustained participation of fishery dependent communities. The Council and NMFS must preserve the historic hook-and-line gear, small boat nature of the GOA sablefish fleet in general and in the SEO in particular. Because relatively more IFQ is fished by small boats in the SEO and WY relative to the CGOA and WGOA, it is clear that the introduction of pots in these areas will reduce the fishing grounds available to these small boats using hook-and-line gear and therefore reduce the number of hook-and-line vessels that can participate in the fishery. Eliminating small vessels from this historically important fishery will negatively impact communities in the SEO and WY. The geographic, social, and economic characteristics of the SEO sablefish fishery demand different considerations for the SEO and WY, and we urge NMFS to provide for the sustained participation of these fishery dependent communities by rejecting Amendment 101 and the proposed rule.

    Response: NMFS has determined that Amendment 101 and this final rule are consistent with National Standard 8. As described in the response to Comment 11, the Council developed this action based on input from its Sablefish Gear Committee, its advisory bodies, public testimony, and the Analysis. Amendment 101 and this final rule balance the needs of sablefish fishermen who want to use longline pot gear and those who will continue to use hook-and-line gear.

    Section 5.1 of the Analysis describes that the Council's objectives for this action implicitly recognize the importance of the sablefish fishery to GOA fishing communities and their residents. Amendment 101 and this final rule could reduce depredation and interactions, reduce bycatch of some species, reduce incidental catch of seabirds, and improve the long-term management of the resource by providing another harvesting option that likely will increase harvesting efficiency. Amendment 101 and this final rule are structured in a manner that does not inherently disadvantage fishery participants who choose not to switch from hook-and-line to longline pot gear. This final rule implements area-specific pot limits, gear redeployment and removal requirements, gear marking, and recordkeeping reporting requirements intended to minimize the potential for gear conflicts and grounds preemption.

    Section 4.9.8 of the Analysis describes the impacts of Amendment 101 and this final rule on individual harvesters and fishing communities. The Analysis did not identify adverse impacts on individual harvesters or fishing communities because it does not anticipate a significant shift in the communities to which sablefish products are delivered, or from which sablefish vessels depart. The Analysis notes that Amendment 101 and this final rule will not alter the IFQ Program management measures that are designed to maintain a diverse fleet to benefit individual fishermen and communities that participate in the GOA sablefish IFQ fishery. These measures include area-specific quota share and IFQ, different quota share and IFQ allocations for vessel size categories, quota share use caps, and vessel IFQ caps.

    Comment 18: The proposed rule and Analysis do not discuss how this action may displace crew or change the current composition of the fleet. The Council and NMFS have always placed a high priority on maintaining the benefits of the IFQ fisheries for small fishing communities. The current trend of quota share-holders hiring a master to harvest their IFQ provides more revenues for quota share-holders, but does not benefit other participants in the fishery such as hired skippers and crew members because more of the fishery revenues are going to quota share-holders. Amendment 101 will make this worse by allowing the hired master practice to continue and delay new entry into the fishery.

    Response: This final rule does not change current regulations at § 679.42(c) that require the holder of sablefish catcher vessel quota share to be on board the vessel when their sablefish IFQ is harvested unless the quota share holder is eligible to hire a master or lease the IFQ under limited exceptions to the owner on board requirement.

    Section 4.9.8.1 of the Analysis describes the potential for fleet consolidation following implementation of Amendment 101 and this final rule. The Analysis describes that if longline pot gear becomes the dominant gear in the sablefish IFQ fishery, it is possible that depredation would be concentrated on vessels that continue to use hook-and-line gear. This increased concentration could increase costs for these participants and, in the extreme, reduce profitability from fishing with hook-and-line gear. If profitability is substantially reduced, some operators that are unable to convert to longline pot gear might choose to sell their sablefish quota share, which could lead to consolidation in the fleet. However, as described in Section 4.9.2 of the Analysis and in the response to Comment 11, it is unlikely that a substantial number of vessel operators will switch to longline pot gear for economic or operational reasons. This makes it unlikely that Amendment 101 will cause fleet consolidation in the GOA sablefish IFQ fishery.

    Comment 19: Most small boats will not be able to convert to longline pot gear. Any sperm whales present while gear is being hauled will concentrate effort on those vessels that continue to use hook-and-line gear, with no overall reduction in depredation. Since a reduction in depredation is the primary goal of this action and the least likely to be achieved in the SEO where the majority of the boats are small, NMFS must balance this low chance of success against the high likelihood of gear conflicts and grounds preemption associated with allowing pots.

    Response: Section 4.11 of the Analysis notes that fishery participants who are not able to fish longline pot gear on their vessels—due to either economic or operational constraints—would not experience the benefits of reduced depredation from Amendment 101 and this final rule. The Analysis notes it is possible that these fishery participants could experience greater rates of depredation as the sablefish hooked on hook-and-line gear becomes concentrated on fewer vessels in a given area. Therefore, the Analysis describes that this action could result in some distributional impacts in the fishery. The Analysis notes that these potential impacts could affect smaller vessels in the sablefish IFQ fleet, though some large vessels may also find it difficult to convert to pot gear.

    Section 4.9.8.1 of the Analysis describes that the Council received public testimony expressing concern that increased concentration of depredation onto remaining hook-and-line gear and fleet consolidation were more likely in the SEO area due to the more constrained fishing grounds. The Council and NMFS determined that these outcomes were unlikely based on the estimated cost for converting a vessel to use longline pot gear (see Section 4.9.2 of the Analysis). As described in the response to Comment 11, the majority of fishermen in the SEO are not likely to switch to longline pot gear and would continue to use hook-and-line gear in the sablefish IFQ fishery.

    As described in the response to Comment 11, it is not possible to determine how many vessels will use longline pot gear, but the existing economic and operations constraints of converting to longline pot gear make it likely that a limited number of vessels will convert under this action. Based on this information, the Council determined and NMFS agrees that the impacts on vessels that continue to use hook-and-line gear likely will be limited. Nevertheless, this final rule includes a number of provisions to mitigate the potential negative impacts on sablefish IFQ fishery participants that continue to use hook-and-line gear.

    Comment 20: Four commenters recommended revisions to the proposed pot limits at § 679.42(l)(5)(ii). The commenters indicated that these revisions were necessary to minimize the potential negative impacts on fishery participants that continue to use hook-and-line gear. The commenters recommended that NMFS implement a limit of 120 pots in the CGOA and WGOA, instead of the proposed limit of 300 pots for these areas. The commenters suggested that allowing a vessel to deploy up to 300 pots was not equitable because it would disadvantage vessels that use hook-and-line gear by allowing a vessel using longline pot gear to have a larger “footprint,” or the amount of gear deployed on the sablefish fishing grounds, than vessels using hook-and-line gear.

    Response: NMFS did not change this final rule in response to this comment. In the development of Amendment 101 and this final rule, the Council and NMFS considered a range of options for pot limits, including the specific requirements recommended by the commenters (see Sections 4.9.3 and 4.9.4 of the Analysis). The Council recommended, and NMFS is implementing, the pot limits at § 679.42(l)(5)(ii) and gear retrieval requirements at § 679.42(l)(5)(iii) after reviewing the Analysis and receiving input from the Sablefish Gear Committee, the Council's advisory bodies, and public testimony. The Council and NMFS also considered that current regulations do not limit the amount of hook-and-line gear that may be used by a vessel in the sablefish IFQ fishery.

    As described in the response to Comment 11, the Council and NMFS reviewed this information and determined that the likelihood of gear conflicts and grounds preemption is low under Amendment 101 and this final rule. However, the Council and NMFS recognize that the likelihood of gear conflicts and grounds preemption is not possible to determine with certainty. Several stakeholders requested that the Council recommend specific measures to address this uncertainty and further minimize the likelihood of gear conflicts and grounds preemption. This final rule implements the measures recommended by the Council.

    The proposed rule and Section 4.9.3 of the Analysis describe that the Council recommended area-specific pot limits to account for the physical nature of the sablefish fishing grounds and the composition of the IFQ sablefish fleet in each sablefish area. The Council also considered public testimony on the number of pots that vessels in the GOA could feasibly deploy in the sablefish IFQ fishery.

    Section 4.9.3 of the Analysis shows that the Council considered options for pot limits that ranged from 60 to 400 pots for each sablefish area. Considering area-specific pot limits allowed the Council to develop pot limits that are appropriate for the make-up of the fleet and the physical nature of the fishing grounds in each sablefish area. The Council determined that smaller pot limits are appropriate in the SEO and WY because the fishing grounds are spatially concentrated and the potential for grounds preemption may be greater. The Council also determined that smaller pot limits are appropriate for the SEO because the local fleet has a historically participating component of small, short-range vessels lacking the capacity to deploy and retrieve longline pots or pack a large hold of sablefish for an extended period. The proposed rule and Section 4.9.8.1 of the Analysis show that approximately 30 percent of sablefish IFQ fishermen in the SEO use vessels 50 feet (15.2 m) or less LOA.

    The Council determined and NMFS agrees that larger pot limits are appropriate in the CGOA and WGOA because Section 4.5.4.3 of the Analysis and public testimony indicated there are relatively more options for productive fishing grounds in the CGOA and WGOA than in the SEO and WY. In addition, Section 4.5.2 of the Analysis shows that the average size of vessels participating in the CGOA and WGOA is larger and these vessels can deploy more pots than vessels used in the SEO and WY. The Council received public testimony that a pot limit of 300 in the CGOA and WGOA would allow vessel operators in these areas to deploy enough pots to efficiently harvest sablefish IFQ while maintaining an overall limit on the number of pots that can be deployed by one vessel.

    In recommending pot limits for each GOA sablefish area, the Council and NMFS balanced the objectives to minimize the potential for gear conflicts and grounds preemption and improve harvesting efficiency of sablefish IFQ by authorizing longline pot gear. Section 4.9.3 of the Analysis describes that limiting the number of pots a vessel can use reduces operational efficiency if the limit is lower than what a vessel operator deems optimal for his or her vessel. A pot limit that is too low might increase variable fishing costs such as fuel and time. If the limit is too low, there may be little or no incentive for vessel owners to purchase new longline pot gear and invest in vessel reconfigurations. The Council and NMFS used the best available information to determine that the pot limits implemented by this final rule achieve the objectives of this action.

    Comment 21: Five commenters recommended revisions to the proposed gear retrieval requirements at § 679.42(l)(5)(iii). The commenters indicated that these revisions were necessary to minimize the potential negative impacts on fishery participants that continue to use hook-and-line gear. The commenters did not support the requirements at § 679.42(l)(5)(iii)(C) and (D) for vessel operators using longline pot gear to redeploy or remove their longline pot gear within five days after deployment in the WY and within seven days after deployment in the CGOA and WGOA. These commenters recommend that NMFS extend the requirement for vessels in the SEO at § 679.42(l)(5)(iii)(A) to remove longline pot gear when leaving the fishing grounds to make a landing in the WY, CGOA, and WGOA. The commenters were concerned that allowing the gear to stay on the fishing grounds between landings in the WY, CGOA, and WGOA would preempt fishing grounds for use by vessels using hook-and-line gear and could result in lost gear due to inclement weather. In addition, one commenter was concerned that the proposed gear retrieval requirements for the WY, CGOA, and WGOA would allow multiple vessel operators to share longline pot gear and preempt fishing grounds for long periods.

    Response: NMFS did not change this final rule in response to this comment. The proposed rule and Section 4.10 of the Analysis describe that the Council considered the Analysis and public testimony when recommending the gear retrieval requirements for the WY, CGOA, and WGOA. The Council and NMFS determined that the fishing grounds are less constrained in the WY, CGOA, and WGOA relative to the SEO due to fewer IFQ holders, larger fishing grounds, or both. Therefore, the Council and NMFS determined that it was not necessary to require fishermen using longline pot gear in these areas to remove their gear from the fishing grounds when making a landing. The Council and NMFS based this decision on testimony from operators in these areas indicating that fishing vessels were much further from port in these areas relative to the SEO and requiring a vessel to return to and retrieve its gear by a certain day could, in some circumstances, force vessels to operate in unsafe or unfavorable conditions. Aside from weather, limiting the amount of time that gear may be deployed (soak time) could reduce a vessel operator's ability to fish an optimal gear rotation if the vessel's longline pot gear is spaced out over a large geographical area, or if the vessel operator determines that a particularly long soak time yields larger fish in that area. Based on this public testimony and the pot soak times in the BSAI sablefish fishery presented in Section 4.8.2 of the Analysis, the Council determined that requiring vessel operators to tend their gear within a maximum period would meet its objective to minimize the potential for longline pot gear to be left unattended on the fishing grounds for an extended period of time in these areas.

    This final rule implements regulations at § 679.42(l)(5)(iv) applicable to vessel operators who want to share longline pot gear during the fishing season to help reduce operating costs. To minimize the potential for grounds preemption by multiple vessels using the same longline pot gear, this final rule allows multiple vessels to use the same longline pot gear during one fishing season but prohibits use of the same longline pot gear simultaneously. In order for more than one vessel to use the same longline pot gear, this final rule requires a vessel operator to remove longline pot gear from the fishing grounds, return the gear to port, and remove the pot tags assigned to the vessel before pot tags assigned to another vessel are attached to the pots and used on that vessel in the GOA sablefish IFQ fishery.

    The Council and NMFS determined that vessel operators using longline pot gear have an incentive to reduce the likelihood of gear conflicts, or lost gear because fishing gear is expensive to purchase and replace (see Section 4.8.2 of the Analysis). This final rule establishes specific gear retrieval requirements to provide an additional incentive for operators using longline pot gear to closely monitor the amount of time their gear is left on the grounds and further minimize potential for gear conflicts or grounds preemption. The Council recommended and NMFS is implementing these provisions to balance the objectives of this action to improve harvesting efficiency and reduce depredation with the further objective to minimize potential negative impacts on fishermen that continue to use hook-and-line gear.

    Comment 22: The proposed requirement for vessel operators to leave longline pot gear on the fishing grounds for no more than five days in the WY and CGOA and seven days in the WGOA will be difficult to enforce.

    Response: The proposed rule and Sections 4.9.3.2, 4.9.4.1, 4.9.5.1, and 4.9.6.1 of the Analysis describe enforcement considerations for provisions of this final rule that are intended to minimize gear conflicts and grounds preemption. The Council considered the methods that would be used to enforce the restrictions on use of longline pot gear in the GOA sablefish IFQ fishery and advice from its Enforcement Committee.

    This final rule implements three additional recordkeeping and reporting requirements to monitor and enforce provisions that are intended to minimize gear conflicts and grounds preemption. First, § 679.5(c)(3)(B) requires all vessel operators using longline pot gear in the GOA sablefish IFQ fishery to report specific information in logbooks about fishing gear used and catch for all sablefish IFQ fishing trips. Second, § 679.42(k)(2) requires all vessel operators using longline pot gear in the GOA sablefish IFQ fishery to have an operating VMS while fishing for sablefish IFQ. Third, this final rule adds additional Prior Notice of Landing (PNOL) reporting requirements at § 679.5(l)(1)(iii) for vessel operators using longline pot gear in the GOA sablefish IFQ fishery. These tools will provide NMFS with information on vessel activity during the sablefish fishing season. The Council and NMFS determined that these requirements will provide sufficient monitoring and enforcement information to meet the Council's objectives for this action.

    Comment 23: NMFS should revise the final rule to clarify that vessels using longline pot gear in the SEO must remove all longline pots in addition to anchors, buoys, buoy line, flags, and any other gear from the fishing grounds when they leave the grounds to make a delivery. As proposed, the rule only requires vessels using longline pot gear to remove pots from the grounds, allowing other components of a pot longline string to remain in the water and preempt fishing grounds.

    Response: NMFS revised this final rule to address this comment. This final rule adds § 679.42(l)(5)(i)(C) to specify that the gear retrieval and removal requirements in § 679.42 (l)(5)(iii) and (iv) apply to all longline pot gear that is assigned to a vessel and deployed to fish IFQ sablefish and to all other fishing equipment attached to longline pot gear that is deployed by the vessel to fish IFQ sablefish in the GOA. This final rule also specifies that all other fishing equipment attached to longline pot gear includes, but is not limited to, equipment used to mark longline pot gear as required in this final rule at § 679.24(a)(3).

    Although the Council and NMFS determined that the potential for grounds preemption is low under this final rule (see response to Comment 11), NMFS agrees with the commenter that the gear retrieval and removal requirements in the proposed rule applied to “longline pot” gear. Section 679.2 defines longline pot as “a stationary, buoyed, and anchored line with two or more pots attached.” This definition does not include buoys, flags, or radar reflectors that must be used to mark longline pot gear in this final rule (§ 679.24(a)(3)) or other equipment that vessel operators may use to mark their gear. Although it is unlikely that vessel operators will remove only pots and leave other equipment to preempt fishing grounds as suggested by the commenter, NMFS agrees that the intent of this final rule is to require vessel operators using longline gear to retrieve or remove all fishing gear from the fishing grounds to minimize the potential for gear conflicts and grounds preemption. This revision to this final rule clarifies that the gear retrieval and removal requirements apply to all pots and associated equipment deployed by a vessel using longline pot gear in all sablefish areas of the GOA.

    Comment 24: Allowing longline pot gear to stay on the fishing grounds between landings is not consistent with the intent of the owner onboard requirement of the IFQ Program. Section 679.42(c) requires most holders of sablefish catcher vessel IFQ to be on board the vessel on which their IFQ is harvested and present during the landing. Authorizing longline pot gear to stay on the fishing grounds while a vessel makes a landing in the WY, CGOA, or WGOA would be inconsistent with current operations of hook-and-line vessels and could allow vessel operators to set gear while the IFQ permit holder is not on board the vessel.

    Under the proposed rule, a vessel operator in the WY, CGOA, or WGOA could deploy pots on the fishing grounds, leave the fishing grounds to pick up an IFQ permit holder in port, and then retrieve the pot gear and collect the sablefish while the IFQ permit holder is on board the vessel. Hook-and-line gear is not generally left on the fishing grounds unattended, so the proposed rule would allow a longline pot gear vessel to operate differently than a hook-and-line vessel.

    Response: This final rule is consistent with the IFQ permit holder on board requirements at § 679.42(c). This final rule does not change the requirement for an IFQ permit holder to be aboard the vessel at all times during the fishing trip while his or her IFQ is harvested and to be present during the landing. This final rule does not change the definition of “fishing trip” at § 679.2 for purposes of the IFQ Program, which is the period beginning when a vessel operator commences harvesting IFQ species and ending when the vessel operator lands any species. Therefore, all IFQ permit holders subject to the permit holder on board requirements must be on board the vessel during the entire fishing trip whether the vessel is using longline pot or hook-and-line gear.

    Comment 25: Longline pot gear should not have a larger footprint than hook-and-line gear. We recommend revising the rule to require that a longline pot set be no more than 9 miles from end to end. This would allow each vessel to have an average of three sets of longline gear that would be from 2.5 to 3 miles in length and would limit the length of a set of longline pot gear to correspond to the footprint of a hook-and-line set.

    Response: NMFS did not change this final rule in response to this comment. The pot limits implemented by this final rule limit the amount of longline pot gear that a fishing vessel can use in the GOA sablefish IFQ fishery (see the response to Comment 20). The Council and NMFS determined that additional limits on the amount of longline pot gear that could be deployed are not necessary to meet the objectives of this final rule.

    Section 4.9.3 of the Analysis describes that the pot limits specified in § 679.42(l)(5)(ii) limit the amount of longline pot gear that each vessel may deploy, which limits the footprint of that vessel on the fishing grounds. The Analysis describes that the Sablefish Gear Committee estimated that a vessel deploying from 180 to 300 longline pots would cover grounds similar to a hook-and-line set in the sablefish fishery, or approximately 10 to 12 miles. The Analysis also notes that current regulations do not limit the amount of hook-and-line gear that a vessel fishing IFQ sablefish may deploy. Based on information in the Analysis, the Council and NMFS determined that it is possible that the footprint of longline pot gear used by some vessels could be greater than the footprint of hook-and-line gear used by other vessels under this final rule. The Analysis describes that the Sablefish Gear Committee reviewed available information on the likely length of longline pot gear sets on the fishing grounds and considered whether gear specifications in addition to pot limits were necessary to minimize the potential for gear conflicts and grounds preemption. The Sablefish Gear Committee, Council, and NMFS considered the potential impacts of additional gear specifications on operations and monitoring and enforcement, and determined that additional gear specifications were not necessary to meet the objectives of this action. In addition, additional gear specifications could unnecessarily constrain individual fishing operations and reduce harvesting efficiency.

    Comment 26: We do not support the proposed gear marking requirements because each vessel operator should be able to use the gear marking equipment that best meets the specifications of their operation. The proposed requirement to mark gear with buoys, a flag, and radar detector on each end of a longline pot set creates a large amount of surface area and makes it more likely that the wind or waves could catch the marking equipment and move the gear from the deployed location. This increases the likelihood of lost gear on the fishing grounds. In some areas, vessels using hook-and-line gear do not mark their gear with flagpoles or radar reflectors due to the known gear loss that results from a combination of wind and tide. While we believe that each vessel operator should have the discretion to determine what gear marking equipment is appropriate for their vessel, it is important that any vessel on the fishing grounds can differentiate between a hook-and-line and longline pot gear set. We recommend revising the rule to require that the end of a longline pot set be marked with one yellow hard buoy a minimum of 13 inches in diameter and marked with an “LP” and the vessel name.

    Response: NMFS did not change this final rule in response to this comment. This final rule maintains current regulations at § 679.24(a) that require all vessel operators using hook-and-line and pot gear (including longline pot gear) to mark buoys carried on board or used by the vessel to be marked with the vessel's Federal fisheries permit number or ADF&G vessel registration number. This regulation also specifies that the markings must be a specified size, shall be visible above the water line, and shall be maintained so the markings are clearly visible.

    This final rule implements the following additional gear marking requirements: Each vessel operator using longline pot gear in the GOA sablefish IFQ fishery must attach a cluster of four or more marker buoys, a flag mounted on a pole, and a radar reflector to each end of a longline pot set.

    The Council received recommendations from the Sablefish Gear Committee, its advisory bodies, and public testimony to develop the gear marking requirements implemented by this final rule. The Council and NMFS considered a broad suite of gear marking options during the development of Amendment 101 and this final rule. Section 4.9.5 of the Analysis describes the options considered, and Section 4.10 describes the anticipated impacts of the additional gear marking requirements implemented by this final rule.

    The Council received public testimony that the marking requirements implemented by this final rule would enhance the visibility of the ends of a longline pot gear set to other vessels that are on the fishing grounds. As described in Section 4.9.5 of the Analysis, public testimony indicated that the gear marking equipment required by this final rule is commonly used by vessel operators that deploy pot gear in fisheries in Alaska and requiring the use of this equipment would not impose a substantial cost on vessel operators using longline pot gear in the GOA sablefish IFQ fishery. Section 4.9.5 of the Analysis describes public testimony indicating that using buoy clusters could be a viable method to keep surface gear from being submerged during strong tides and would minimize the potential for longline pot gear to move a substantial distance from its deployed location. The testimony indicated that buoy clusters add buoyancy to surface gear by putting additional buoys on the main anchor line. The Analysis also describes that requiring a vessel operator to use a flag mounted on a pole and a radar reflector to mark each end of a longline pot gear set would enhance the visibility of the location of the gear and minimize the potential for gear conflicts. This was supported by public testimony from vessel operators who indicated they planned to use longline pots in the GOA sablefish IFQ fishery.

    As described in the response to Comment 11, the Council intends to review the use of longline pot gear in the GOA sablefish IFQ fishery three years after the implementation of this final rule. NMFS anticipates that if the gear marking requirements in this final rule impose substantial costs on vessel operators or could be revised to better meet the Council's objectives, the Council will consider potential changes to the gear marking requirements in the future.

    Comment 27: Vessels using longline pot gear should be equipped with a 25 watt, Class A Automatic Identification System (AIS) to enable other boats to identify and communicate with the vessel about the location of their deployed longline pot gear.

    Response: Section 4.9.5 of the Analysis describes that the Council and NMFS considered an option to require both ends of a longline pot set in the GOA sablefish IFQ fishery to be marked with buoys, flagpoles, and a transponder that is compatible with a location and identification system such as AIS. Gear transponders could allow a fishery participant to view the location of deployed gear in order to avoid setting gear in the same area. Additional information on the AIS technology, application, approximate cost, and relevant regulations are described in Appendix 2 of the Analysis.

    Section 4.9.4 of the Analysis describes the key challenges involved in requiring the use of AIS as a buoy transponder. The challenges include limited operational time due to limited battery capacity, potentially inadequate seaworthiness, and the requirement for regulatory approval by the United States Coast Guard and international oversight bodies. The Analysis notes that implementing a longline pot gear tracking system using technology such as AIS or a scannable pot tag to locate longline pot gear on the fishing grounds is beyond the scope of available NMFS resources in the Alaska Region. In addition, anecdotal reports suggest that AIS or other scannable systems may not be effective in all weather and sea conditions (e.g., signals can be blocked or greatly attenuated in high seas). Section 4.9.4.1 of the Analysis concludes that given that these factors and that the total costs of fitting longline pot gear can be substantial, gear tracking systems, including AIS, are not appropriate at this time.

    The Analysis describes that the Council did not adopt the option to require AIS transponders in this final rule due to the current challenges related to using AIS transponders in the GOA sablefish IFQ fishery and stakeholder willingness to pursue a voluntary program to report longline pot gear locations (see the response to Comment 29). The Council intends to review the use of longline pot gear three years following implementation of this final rule. This review will provide an opportunity for the Council and NMFS to evaluate whether additional gear marking requirements may be necessary for longline pot gear in the future.

    Comment 28: The proposed rule incorrectly claims on page 55416 (81 FR 55408, August 19, 2016) that “most vessel operators in the GOA sablefish IFQ fishery are currently required to complete logbooks.” This is incorrect because vessels less than 60 feet in length are exempt from logbook reporting requirements and the median vessel length in the sablefish IFQ fleet is less than 60 feet. The proposed rule discriminates against vessels that choose to use pot gear because it would require vessels less than 60 feet LOA to complete a logbook. The proposed rule would require all vessels using longline pot gear in the GOA sablefish IFQ fishery to complete a logbook. The rule should be revised to require all vessels in the sablefish IFQ fishery to complete a logbook for consistency with the requirements for the halibut IFQ fishery. The same vessel operators that are declining to complete a logbook for sablefish are completing logbooks for their halibut fishing. Recordkeeping and reporting requirements cannot be inequitably applied to one gear type over another. All users have an obligation to supply information on their catch of this public resource to the stock assessment scientists.

    Response: NMFS did not change this final rule in response to this comment. NMFS agrees with the commenter that the statement on page 55416 (81 FR 55408, August 19, 2016) of the proposed rule preamble is incorrect. Notwithstanding that it is a misstatement, as explained below, the misstatement does not require revisions to this final rule.

    The statement on page 55416 of the proposed rule preamble should have stated that most vessel operators in the GOA sablefish IFQ fishery currently complete logbooks. The commenter is correct that most vessels in the sablefish IFQ fleet are less than 60 feet (18.3m) LOA, and these vessels are not required to complete a logbook (§ 679.5(a)(4)(i)). In 2015, 85 percent of the vessels participating in the BSAI and GOA sablefish IFQ fishery were less than 60 feet LOA. While these vessels are not required to complete a logbook for sablefish fishing, Section 4.9.3.2 of the Analysis notes that many vessel operators voluntarily complete and submit logbooks. Logbook participation increased sharply in 2004 in all areas primarily because the IPHC collects, edits, and enters logbooks electronically. In 2015, 68 percent of the 252 vessels less than 60 feet LOA in the sablefish IFQ fishery submitted logbooks.

    The Council and NMFS determined that this final rule should include a requirement for all vessels using longline pot gear in the GOA sablefish IFQ fishery to complete a logbook. The proposed rule and Section 4.9 of the Analysis describe that NMFS uses logbooks to collect detailed information from vessel operators participating in the IFQ fisheries. The proposed rule and Analysis also describe that NMFS will use logbooks as one tool to monitor and enforce the management measures in this final rule intended to minimize the potential for gear conflicts and grounds preemption, such as the gear redeployment and removal requirements.

    This final rule adds a requirement at § 679.5(c)(3)(i)(B) for an operator of a vessel using longline pot gear in the GOA sablefish IFQ fishery to report in a Daily Fishing Logbook (for catcher vessels) or Daily Cumulative Production Logbook (for catcher/processors) the number of pots and location of longline pot sets deployed on a fishing trip. This final rule removes the exemption from the logbook submission requirements for the operator of a vessel less than 60 feet LOA using longline pot gear in the GOA sablefish IFQ fishery. While this is a new regulatory requirement for these vessels, Section 4.9.3.2 of the Analysis explains that many operators of vessels less than 60 feet (18.3 m) in the sablefish IFQ fishery voluntarily complete and submit logbooks. Therefore, the Council and NMFS anticipate this additional reporting requirement will not negatively impact operators of vessels less than 60 feet (18.3 m) that choose to use longline pot gear.

    Comment 29: We suggest that the coordinates of lost pots reported to NMFS are posted and available for the public to access. This will allow vessel operators using hook-and-line gear to avoid setting gear on lost pots and losing gear in those areas.

    Response: Section 4.9.4.1 of the Analysis describes that the Council and NMFS considered and rejected a requirement for vessel operators to report the coordinates of lost longline pot gear to NMFS in an electronic form for release to the public. The Council and NMFS did not adopt this option for two reasons. First, the coordinates of lost longline pot gear pots are confidential under section 402(b) of the Magnuson-Stevens Act and potentially other laws, as well. Second, NMFS cannot enforce a requirement to report the loss of longline pot gear because it is not possible to verify that fishing gear is lost.

    Section 4.9.4 of the Analysis describes a proposal for a voluntary pot gear reporting program for vessels that use longline pot gear in the GOA sablefish IFQ fishery. GOA sablefish IFQ fishery participants who advocated before the Council for the ability to use longline pot gear presented the proposal to assure the Council of their ability and willingness to report the location of longline pot gear on the fishing grounds, in as close to real-time as is practicable, and without placing additional cost burdens on the hook-and-line fleet. These proponents presented a voluntary measure in the form of a written agreement that would set out expectations of, and best practices by, those who opt to use longline pot gear.

    While the Council did not recommend the formalization of a voluntary pot gear reporting program in its recommendation of Amendment 101 and this final rule, Section 4.10 of the Analysis describes that the Council encouraged fishery participants to work cooperatively to develop electronic reporting protocols for reporting the location of pots being fished and/or pots left on the fishing grounds, as well as any other methods that may enhance the GOA sablefish IFQ longline pot fishery. The Council determined and NMFS agrees that the expressed willingness of fishermen who intend to use longline pot gear to work beyond the gear specifications and gear retrieval requirements specified in this final rule, combined with the Council's commitment to review the use of longline pot gear three years after implementation of this final rule, will minimize the potential for gear conflicts and grounds preemption.

    This final rule requires vessel operators using longline pot gear to report the number of lost pots to NMFS in the vessel's PNOL submitted prior to landing. In addition, if a vessel operator loses pots and intends to replace those pots to harvest IFQ sablefish, they must request replacement pot tags from NMFS consistent with the requirements at § 679.42(l)(3)(iii). The vessel owner will be required to provide NMFS with the pot tag numbers that were lost and describe the circumstances under which the pot tags were lost.

    Classification

    The Administrator, Alaska Region, NMFS, determined that this rule is necessary for the conservation and management of the GOA sablefish IFQ fishery and that it is consistent with the Magnuson-Stevens Act, the Halibut Act, and other applicable law.

    This final rule has been determined to be not significant for the purposes of Executive Order 12866.

    Small Entity Compliance Guide

    Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. The preamble to the proposed rule (81 FR 55408, August 19, 2016) and the preamble to this final rule serve as the small entity compliance guide for this action.

    Final Regulatory Flexibility Analysis

    Section 604 of the Regulatory Flexibility Act (RFA) requires an agency to prepare a final regulatory flexibility analysis (FRFA) after being required by that section or any other law to publish a general notice of proposed rulemaking and when an agency promulgates a final rule under section 553 of Title 5 of the U.S. Code. The following paragraphs constitute the FRFA for this action.

    This FRFA incorporates the Initial Regulatory Flexibility Analysis (IRFA) (see ADDRESSES) and the summary of the IRFA in the proposed rule (81 FR 55408, August 19, 2016), a summary of the significant issues raised by the public comments, NMFS' responses to those comments, and a summary of the analyses completed to support the action. The FRFA describes the impacts on small entities, which are defined in the IRFA for this action and not repeated here. Analytical requirements for the FRFA are described in the RFA, section 604(a)(1) through (6). The FRFA must contain:

    1. A statement of the need for, and objectives of, the rule;

    2. A statement of the significant issues raised by the public comments in response to the IRFA, a statement of the assessment of the agency of such issues, and a statement of any changes made in the proposed rule as a result of such comments;

    3. The response of the agency to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA) in response to the proposed rule, and a detailed statement of any change made to the proposed rule in the final rule as a result of the comments;

    4. A description and an estimate of the number of small entities to which the rule will apply, or an explanation of why no such estimate is available;

    5. A description of the projected reporting, recordkeeping, and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and

    6. A description of the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected.

    The “universe” of entities to be considered in a FRFA generally includes only those small entities that can reasonably be expected to be directly regulated by the action. If the effects of the rule fall primarily on a distinct segment of the industry, or portion thereof (e.g., user group, gear type, geographic area), that segment will be considered the universe for purposes of this analysis.

    In preparing a FRFA, an agency may provide either a quantifiable or numerical description of the effects of a rule (and alternatives to the rule), or more general descriptive statements, if quantification is not practicable or reliable.

    Need for and Objectives of This Final Rule

    A statement of the need for and objectives of this rule is contained earlier in the preamble and is not repeated here. This FRFA incorporates the IRFA (see ADDRESSES) and the summary of the IRFA in the proposed rule (81 FR 55408, August 19, 2016), a summary of the significant issues raised by the public comments, NMFS' responses to those comments, and a summary of the analyses completed to support the action.

    Summary of Significant Issues Raised During Public Comment

    NMFS published the proposed rule to implement Amendment 101 on August 19, 2016 (81 FR 55408), with comments invited through September 19, 2016. An IRFA was prepared and summarized in the Classification section of the preamble to the proposed rule. No comments were received that raised significant issues in response to the IRFA specifically; therefore, no changes were made to this rule as a result of comments on the IRFA. NMFS received several comments on the potential impacts of this final rule on the operators of sablefish vessels that cannot convert to longline pot gear due to economic or operational constraints. Several comments expressed concerns about the impacts of this action on small fishing operations that will continue to use hook-and-line gear to fish for sablefish in specific areas of the GOA. NMFS summarized and responded to these comments in the section above titled “Comments and Responses.” The Chief Counsel for Advocacy of the SBA did not file any comments on the proposed rule.

    Number and Description of Small Entities Regulated by This Rule

    NMFS estimates that there are a total of 310 small catcher vessels and 1 small catcher/processor that participate in the GOA sablefish IFQ fishery using hook-and-line gear. These entities will be directly regulated by this rule because they will be subject to the requirements for using longline pot gear if they choose to use longline pot gear in the GOA sablefish IFQ fishery. Thus, NMFS estimates that 311 small entities are directly regulated by this rule.

    Description of Significant Alternatives That Minimize Adverse Impacts on Small Entities

    Several aspects of this rule directly regulate small entities. Small entities will be required to comply with the requirements for using longline pot gear in the GOA sablefish IFQ fishery, which include using only longline pot gear, pot limits, and gear retrieval and gear marking requirements. Authorizing longline pot gear in this rule provides an opportunity for small entities to choose whether to use longline pot gear to increase harvesting efficiencies and reduce operating costs in the GOA sablefish IFQ fishery.

    Based on public testimony to the Council and NMFS, and Section 4.9 of the Analysis, the requirements for using pot gear are not expected to adversely impact small entities because each entity can choose to use longline pot gear or continue to use hook-and-line gear. In addition, the requirements for using longline pot gear are not expected to unduly restrict sablefish harvesting operations. The Council and NMFS considered requirements that would impose larger costs on directly regulated small entities. These alternatives included requiring all vessels to remove gear from the fishing grounds each time the vessel made a landing and requiring more sophisticated and costly satellite-based gear marking systems. The Council and NMFS determined that these additional requirements were not necessary to meet the objectives of this action. These additional requirements could adversely impact small entities by reducing sablefish harvesting efficiency and increasing sablefish harvesting costs, contrary to the intent of this rule. This rule implements pot limits and gear retrieval and gear marking requirements that meet the objectives of this action while minimizing adverse impacts on fishery participants.

    Small entities will be required to comply with additional recordkeeping and reporting requirements under this rule if they choose to use longline pot gear in the GOA sablefish IFQ fishery. Section 4.9 of the Analysis notes that directly regulated small entities using longline pot gear will be required to request pot tags from NMFS, maintain and submit logbooks to NMFS, have an operating VMS on board the vessel, and report additional information in a PNOL. The Analysis notes that these additional recordkeeping and reporting requirements are not expected to adversely impact directly regulated small entities because the costs of complying with these requirements is de minimis to total gross fishing revenue. In addition, NMFS anticipates that many of the vessels that choose to use longline pot gear under this rule currently comply with the logbook and VMS reporting requirements when participating in the sablefish IFQ fishery and in other fisheries. The Council and NMFS considered alternatives to implement additional requirements to report locations of deployed and lost gear in an electronic database to reduce the likelihood that sablefish IFQ fishery participants would deploy fishing gear in these locations. The Analysis describes that the information reported in the electronic database would be confidential under section 402(b) of the Magnuson-Stevens Act and could not be provided to participants in the sablefish IFQ fishery to meet the intended purpose. The Council and NMFS determined that these additional requirements were not necessary to meet the objectives of this action. This rule meets the objectives of this action while minimizing the reporting burden for fishery participants.

    Thus, there are no significant alternatives to this rule that accomplish the objectives to authorize longline pot gear in the GOA sablefish IFQ fishery and minimize adverse economic impacts on small entities.

    Recordkeeping, Reporting, and Other Compliance Requirements

    The recordkeeping, reporting, and other compliance requirements will be increased slightly under this rule. This rule contains new requirements for vessels participating in the longline pot fishery for sablefish IFQ in the GOA.

    Prior to this final rule, NMFS required catcher vessel operators, catcher/processor operators, buying station operators, tender vessels, mothership operators, shoreside processor managers, and stationary floating processor managers to record and report all FMP species in logbooks, forms, eLandings, and eLogbooks. This rule revises regulations to require all vessels using longline pot gear in the GOA sablefish IFQ fishery to report information on fishery participation in logbooks, forms, and eLandings.

    NMFS currently requires vessels in the BSAI to have an operating VMS on board the vessel while participating in the sablefish IFQ fishery. This rule revises regulations to extend this requirement to vessels using longline pot gear in the GOA sablefish IFQ fishery.

    NMFS currently requires all vessels in the sablefish and halibut IFQ fisheries to submit a PNOL to NMFS. This rule revises regulations to require vessels using longline pot gear in the GOA sablefish IFQ fishery to report the number of pots deployed, the number of pots lost, and the number of pots left deployed on the fishing grounds in the PNOL, in addition to other required information.

    Collection-of-Information Requirements

    This rule contains collection-of-information requirements subject to the Paperwork Reduction Act (PRA) and which have been approved by the Office of Management and Budget (OMB). The collections are listed below by OMB control number.

    OMB Control Number 0648-0213

    Public reporting burden is estimated to average 35 minutes per individual response for Catcher Vessel Longline and Pot Gear Daily Fishing Logbook; and 50 minutes for Catcher/processor Longline and Pot Gear Daily Cumulative Production Logbook.

    OMB Control Number 0648-0272

    Public reporting burden is estimated to average 15 minutes per individual response for Prior Notice of Landing.

    OMB Control Number 0648-0353

    Public reporting burden is estimated to average 15 minutes per individual response to mark longline pot gear; 15 minutes for IFQ Sablefish Longline Pot Gear: Vessel Registration and Request for Pot Gear Tags; and 15 minutes for IFQ Sablefish Longline Pot Gear: Request for Replacement of Longline Pot Gear Tags.

    OMB Control Number 0648-0445

    Public reporting burden is estimated to average 2 hours per individual response for VMS operation; and 12 minutes for VMS check-in report.

    OMB Control Number 0648-0711

    The cost recovery program is mentioned in this rule. The cost to implement and manage the sablefish IFQ longline pot gear fishery, including the cost of the pot tags, will be included in the annual calculation of NMFS' recoverable costs. These costs will be part of the total management and enforcement costs used in the calculation of the annual fee percentage. For example, when the pot gear tags are ordered, the payment of those tags is charged 100 percent to the IFQ Program for cost recovery purposes. This rule will not change the process that harvesters use to pay cost recovery fees.

    The public reporting burden includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

    Send comments regarding these burden estimates or any other aspect of this data collection, including suggestions for reducing the burden, to NMFS (see ADDRESSES), and by email to [email protected], or fax to 202-395-5806.

    Notwithstanding any other provision of the 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 PRA, unless that collection of information displays a currently valid OMB control number. All currently approved NOAA collections of information may be viewed at: http://www.cio.noaa.gov/services_programs/prasubs.html.

    List of Subjects 15 CFR Part 902

    Reporting and recordkeeping requirements.

    50 CFR Part 300

    Administrative practice and procedure, Antarctica, Canada, Exports, Fish, Fisheries, Fishing, Imports, Indians, Labeling, Marine resources, Reporting and recordkeeping requirements, Russian Federation, Transportation, Treaties, Wildlife.

    50 CFR Part 679

    Alaska, Fisheries, Reporting and recordkeeping requirements.

    Dated: December 19, 2016. Samuel D. Rauch III, Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service.

    For the reasons set out in the preamble, NMFS amends 15 CFR part 902 and 50 CFR parts 300 and 679 as follows:

    Title 15—Commerce and Foreign Trade PART 902—NOAA INFORMATION COLLECTION REQUIREMENTS UNDER THE PAPERWORK REDUCTION ACT: OMB CONTROL NUMBERS 1. The authority citation for part 902 continues to read as follows: Authority:

    44 U.S.C. 3501 et seq.

    2. In § 902.1, in the table in paragraph (b), under the entry “50 CFR”: a. Remove entry for “679.24(a)”; b. Revise entry for “679.42(a) through (j)”; and c. Add entries in alphanumeric order for “679.24”, “679.42(b), (k)(2), and (l)”.

    The additions and revisions read as follows:

    § 902.1 OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    (b) * * *

    CFR part or section where the information collection requirement is located Current OMB control number
  • (all numbers begin with 0648-)
  • *    *    *    *    *     50 CFR: *    *    *    *    *     679.24 −0353 *    *    *    *    *     679.42(a), and (c) through (j) −0272 and −0665 679.42(b), (k)(2), and (l) −0353 *    *    *    *    *    
    Title 50—Wildlife and Fisheries PART 300—INTERNATIONAL FISHERIES REGULATIONS Subpart E—Pacific Halibut Fisheries 3. The authority citation for part 300, subpart E, continues to read as follows: Authority:

    16 U.S.C. 773-773k.

    4. In § 300.61, revise the definitions of “Fishing” and “IFQ halibut” to read as follows:
    § 300.61 Definitions.

    Fishing means the taking, harvesting, or catching of fish, or any activity that can reasonably be expected to result in the taking, harvesting, or catching of fish, including:

    (1) The deployment of any amount or component part of setline gear anywhere in the maritime area; or

    (2) The deployment of longline pot gear as defined in § 679.2 of this title, or component part of that gear in Commission regulatory areas 2C, 3A, 3B, and that portion of Area 4A in the Gulf of Alaska west of Area 3B and east of 170°00' W. long.

    IFQ halibut means any halibut that is harvested with setline gear as defined in this section or fixed gear as defined in § 679.2 of this title while commercial fishing in any IFQ regulatory area defined in § 679.2 of this title.

    PART 679—FISHERIES OF THE EXCLUSIVE ECONOMIC ZONE OFF ALASKA 5. The authority citation for part 679 continues to read as follows: Authority:

    16 U.S.C. 773 et seq.; 1801 et seq.; 3631 et seq.; Pub. L. 108-447; Pub. L. 111-281.

    6. In § 679.2: a. In the definition of “Authorized fishing gear,” revise paragraphs (4)(i) and (iii), and add paragraph (4)(iv); and b. Revise the definition of “IFQ halibut.”

    The additions and revisions read as follows:

    § 679.2 Definitions.

    Authorized fishing gear * * *

    (4) * * *

    (i) For sablefish harvested from any GOA reporting area, all longline gear, longline pot gear, and, for purposes of determining initial IFQ allocation, all pot gear used to make a legal landing.

    (iii) For halibut harvested from any IFQ regulatory area, all fishing gear composed of lines with hooks attached, including one or more stationary, buoyed, and anchored lines with hooks attached.

    (iv) For halibut harvested from any GOA reporting area, all longline pot gear, if the vessel operator is fishing for IFQ sablefish in accordance with § 679.42(l).

    IFQ halibut means any halibut that is harvested with setline gear as defined in § 300.61 of this title or fixed gear as defined in this section while commercial fishing in any IFQ regulatory area defined in this section.

    7. In § 679.5: a. Revise paragraph (a)(4)(i); b. Revise note to the table at paragraph (c)(1)(vi)(B), and revise paragraphs (c)(2)(iii)(A), (c)(3)(i)(B), (c)(3)(ii)(A)(1) and (B)(1), (c)(3)(iv)(A)(2), (c)(3)(iv)(B)(2), (c)(3)(v)(G); and (l)(1)(iii)(F) and (G); and c. Add paragraphs (l)(1)(iii)(H) and (I).

    The additions and revisions read as follows.

    § 679.5 Recordkeeping and reporting (R&R).

    (a) * * *

    (4) * * *

    (i) Catcher vessels less than 60 ft (18.3 m) LOA. Except for vessels using longline pot gear as described in paragraph (c)(3)(i)(B)(1) of this section and the vessel activity report described at paragraph (k) of this section, the owner or operator of a catcher vessel less than 60 ft (18.3 m) LOA is not required to comply with the R&R requirements of this section.

    (c) * * *

    (1) * * *

    (vi) * * *

    (B) * * *

    Note:

    CP = catcher/processor; CV = catcher vessel; pot = longline pot or pot-and-line; lgl = longline; trw = trawl; MS = mothership.

    (2) * * *

    (iii) * * *

    (A) If a catcher vessel, record vessel name, ADF&G vessel registration number, FFP number or Federal crab vessel permit number, operator printed name, operator signature, and page number.

    (3) * * *

    (i) * * *

    (B) IFQ halibut, CDQ halibut, and IFQ sablefish fisheries. (1) The operator of a catcher vessel less than 60 ft (18.3 m) LOA, using longline pot gear to harvest IFQ sablefish or IFQ halibut in the GOA must maintain a longline and pot gear DFL according to paragraph (c)(3)(iv)(A)(2) of this section.

    (2) Except as described in paragraph (f)(1)(i) of this section, the operator of a catcher vessel 60 ft (18.3 m) or greater LOA in the GOA must maintain a longline and pot gear DFL according to paragraph (c)(3)(iv)(A)(2) of this section, when using longline gear or longline pot gear to harvest IFQ sablefish and when using gear composed of lines with hooks attached, setline gear (IPHC), or longline pot gear to harvest IFQ halibut.

    (3) Except as described in paragraph (f)(1)(i) of this section, the operator of a catcher vessel 60 ft (18.3 m) or greater LOA in the BSAI must maintain a longline and pot gear DFL according to paragraph (c)(3)(iv)(A)(2) of this section, when using hook-and-line gear or pot gear to harvest IFQ sablefish, and when using gear composed of lines with hooks attached or setline gear (IPHC) to harvest IFQ halibut or CDQ halibut.

    (4) Except as described in paragraph (f)(1)(ii) of this section, the operator of a catcher/processor in the GOA must use a combination of a catcher/processor longline and pot gear DCPL and eLandings according to paragraph (c)(3)(iv)(B)(2) of this section, when using longline gear or longline pot gear to harvest IFQ sablefish and when using gear composed of lines with hooks attached, setline gear (IPHC), or longline pot gear to harvest IFQ halibut.

    (5) Except as described in paragraph (f)(1)(ii) of this section, the operator of a catcher/processor in the BSAI must use a combination of a catcher/processor longline and pot gear DCPL and eLandings according to (c)(3)(iv)(B)(2) of this section, when using hook-and-line gear or pot gear to harvest IFQ sablefish, and when using gear composed of lines with hooks attached or setline gear (IPHC) to harvest IFQ halibut or CDQ halibut.

    (ii) * * *

    (A) * * *

    Reporting Time Limits, Catcher Vessel Longline or Pot Gear Required information Time limit for recording (1) FFP number and/or Federal crab vessel permit number (if applicable), IFQ permit numbers (halibut, sablefish, and crab), CDQ group number, halibut CDQ permit number, set number, date and time gear set, date and time gear hauled, beginning and end positions of set, number of skates or pots set, and estimated total hail weight for each set Within 2 hours after completion of gear retrieval. *         *         *         *         *         *         *

    (B) * * *

    Reporting Time Limits, Catcher/Processor Longline or Pot Gear Required information Record in DCPL Submit via eLandings Time limit for reporting (1) FFP number and/or Federal crab vessel permit number (if applicable), IFQ permit numbers (halibut, sablefish, and crab), CDQ group number, halibut CDQ permit number, set number, date and time gear set, date and time gear hauled, beginning and end positions of set, number of skates or pots set, and estimated total hail weight for each set X Within 2 hours after completion of gear retrieval. *         *         *         *         *         *         *

    (iv) * * *

    (A) * * *

    (2) If a catcher vessel identified in paragraph (c)(3)(i)(A)(1) or (c)(3)(i)(B)(1) through (3) of this section is active, the operator must record in the longline and pot gear DFL, for one or more days on each logsheet, the information listed in paragraphs (c)(3)(v), (vi), (viii), and (x) of this section.

    (B) * * *

    (2) If a catcher/processor identified in paragraph (c)(3)(i)(A)(2) or (c)(3)(i)(B)(4) through (5) of this section is active, the operator must record in the catcher/processor longline and pot gear DCPL the information listed in paragraphs (c)(3)(v) and (vi) of this section and must record in eLandings the information listed in paragraphs (c)(3)(v), (vii), and (ix) of this section.

    (v) * * *

    (G) Gear type. Use a separate logsheet for each gear type. Place a check mark in the box for the gear type used to harvest the fish or crab. Record the information from the following table for the appropriate gear type on the logsheet. If the gear type is the same on subsequent logsheets, place a check mark in the box instead of re-entering the gear type information on the next logsheet.

    If gear type is . . . Then . . . (1) Other gear If gear is other than those listed within this table, indicate “Other” and describe. (2) Pot gear (includes pot-and-line and longline pot) (i) If using longline pot gear in the GOA, enter the length of longline pot set to the nearest foot, the size of pot in inches (width by length by height or diameter), and spacing of pots to the nearest foot. (ii) If using longline pot gear in the GOA, enter the number of pots deployed in each set (see paragraph (c)(3)(vi)(F) of this section) and the number of pots lost when the set is retrieved (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title). (iii) If using pot gear, enter the number of pots deployed in each set (see paragraph (c)(3)(vi)(F) of this section) and the number of pots lost when the set is retrieved (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title). (3) Hook-and-line gear Indicate: (i) Whether gear is fixed hook (conventional or tub), autoline, or snap (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title). (ii) Number of hooks per skate (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title), length of skate to the nearest foot (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title), size of hooks, and hook spacing in feet. (iii) Enter the number of skates set and number of skates lost (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title). (iv) Seabird avoidance gear code(s) (see § 679.24(e) and Table 19 to this part). (v) Enter the number of mammals sighted while hauling gear next to the mammal name: Sperm, orca, and other (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title). (vi) Enter the number of sablefish, halibut, other fish, or hooks damaged found while hauling gear (optional, but may be required by IPHC regulations, see §§ 300.60 through 300.65 of this title).

    (l) * * *

    (1) * * *

    (iii) * * *

    (F) IFQ regulatory area(s) in which the IFQ halibut, CDQ halibut, or IFQ sablefish were harvested;

    (G) IFQ permit number(s) that will be used to land the IFQ halibut, CDQ halibut, or IFQ sablefish;

    (H) Gear type used to harvest the IFQ sablefish or IFQ halibut (see Table 15 to this part); and

    (I) If using longline pot gear in the GOA, report the number of pots set, the number of pots lost, and the number of pots left deployed on the fishing grounds.

    8. In § 679.7: a. Revise paragraph (a)(6) introductory text, paragraph (a)(6)(i), paragraph (a)(13) introductory text, paragraph (a)(13)(ii) introductory text, and paragraph (a)(13)(iv); and b. Add paragraphs (f)(17) through (25).

    The additions and revisions read as follows:

    § 679.7 Prohibitions.

    (a) * * *

    (6) Gear. Deploy any trawl, longline, longline pot, pot-and-line, or jig gear in an area when directed fishing for, or retention of, all groundfish by operators of vessels using that gear type is prohibited in that area, except that this paragraph (a)(6) shall not prohibit:

    (i) Deployment of fixed gear, as defined in § 679.2 under “Authorized fishing gear,” by an operator of a vessel fishing for IFQ halibut during the fishing period prescribed in the annual management measures published in the Federal Register pursuant to § 300.62 of this title.

    (13) Halibut. With respect to halibut caught with fixed gear, as defined in § 679.2 under the definition of “Authorized fishing gear,” deployed from a vessel fishing for groundfish, except for vessels fishing for halibut as prescribed in the annual management measures published in the Federal Register pursuant to § 300.62 of this title:

    (ii) Release halibut caught with longline gear by any method other than—

    (iv) Allow halibut caught with longline gear to contact the vessel, if such contact causes, or is capable of causing, the halibut to be stripped from the hook.

    (f) * * *

    (17) Deploy, conduct fishing with, or retrieve longline pot gear in the GOA before the start or after the end of the IFQ sablefish fishing period specified in § 679.23(g)(1).

    (18) Deploy, conduct fishing with, retrieve, or retain IFQ sablefish or IFQ halibut from longline pot gear in the GOA:

    (i) In excess of the pot limits specified in § 679.42(l)(5)(ii); or

    (ii) Without a pot tag attached to each pot in accordance with § 679.42(l)(4).

    (19) Deploy, conduct fishing with, or retain IFQ sablefish or IFQ halibut in the GOA from a pot with an attached pot tag that has a serial number assigned to another vessel or has been reported lost, stolen, or mutilated to NMFS in a request for a replacement pot tag as described in § 679.42(l)(3)(iii).

    (20) Deploy longline pot gear to fish IFQ sablefish in the GOA without marking the gear in accordance with § 679.24(a).

    (21) Fail to retrieve and remove from the fishing grounds all deployed longline pot gear that is assigned to, and used by, a catcher vessel to fish IFQ sablefish in the Southeast Outside District of the GOA when the vessel makes an IFQ landing.

    (22) Fail to redeploy or remove from the fishing grounds all deployed longline pot gear that is assigned to, and used by, a catcher/processor within five days of deploying the gear to fish IFQ sablefish in the Southeast Outside District of the GOA.

    (23) Fail to redeploy or remove from the fishing grounds all deployed longline pot gear that is assigned to, and used by, a catcher vessel or a catcher/processor within five days of deploying the gear to fish IFQ sablefish in the West Yakutat District of the GOA and the Central GOA regulatory area.

    (24) Fail to redeploy or remove from the fishing grounds all deployed longline pot gear that is assigned to, and used by, a catcher vessel or a catcher/processor within seven days of deploying the gear to fish IFQ sablefish in the Western GOA regulatory area.

    (25) Operate a catcher vessel or a catcher/processor using longline pot gear to fish IFQ sablefish or IFQ halibut in the GOA and fail to use functioning VMS equipment as required in § 679.42(k)(2).

    9. In § 679.20, revise paragraphs (a)(4)(i), (a)(4)(ii) heading, and (a)(4)(ii)(A) to read as follows:
    § 679.20 General limitations.

    (a) * * *

    (4) * * *

    (i) Eastern GOA regulatory area—(A) Fixed gear. Vessels in the Eastern GOA regulatory area using fixed gear will be allocated 95 percent of the sablefish TAC.

    (B) Trawl gear. Vessels in the Eastern GOA regulatory area using trawl gear will be allocated 5 percent of the sablefish TAC for bycatch in other trawl fisheries.

    (ii) Central and Western GOA regulatory areas—(A) Fixed gear. Vessels in the Central and Western GOA regulatory areas using fixed gear will be allocated 80 percent of the sablefish TAC in each of the Central and Western GOA regulatory areas.

    10. In § 679.23, revise paragraph (g)(2) to read as follows:
    § 679.23 Seasons.

    (g) * * *

    (2) Except for catches of sablefish with longline pot gear in the GOA, catches of sablefish by fixed gear during other periods may be retained up to the amounts provided for by the directed fishing standards specified at § 679.20 when made by an individual aboard the vessel who has a valid IFQ permit and unused IFQ in the account on which the permit was issued.

    11. In § 679.24: a. Add paragraphs (a)(3) and (b)(1)(iii); and b. Revise paragraphs (c)(2)(i)(A) and (B); and (c)(3).

    The additions and revisions read as follows.

    § 679.24 Gear limitations.

    (a) * * *

    (3) Each end of a set of longline pot gear deployed to fish IFQ sablefish in the GOA must have attached a cluster of four or more marker buoys including one hard buoy ball marked with the capital letters “LP” in accordance with paragraph (a)(2) of this section, a flag mounted on a pole, and radar reflector floating on the sea surface.

    (b) * * *

    (1) * * *

    (iii) While directed fishing for IFQ sablefish in the GOA.

    (c) * * *

    (2) * * *

    (i) * * *

    (A) No person may use any gear other than hook-and-line, longline pot, and trawl gear when fishing for sablefish in the Eastern GOA regulatory area.

    (B) No person may use any gear other than hook-and-line gear and longline pot gear to engage in directed fishing for IFQ sablefish.

    (3) Central and Western GOA regulatory areas; sablefish as prohibited species. Operators of vessels using gear types other than hook-and-line, longline pot, and trawl gear in the Central and Western GOA regulatory areas must treat any catch of sablefish in these areas as a prohibited species as provided by § 679.21(a).

    12. In § 679.42: a. Revise paragraphs (b)(1) and (2), and paragraphs (k)(1) and (k)(2); and b. Add paragraph (l).

    The addition and revisions read as follows:

    § 679.42 Limitations on use of QS and IFQ.

    (b) * * *

    (1) IFQ Fisheries. Authorized fishing gear to harvest IFQ halibut and IFQ sablefish is defined in § 679.2.

    (i) IFQ halibut. IFQ halibut must not be harvested with trawl gear in any IFQ regulatory area, or with pot gear in any IFQ regulatory area in the BSAI.

    (ii) IFQ sablefish. IFQ sablefish must not be harvested with trawl gear in any IFQ regulatory area, or with pot-and-line gear in the GOA. A vessel operator using longline pot gear in the GOA to fish for IFQ sablefish must comply with the GOA sablefish longline pot gear requirements in paragraph (l) of this section.

    (2) Seabird avoidance gear and methods. The operator of a vessel using hook-and-line gear authorized at § 679.2 while fishing for IFQ halibut, CDQ halibut, or IFQ sablefish must comply with requirements for seabird avoidance gear and methods set forth at § 679.24(e).

    (k) * * *

    (1) Bering Sea or Aleutian Islands. (i) General. Any vessel operator who fishes for IFQ sablefish in the Bering Sea or Aleutian Islands must possess a transmitting VMS transmitter while fishing for IFQ sablefish.

    (ii) VMS requirements. (A) The operator of the vessel must comply with VMS requirements at § 679.28(f)(3), (f)(4), and (f)(5); and

    (B) The operator of the vessel must contact NMFS at 800-304-4846 (option 1) between 0600 and 0000 A.l.t. and receive a VMS confirmation number at least 72 hours prior to fishing for IFQ sablefish in the Bering Sea or Aleutian Islands.

    (2) Gulf of Alaska. (i) General. A vessel operator using longline pot gear to fish for IFQ sablefish in the Gulf of Alaska must possess a transmitting VMS transmitter while fishing for sablefish.

    (ii) VMS requirements. (A) The operator of the vessel must comply with VMS requirements at § 679.28(f)(3), (f)(4), and (f)(5); and

    (B) The operator of the vessel must contact NMFS at 800-304-4846 (option 1) between 0600 and 0000 A.l.t. and receive a VMS confirmation number at least 72 hours prior to using longline pot gear to fish for IFQ sablefish in the Gulf of Alaska.

    (l) GOA sablefish longline pot gear requirements. Additional regulations that implement specific requirements for any vessel operator who fishes for IFQ sablefish in the GOA using longline pot gear are set out under: § 300.61 Definitions, § 679.2 Definitions, § 679.5 Recordkeeping and reporting (R&R), § 679.7 Prohibitions, § 679.20 General limitations, § 679.23 Seasons, § 679.24 Gear limitations, and § 679.51 Observer requirements for vessels and plants.

    (1) Applicability. Any vessel operator who fishes for IFQ sablefish with longline pot gear in the GOA must comply with the requirements of this paragraph (l). The IFQ regulatory areas in the GOA include the Southeast Outside District of the GOA, the West Yakutat District of the GOA, the Central GOA regulatory area, and the Western GOA regulatory area.

    (2) General. To use longline pot gear to fish for IFQ sablefish in the GOA, a vessel operator must:

    (i) Request and be issued pot tags from NMFS as specified in paragraph (l)(3);

    (ii) Use pot tags as specified in paragraph (l)(4);

    (iii) Deploy and retrieve longline pot gear as specified in paragraph (l)(5);

    (iv) Retain IFQ halibut caught in longline pot gear if sufficient halibut IFQ is held by persons on board the vessel as specified in paragraph (l)(6); and

    (v) Comply with other requirements as specified in paragraph (l)(7).

    (3) Pot tags. (i) Request for pot tags. (A) The owner of a vessel that uses longline pot gear to fish for IFQ sablefish in the GOA must use pot tags issued by NMFS. A vessel owner may only receive pot tags from NMFS for each vessel that uses longline pot gear to fish for IFQ sablefish in the GOA by submitting a complete IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form according to form instructions. The form is located on the NMFS Alaska Region Web site at alaskafisheries.noaa.gov.

    (B) The vessel owner must specify the number of requested pot tags for each vessel for each IFQ regulatory area in the GOA (up to the maximum number of pots specified in paragraph (l)(5)(ii) of this section) on the IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form.

    (ii) Issuance of pot tags. (A) Upon submission of a completed IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form, NMFS will assign each pot tag to the vessel specified on the form.

    (B) Each pot tag will be a unique color that is specific to the IFQ regulatory area in the GOA in which it must be deployed and imprinted with a unique serial number.

    (C) NMFS will send the pot tags to the vessel owner at the address provided on the IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form.

    (iii) Request for pot tag replacement. (A) The vessel owner may submit a request to NMFS to replace pot tags that are lost, stolen, or mutilated.

    (B) The vessel owner to whom the lost, stolen, or mutilated pot tag was issued must submit a complete IFQ Sablefish Request for Replacement of Longline Pot Gear Tags form according to form instructions. The form is located on the NMFS Alaska Region Web site at alaskafisheries.noaa.gov.

    (C) A complete form must be signed by the vessel owner and is a sworn affidavit to NMFS indicating the reason for the request for a replacement pot tag or pot tags and the number of replacement pot tags requested by IFQ regulatory area.

    (D) NMFS will review a request to replace a pot tag or tags and will issue the appropriate number of replacement pot tags. The total number of pot tags issued to a vessel owner for an IFQ regulatory area in the GOA cannot exceed the maximum number of pots authorized for use by a vessel in that IFQ regulatory area specified in paragraph (l)(5)(ii) of this section. The total number of pot tags issued to a vessel owner for an IFQ regulatory area in the GOA equals the sum of the number of pot tags issued for that IFQ regulatory area that have not been replaced plus the number of replacement pot tags issued for that IFQ regulatory area.

    (iv) Annual vessel registration and pot tag assignment. (A) The owner of a vessel that uses longline pot gear to fish for IFQ sablefish in the GOA must annually register the vessel with NMFS and specify the pot tags that NMFS will assign to the vessel. Pot tags must be assigned to only one vessel each year.

    (B) To register a vessel and assign pot tags, the vessel owner must annually submit a complete IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form to NMFS.

    (1) The vessel owner must specify the vessel to be registered on the IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form. The specified vessel must have a valid ADF&G vessel registration number.

    (2) The vessel owner must specify on the IFQ Sablefish Longline Pot Gear Vessel Registration and Request for Pot Gear Tags form either that the vessel owner is requesting that NMFS assign pot tags to a vessel to which the pot tags were previously assigned or that the vessel owner is requesting new pot tags from NMFS.

    (4) Using pot tags. (i) Each pot used to fish for IFQ sablefish in the GOA must be identified with a valid pot tag. A valid pot tag is:

    (A) Issued by NMFS according to paragraph (l)(3) of this section;

    (B) The color specific to the regulatory area in which it will be used; and

    (C) Inscribed with a legible unique serial number.

    (ii) A valid pot tag must be attached to each pot on board the vessel to which the pot tags are assigned before the vessel departs port to fish.

    (iii) A valid pot tag must be attached to a pot bridge or cross member such that the entire pot tag is visible and not obstructed.

    (5) Restrictions on GOA longline pot gear deployment and retrieval—(i) General.

    (A) A vessel operator must mark longline pot gear used to fish IFQ sablefish in the GOA as specified in § 679.24(a).

    (B) A vessel operator must deploy and retrieve longline pot gear to fish IFQ sablefish in the GOA only during the sablefish fishing period specified in § 679.23(g)(1).

    (C) The gear retrieval and removal requirements in paragraphs (l)(5)(iii) and (iv) of this section apply to all longline pot gear that is assigned to the vessel and deployed to fish IFQ sablefish and to all other fishing equipment attached to longline pot gear that is deployed in the water by the vessel to fish IFQ sablefish. All other fishing equipment attached to longline pot gear includes, but is not limited to, equipment used to mark longline pot gear as required in § 679.24(a)(3).

    (ii) Pot limits. A vessel operator is limited to deploying a maximum number of pots to fish IFQ sablefish in each IFQ regulatory area in the GOA.

    (A) In the Southeast Outside District of the GOA, a vessel operator is limited to deploying a maximum of 120 pots.

    (B) In the West Yakutat District of the GOA, a vessel operator is limited to deploying a maximum of 120 pots.

    (C) In the Central GOA regulatory area, a vessel operator is limited to deploying a maximum of 300 pots.

    (D) In the Western GOA regulatory area, a vessel operator is limited to deploying a maximum of 300 pots.

    (iii) Gear retrieval. (A) In the Southeast Outside District of the GOA, a catcher vessel operator must retrieve and remove from the fishing grounds all longline pot gear that is assigned to the vessel and deployed to fish IFQ sablefish when the vessel makes an IFQ landing.

    (B) In the Southeast Outside District of the GOA, a catcher/processor must redeploy or remove from the fishing grounds all longline pot gear that is assigned to the vessel and deployed to fish IFQ sablefish within five days of deploying the gear.

    (C) In the West Yakutat District of the GOA and the Central GOA regulatory area, a vessel operator must redeploy or remove from the fishing grounds all longline pot gear that is assigned to the vessel and deployed to fish IFQ sablefish within five days of deploying the gear.

    (D) In the Western GOA regulatory area, a vessel operator must redeploy or remove from the fishing grounds all longline pot gear that is assigned to the vessel and deployed to fish IFQ sablefish within seven days of deploying the gear.

    (iv) Longline pot gear used on multiple vessels. Longline pot gear assigned to one vessel and deployed to fish IFQ sablefish in the GOA must be removed from the fishing grounds, returned to port, and must have only one set of the appropriate vessel-specific pot tags before being deployed by another vessel to fish IFQ sablefish in the GOA.

    (6) Retention of halibut. (i) A vessel operator who fishes for IFQ sablefish using longline pot gear must retain IFQ halibut if:

    (A) The IFQ halibut is caught in any GOA reporting area in accordance with paragraph (l) of this section; and

    (B) An IFQ permit holder on board the vessel has unused halibut IFQ for the IFQ regulatory area fished and IFQ vessel category.

    (ii) [Reserved]

    (7) Other requirements. A vessel operator who fishes for IFQ sablefish using longline pot gear in the GOA must:

    (i) Complete a longline and pot gear Daily Fishing Logbook (DFL) or Daily Cumulative Production Logbook (DCPL) as specified in § 679.5(c); and

    (ii) Comply with Vessel Monitoring System (VMS) requirements specified in paragraph (k)(2) of this section.

    13. In § 679.51, revise paragraphs (a)(1)(i) introductory text and (a)(1)(i)(B) to read as follows:
    § 679.51 Observer requirements for vessels and plants.

    (a) * * *

    (1) * * *

    (i) Vessel classes in partial coverage category. Unless otherwise specified in paragraph (a)(2) of this section, the following catcher vessels and catcher/processors are in the partial observer coverage category when fishing for halibut or when directed fishing for groundfish in a federally managed or parallel groundfish fishery, as defined at § 679.2:

    (B) A catcher vessel when fishing for halibut while carrying a person named on a permit issued under § 679.4(d)(1)(i), (d)(2)(i), or (e)(2), or for IFQ sablefish, as defined at § 679.2, while carrying a person named on a permit issued under § 679.4(d)(1)(i) or (d)(2)(i); or

    14. In Table 15 to part 679, revise entries for “Pot”, “Authorized gear for sablefish harvested from any GOA reporting area”, and “Authorized gear for halibut harvested from any IFQ regulatory area”, and add entry for “Authorized gear for halibut harvested from any IFQ regulatory area in the BSAI” to read as follows:

    Table 15 to Part 679—Gear Codes, Descriptions, and Use [X indicates where this code is used] Name of gear Use alphabetic code to complete the following: Alpha gear
  • code
  • NMFS
  • logbooks
  • Electronic
  • check-in/
  • check-out
  • Use numeric code to
  • complete the following:
  • Numeric
  • gear code
  • IERS
  • eLandings
  • ADF&G
  • COAR
  • NMFS AND ADF&G GEAR CODES *         *         *         *         *         *         * Pot (includes longline pot and pot-and-line) POT X X 91 X X *         *         *         *         *         *         * FIXED GEAR Authorized gear for sablefish harvested from any GOA reporting area All longline gear (hook-and-line, jig, troll, and handline) and longline pot gear. For purposes of determining initial IFQ allocation, all pot gear used to make a legal landing. *         *         *         *         *         *         * Authorized gear for halibut harvested from any IFQ regulatory area in the GOA All fishing gear composed of lines with hooks attached, including one or more stationary, buoyed, and anchored lines with hooks attached and longline pot gear. Authorized gear for halibut harvested from any IFQ regulatory area in the BSAI All fishing gear composed of lines with hooks attached, including one or more stationary, buoyed, and anchored lines with hooks attached.
    [FR Doc. 2016-31057 Filed 12-27-16; 8:45 am] BILLING CODE 3510-22-P
    SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 240 [Release No. 33-10075A; 34-77757A; File No. S7-12-14] RIN 3235-AL40 Changes to Exchange Act Registration Requirements To Implement Title V and Title VI of the JOBS Act; Correction AGENCY:

    Securities and Exchange Commission.

    ACTION:

    Final rule; technical correction.

    SUMMARY:

    This document makes technical corrections to a rule that was published in the Federal Register on May 10, 2016 (81 FR 28689). The Commission adopted revisions to Rule 12g-1 under the Securities Exchange Act of 1934 (“Exchange Act”) in light of the statutory changes made by Title V and Title VI of the Jumpstart Our Business Startups Act and Title LXXXV of the Fixing America's Surface Transportation Act. This document is being published to correct language in that rule to more precisely reflect the holder of record threshold established by Exchange Act Section 12(g)(1).

    DATES:

    Effective December 28, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Steven G. Hearne, Senior Special Counsel, at (202) 551-3430, Division of Corporation Finance, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.

    SUPPLEMENTARY INFORMATION:

    We are making technical corrections to Rule 12g-1 1 under the Exchange Act.2

    1 17 CFR 240.12g-1.

    2 15 U.S.C. 78a et seq.

    List of Subjects in 17 CFR Part 240

    Reporting and recordkeeping requirements, Securities.

    Text of the Amendments

    For the reasons set out above, title 17, chapter II of the Code of Federal Regulations is amended as follows:

    PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 1. The general authority citation for part 240 continues to read as follows: Authority:

    15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.

    2. Amend § 240.12g-1 by revising paragraph (b)(1) to read as follows:
    § 240.12g-1 Registration of securities; Exemption from section 12(g).

    (b)(1) The class of equity securities was held of record by fewer than 2,000 persons and fewer than 500 of those persons were not accredited investors (as such term is defined in § 230.501(a) of this chapter, determined as of such day rather than at the time of the sale of the securities); or

    Dated: December 21, 2016. Brent J. Fields, Secretary.
    [FR Doc. 2016-31286 Filed 12-27-16; 8:45 am] BILLING CODE 8011-01-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9806] RIN 1545-BK66 Definitions and Reporting Requirements for Shareholders of Passive Foreign Investment Companies AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Final regulations and removal of temporary regulations.

    SUMMARY:

    This document contains final regulations that provide guidance on determining ownership of a passive foreign investment company (PFIC) and on certain annual reporting requirements for shareholders of PFICs to file Form 8621, “Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.” In addition, the final regulations provide guidance on an exception to the requirement for certain shareholders of foreign corporations to file Form 5471, “Information Return of U.S. Persons with Respect to Certain Foreign Corporations.” The regulations finalize proposed regulations and withdraw temporary regulations published on December 31, 2013. The final regulations affect United States persons that own interests in PFICs, and certain United States shareholders of foreign corporations.

    DATES:

    Effective Date: These regulations are effective on December 28, 2016.

    Applicability Dates: For dates of applicability, see §§ 1.1291-1(j)(3), 1.1291-9(k)(3), 1.1298-1(h), 1.6038-2(m), and 1.6046-1(l)(3).

    FOR FURTHER INFORMATION CONTACT:

    Jeffery G. Mitchell at (202) 317-6934 (not a toll-free number).

    SUPPLEMENTARY INFORMATION: Background

    On December 31, 2013, the Treasury Department and the IRS published final and temporary regulations (2013 temporary regulations) under sections 1291, 1298, 6038, and 6046 (T.D. 9650) in the Federal Register (78 FR 79602, as corrected at 79 FR 26836). On the same date, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-140974-11) in the Federal Register (78 FR 79650, as corrected at 79 FR 27230) cross-referencing the 2013 temporary regulations (2013 proposed regulations). No public hearing was requested or held. Written comments were received, and are available at www.regulations.gov or upon request.

    On April 28, 2014, the Treasury Department and the IRS issued Notice 2014-28 (2014-18 I.R.B. 990), which announced that the regulations under section 1291 would provide that a United States person that owns stock of a PFIC through a tax-exempt organization or account is not treated as a shareholder of the PFIC with respect to the stock. In addition, on September 29, 2014, the Treasury Department and the IRS issued Notice 2014-51 (2014-40 I.R.B. 594), which announced that the regulations under section 1298 would provide guidance concerning United States persons that own stock in a PFIC that is marked to market under a provision of chapter 1 of the Code other than section 1296.

    This Treasury decision adopts the 2013 proposed regulations with the changes described below as final regulations, including implementing the rules described in Notice 2014-28 and Notice 2014-51, and removes the corresponding 2013 temporary regulations.

    Summary of Comments and Explanation of Revisions

    The final regulations retain the basic approach and structure of the 2013 temporary regulations, with certain revisions. This Summary of Comments and Explanation of Revisions section discusses those revisions as well as comments received in response to the solicitation of comments in the notice of proposed rulemaking accompanying the 2013 temporary regulations. Several comments were received that did not pertain to the rules in the 2013 temporary regulations. These comments are beyond the scope of this rulemaking and are not addressed in this preamble. The Treasury Department and the IRS will consider these comments in connection with any future guidance projects addressing the issues discussed in the comments.

    A. Definition of Shareholder and Indirect Shareholder in § 1.1291-1(b)(7) and (8) 1. Revision to Definition of Shareholder Announced in Notice 2014-28

    As described in Notice 2014-28, the application of the PFIC rules to a United States person treated as owning stock of a PFIC through a tax-exempt organization or account described in § 1.1298-1(c)(1) would be inconsistent with the tax policies underlying the PFIC rules and the treatment of tax-exempt organizations and accounts. For example, applying the PFIC rules to a United States person that owns stock of a PFIC through an individual retirement account (IRA) described in section 408(a) would be inconsistent with the principle of deferred taxation provided by IRAs. Notice 2014-28 provides that the regulations incorporating the guidance described in the notice will be effective for taxable years of United States persons that own stock of a PFIC through a tax-exempt organization or account ending on or after December 31, 2013.

    The final regulations modify the definition of shareholder in § 1.1291-1 as announced in Notice 2014-28. Under new § 1.1291-1(e)(2), a United States person is not treated as a shareholder of a PFIC to the extent the person owns PFIC stock through a tax-exempt organization or account described in § 1.1298-1(c)(1).

    2. Indirect Shareholder as a Result of Attribution Through a Domestic Corporation a. 1992 Proposed Regulations

    On April 1, 1992 (57 FR 11024) the Treasury Department and the IRS issued proposed regulations (1992 proposed regulations) that, among other things, included rules for determining when a United States person is treated as indirectly owning stock of a PFIC. Consistent with section 1298(a)(2)(A), § 1.1291-1(b)(8)(ii)(A) of the 1992 proposed regulations provided that a United States person who directly or indirectly owns 50 percent or more in value of the stock of a foreign corporation that is not a PFIC is considered to own a proportionate amount (by value) of any stock (including PFIC stock) owned directly or indirectly by the foreign corporation. Thus, for example, if a United States person owned 100 percent of the shares of FC, a foreign corporation that is not a PFIC but that owns 50 shares of a PFIC, the United States person would be treated as indirectly owning the 50 PFIC shares under § 1.1291-1(b)(8)(ii)(A) of the 1992 proposed regulations.

    By contrast, section 1298(a)(1)(B) provides that PFIC stock owned by a domestic corporation (which generally would be treated as a PFIC shareholder itself) is not attributed to any other person, except to the extent provided in regulations. Pursuant to this grant of regulatory authority, § 1.1291-1(b)(8)(ii)(C) of the 1992 proposed regulations provided that, if stock of a section 1291 fund was not treated as owned indirectly by a United States person under the other attribution rules provided in the proposed regulations, but would be treated as owned by a United States person if the ownership rule of § 1.1291-1(b)(8)(ii)(A) of the 1992 proposed regulations applied to domestic corporations (in addition to foreign corporations), then the stock of the section 1291 fund would be considered as owned by such United States person.

    Both § 1.1291-1(b)(8)(ii)(A) and (C) of the 1992 proposed regulations were withdrawn and reissued under the 2013 temporary regulations as § 1.1291-1T(b)(8)(ii)(A) and (C), respectively.

    b. Intended Scope of § 1.1291-1T(b)(8)(ii)(C)

    The purpose of § 1.1291-1(b)(8)(ii)(C) of the 1992 proposed regulations and § 1.1291-1T(b)(8)(ii)(C), as explained in the preamble to the 1992 proposed regulations, was to attribute stock through a domestic C corporation in certain circumstances if, absent such attribution, the stock of a PFIC would not be treated as owned by any United States person. In particular, because § 1.1291-1T(b)(8)(ii)(A) provides that a United States person who directly or indirectly owns 50 percent or more in value of the stock of a foreign corporation that is not a PFIC is considered to own a proportionate amount (by value) of any stock owned directly or indirectly by the foreign corporation, without § 1.1291-1T(b)(8)(ii)(C), a United States person could interpose a domestic C corporation into an ownership structure to avoid shareholder status with respect to stock of a PFIC that the United States person indirectly owned through one or more foreign corporations that were not PFICs. In other words, § 1.1291-1T(b)(8)(ii)(C) provides guidance as to when a United States person is treated as indirectly owning stock of a foreign corporation through a domestic corporation for purposes of § 1.1291-1T(b)(8)(ii)(A).

    For example, assume that A, a United States person, owns 49 percent of the stock of FC1, a foreign corporation that is not a PFIC, and separately all the stock of DC, a domestic corporation that is not an S corporation. DC, in turn, owns the remaining 51 percent of the stock of FC1, and FC1 owns 100 shares of stock in a PFIC (which is not a controlled foreign corporation within the meaning of section 957(a)). DC is an indirect shareholder with respect to 51 percent of the PFIC stock held by FC1 under § 1.1291-1T(b)(8)(ii)(A). Absent the application of § 1.1291-1T(b)(8)(ii)(C), because A directly or indirectly owns less than 50 percent of the value of the stock of FC1 and thus § 1.1291-1T(b)(8)(ii)(A) does not apply, A would not be treated as an indirect shareholder with respect to any of the PFIC stock directly owned by FC1 when, from an economic perspective, A indirectly owns all the PFIC stock held by FC1. Therefore, without a rule treating A as owning DC's stock in FC1, the remaining 49 percent of the PFIC stock held by FC1 would not be treated as owned by any United States person.

    On the other hand, the literal language of § 1.1291-1T(b)(8)(ii)(C) could have been interpreted to create overlapping ownership by two or more United States persons in the same stock of a section 1291 fund. Thus, in the foregoing example, A may have been considered as owning 100 percent of the stock of FC1, and therefore as indirectly owning all 100 shares of the PFIC stock held by FC1, even though 51 of those shares are considered indirectly owned by DC, a United States person. This outcome is inconsistent with the intended purpose of the rule to attribute stock through a domestic C corporation in certain circumstances if, absent such attribution, the stock of a PFIC would not be treated as owned by any United States person.

    c. Revisions to 2013 Temporary Regulations

    To address this concern, the final regulations include a non-duplication rule. Specifically, the final regulations provide under § 1.1291-1(b)(8)(ii)(C)(1) that, solely for purposes of determining whether a person owns 50 percent or more in value of the stock of a foreign corporation that is not a PFIC under § 1.1291-1(b)(8)(ii)(A), a person who directly or indirectly owns 50 percent or more in value of the stock of a domestic corporation is considered to own a proportionate amount (by value) of any stock owned directly or indirectly by the domestic corporation. However, the non-duplication rule in § 1.1291-1(b)(8)(ii)(C)(2) states that a United States person will not be treated, as a result of applying § 1.1291-1(b)(8)(ii)(C)(1), as owning (other than for purposes of determining whether a person satisfies the ownership threshold of § 1.1291-1(b)(8)(ii)(A)) stock of a PFIC that is directly owned or considered owned indirectly under § 1.1291-1(b)(8) by another United States person (determined without regard to § 1.1291-1(b)(8)(ii)(C)(1)).

    Applying the non-duplication rule to the example above, to the extent that the 51 shares of PFIC stock are indirectly owned by DC (a United States person) under § 1.1291-1(b)(8)(ii)(A), those shares are not also treated as indirectly owned by A (other than for purposes of determining whether A satisfies the ownership threshold of § 1.1291-1(b)(8)(ii)(A)). Only the remaining 49 shares of PFIC stock are considered to be indirectly owned by A.

    d. Additional Revisions to 2013 Temporary Regulations

    Lastly, the final regulations make two additional clarifications with respect to this rule. First, the final regulations clarify, under § 1.1291-1(b)(8)(ii)(C)(3), that the ownership rule of § 1.1291-1(b)(8)(ii)(C)(1) does not apply to stock owned directly or indirectly by an S corporation; rather, the indirect ownership rule under § 1.1291-1(b)(8)(iii)(B) applies in those instances. Second, the final regulations clarify that the attribution rule in § 1.1291-1(b)(8)(ii)(C) applies to all PFICs and not only section 1291 funds, in order to ensure that United States persons who are treated as indirect shareholders of PFICs are permitted to make qualified electing fund elections under section 1295.

    B. Exceptions to Section 1298(f) Reporting

    A number of comments requested that the final regulations expand the exceptions to section 1298(f) reporting provided in the 2013 temporary regulations or add new exceptions.

    1. Exception for PFIC Stock That Is Marked To Market Under a Non-Section 1296 MTM Provision Announced in Notice 2014-51

    Two comments requested an exception to section 1298(f) reporting for PFIC stock that is marked to market under a provision of chapter 1 of the Code other than section 1296 (a non-section 1296 MTM provision), such as section 475(f). In response to these comments, the Treasury Department and the IRS issued Notice 2014-51, which announced that the regulations under section 1298 would be amended to provide that United States persons that own stock in a PFIC that is marked to market under a non-section 1296 MTM regime generally are not subject to section 1298(f) reporting. In addition, the notice states that the regulations would provide that a shareholder's PFIC stock that is marked to market under a non-section 1296 MTM provision is not taken into account in determining whether the shareholder qualifies for the exceptions from reporting set forth in § 1.1298-1T(c)(2)(i)(A)(1) or (c)(2)(iii), which generally exempt certain shareholders from certain section 1298(f) reporting requirements when their aggregate PFIC holdings do not exceed $25,000 (or, $50,000 in the case of a shareholder that files a joint return). Notice 2014-51 states that the regulations that incorporate the guidance described in the notice would be effective for taxable years of shareholders ending on or after December 31, 2013.

    The final regulations, in accordance with Notice 2014-51, add § 1.1298-1(c)(3), which provides that United States persons that own PFIC stock that is marked to market under a non-section 1296 MTM provision are not subject to section 1298(f) reporting unless they are subject to section 1291 under the coordination rule in § 1.1291-1(c)(4)(ii). Generally, under § 1.1291-1(c)(4)(ii), when a United States person's PFIC stock is marked to market under a non-section 1296 MTM provision in a taxable year after the year in which the United States person acquired the stock, the United States person is subject to section 1291 for the first taxable year in which the United States person marks to market the PFIC stock. Thus, the United States person is subject to section 1291 with respect to any unrealized gain in the stock as of the last day of the first taxable year in which the stock is marked to market, as if the person disposed of the stock on that day. See § 1.1291-1(c)(4)(ii) and § 1.1296-1(i)(2) and (3).

    Also consistent with Notice 2014-51, the final regulations add § 1.1298-1(c)(2)(ii)(C), pursuant to which a United States person's PFIC stock that is marked to market under a non-section 1296 MTM provision is not taken into account in determining whether the person qualifies for the exceptions from section 1298(f) reporting set forth in § 1.1298-1(c)(2)(i)(A)(1) or (c)(2)(iii), provided that the rules of § 1.1296-1(i)(2) and (3) do not apply with respect to the PFIC stock pursuant to § 1.1291-1(c)(4)(ii) for the taxable year. See Section B.7 of this preamble for a description of these exceptions.

    2. Exception for Certain Domestic Partnerships

    A comment requested that the final regulations add a new exception from the section 1298(f) filing requirements for domestic partnerships in which all of the partners are tax-exempt organizations (or other partnerships, all of the partners of which are tax-exempt organizations) that are not subject to the PFIC rules with respect to a PFIC held by the partnership because any income derived with respect to the PFIC would not be taxable to the tax-exempt partners under subchapter F of Subtitle A of the Code. The comment pointed out that a tax-exempt organization is subject to section 1298(f) reporting with respect to PFIC stock under § 1.1298-1(c)(1) only if the income derived by the organization with respect to the PFIC stock would be taxable to the organization under subchapter F of Subtitle A of the Code. However, under the 2013 temporary regulations, a domestic partnership (such as a domestic partnership that exclusively pools the funds of tax-exempt organizations to invest in PFICs) is required to file a Form 8621 with respect to PFIC stock even when none of its partners are subject to the PFIC rules with respect to the PFIC stock.

    Requiring reporting under section 1298(f) by a domestic partnership when none of its direct and indirect owners are subject to the PFIC rules may result in undue compliance costs and burdens. Accordingly, consistent with the exception in § 1.1298-1(c)(1), the final regulations adopt and expand upon this comment and provide a final rule in § 1.1298-1(c)(6) that exempts a domestic partnership from section 1298(f) reporting with respect to an interest in a PFIC for a taxable year when none of its direct or indirect partners are required to file Form 8621 (or successor form) with respect to the PFIC interest under section 1298(f) and these regulations because the partners are not subject to the PFIC rules.

    Thus, for example, if all the partners of a domestic partnership are tax-exempt organizations exempt from PFIC taxation under § 1.1291-1(e) with respect to PFIC stock held by the partnership, and accordingly are exempt from reporting pursuant to § 1.1298-1(c)(1), the partnership, in turn, is exempt from filing Form 8621 under section 1298(f) with respect to the PFIC stock held by the partnership. Likewise, if all the partners of a domestic partnership are foreign corporations that are not considered to be shareholders under § 1.1291-1(b)(7) of PFIC stock held by the partnership, and no United States person is an indirect shareholder of the PFIC stock under § 1.1291-1(b)(8), the partnership, in turn, is exempt from filing Form 8621 under section 1298(f) with respect to the PFIC stock held by the partnership.

    In contrast, a domestic partnership is not exempt from filing Form 8621 under § 1.1298-1(c)(6) with respect to stock it holds in a section 1291 fund when some or all of its partners are exempt from filing Form 8621 with respect to that stock but otherwise would be subject to tax on distributions on, or dispositions of, that stock. PFIC information reporting by the domestic partnership in these circumstances is appropriate because it furthers PFIC tax compliance and enforcement.

    3. Exception for PFIC Stock Held Through Certain Foreign Pension Funds That Are Covered by a U.S. Income Tax Treaty

    In general, § 1.1298-1T(b)(3)(ii) exempts a United States person from section 1298(f) reporting with respect to PFIC stock that is owned by the United States person through a foreign trust that is a foreign pension fund operated principally to provide pension or retirement benefits, when, pursuant to the provisions of a U.S. income tax treaty, the income earned by the pension fund may be taxed as the income of the United States person only when, and to the extent, the income is paid to, or for the benefit of, the United States person.

    As a threshold matter, this rule applies only when the United States person owns the PFIC through a foreign pension fund that is treated as a foreign trust under section 7701(a)(31)(B). However, the applicable provisions of U.S. income tax treaties apply generally to foreign pension funds, regardless of whether the foreign pension fund is treated as a trust for U.S. income tax purposes.

    The Treasury Department and the IRS have concluded that the treaty-based exception in § 1.1298-1T(b)(3)(ii) should be expanded to apply to PFICs held by United States persons through all applicable foreign pension funds (or equivalents, such as exempt pension trusts or pension schemes referred to in certain U.S. income tax treaties), regardless of their entity classification for U.S. income tax purposes. Accordingly, the final regulations revise the treaty-based exception for PFIC stock held by a United States person through certain foreign pension funds under § 1.1298-1T(b)(3)(ii) to eliminate the requirement that the foreign pension fund be treated as a foreign trust under section 7701(a)(31)(B). The final rule, which is renumbered § 1.1298-1(c)(4), clarifies that a foreign pension fund (or equivalent) covered by this exception may be any type of arrangement, including but not limited to one of the arrangements listed in § 1.1298-1(c)(4). The final rule also applies in the case of an income tax treaty that provides the relevant benefit by election (or other procedure), such as under paragraph 7 of Article 18 of the U.S.-Canada income tax treaty, to the extent that the election is in effect (or other procedure properly satisfied).

    4. Exception for Dual Resident Taxpayers

    A comment requested that an exception from the section 1298(f) filing requirements be added for dual resident taxpayers who are treated as residents of another country (treaty country) pursuant to an income tax treaty between the United States and the treaty country. In general, a “dual resident taxpayer” is an individual who is considered a resident of the United States under the Code, and is also considered a resident of a treaty country under the treaty country's internal laws. § 301.7701(b)-7(a)(1). Certain U.S. income tax treaties contain provisions that resolve the conflicting claims of residence by both countries (tie-breaker rules), pursuant to which dual resident taxpayers are treated as residents of only one country for purposes of income taxation. A dual resident taxpayer may claim the benefit of treatment as a resident of a treaty country for U.S. income tax purposes under a tie-breaker rule of an applicable treaty provision by timely filing Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b),” with an appropriate income tax return, such as Form 1040NR, “U.S. Nonresident Alien Income Tax Return.” § 301.7701(b)-7(b) and (c). A dual resident taxpayer who properly claims this benefit is taxed as a nonresident alien (as defined in section 7701(b)(1)(B)) for U.S. income tax purposes.

    Nonresident aliens are not subject to tax under the PFIC provisions (sections 1291 through 1298) because the PFIC rules apply only to “United States persons,” and nonresident aliens are not United States persons within the meaning of section 7701(a)(30). However, dual resident taxpayers treated as residents of a treaty country for U.S. income tax purposes generally are treated as United States residents under the Code for purposes other than the computation of their income tax liability. § 301.7701(b)-7(a)(3). Accordingly, dual resident taxpayers who are treated as residents of a treaty country under a tie-breaker rule and who own PFICs are subject to the section 1298(f) reporting rules set forth in the 2013 temporary regulations even though they are not subject to tax under the PFIC provisions.

    The requirement to file Form 8621 under section 1298(f) increases taxpayer awareness of, and compliance with, the PFIC rules. However, because dual resident taxpayers treated as nonresident aliens for purposes of computing their U.S. tax liability are not subject to tax under the PFIC rules, section 1298(f) reporting by these dual resident taxpayers is not essential to the enforcement of the PFIC provisions. Thus, the Treasury Department and the IRS have determined that it is appropriate to provide an exception from the section 1298(f) reporting rules for dual resident taxpayers who are treated as residents of a treaty country, and, accordingly, not subject to tax under the PFIC provisions.

    Accordingly, the final regulations add § 1.1298-1(c)(5), which sets forth an exception from section 1298(f) reporting for a dual resident taxpayer for a taxable year, or the portion of a taxable year, during which the dual resident taxpayer determines any U.S. income tax liability as a nonresident alien under § 301.7701(b)-7, and complies with the filing requirements of § 301.7701(b)-7(b) and (c) and, if applicable, § 1.6012-1(b)(2)(ii)(b) (applicable when the dual resident taxpayer is treated as a resident of the treaty country on the last day of the taxable year), or § 1.6012-1(b)(2)(ii)(a) (applicable when the dual resident taxpayer is treated as a resident of the United States on the last day of the taxable year). This new section 1298(f) reporting exception is consistent with § 1.6038D-2(e), which generally exempts a dual resident taxpayer who is taxed as a nonresident alien from section 6038D reporting for a taxable year, or the portion of a taxable year, during which the taxpayer is treated as a nonresident alien and properly files Form 8833.

    5. Exception for Certain PFIC Stock Held for a Period of 30 Days or Less

    Under the 2013 temporary regulations, a shareholder who owns stock in a section 1291 fund for only a short period of time during a year, and does not recognize an excess distribution (or gain treated as an excess distribution) with respect to the section 1291 fund during the year may still have a filing obligation under section 1298(f). Assume, for example, that during a shareholder's taxable year, its section 1291 fund (upper-tier PFIC) acquires all of the stock of another section 1291 fund (lower-tier PFIC), which is liquidated into the upper-tier PFIC a few days after it is acquired. The lower-tier PFIC does not make any distributions to the upper-tier PFIC before the liquidation, and the upper-tier PFIC does not recognize any gain upon the liquidation of the lower-tier PFIC. On the last day of its taxable year, the shareholder owns PFIC stock with a value of more than $25,000, and thus the exception in § 1.1298-1T(c)(2) is not applicable. (See Section B.7 of this preamble for an explanation of the reporting exception in § 1.1298-1T(c)(2).) Accordingly, under the 2013 temporary regulations, the shareholder is required to report its ownership in the lower-tier PFIC, even though it only owned the PFIC for a few days during the year and did not recognize any income with respect to the PFIC.

    The Treasury Department and the IRS have concluded that compliance with, and enforcement of, the PFIC regime would not be adversely impacted by allowing a reporting exception for transitory ownership of section 1291 funds when there is no taxation under section 1291 with respect to the short period of ownership. Thus, the final regulations provide an exception for section 1298(f) reporting for certain shareholders with respect to PFICs that were owned for a short period of time during which no PFIC taxation was imposed on the shareholders. Specifically, under § 1.1298-1(c)(7), a shareholder is not required to file a Form 8621 under section 1298(f) with respect to stock of a section 1291 fund that it acquired either during its taxable year or the immediately preceding year, when the shareholder (i) does not own any stock of the section 1291 fund for more than 30 days during the period beginning 29 days before the first day of the shareholder's taxable year and ending 29 days after the close of the shareholder's taxable year and (ii) did not receive an excess distribution (including gain treated as an excess distribution) with respect to the section 1291 fund.

    6. Exception for Certain Bona Fide Residents of U.S. Territories

    A bona fide resident (within the meaning of section 937(a)) of a possession of the United States (U.S. territories) (namely, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the United States Virgin Islands) may include an individual who is also a United States person, and thus the bona fide resident may be a shareholder of a PFIC.

    Under the 2013 temporary regulations, the general section 1298(f) reporting requirements in § 1.1298-1T(b)(1) apply regardless of whether a shareholder is required to file a U.S. income tax return. As a result, under the 2013 temporary regulations, bona fide residents of U.S. territories who were shareholders of PFICs were subject to the section 1298(f) filing requirements set forth in the 2013 temporary regulations even when they were not required to file a U.S. income tax return. As described in greater detail in this Section B.6, the final regulations change this result for bona fide residents of Guam, the Northern Mariana Islands, and the United States Virgin Islands and, as provided in § 1.1298-1(h)(1), the final regulations apply to taxable years ending on or after the issuance of the 2013 temporary regulations.

    Three of the five U.S. territories (Guam, the Northern Mariana Islands, and the United States Virgin Islands) have a mirror code system of taxation, which means that their income tax laws generally are identical to the Code (except for the substitution of the name of the relevant territory for the term “United States,” where appropriate). Bona fide residents of U.S. territories that are mirror code jurisdictions have no income tax obligation (or related filing obligation) with the United States provided, generally, that they properly report income and fully pay their income tax liability to the tax administration of their respective U.S. territory. See sections 932 and 935. Thus, for example, a bona fide resident of Guam who is a shareholder of a PFIC would generally not have a U.S. income tax obligation even in a year when the shareholder is treated as receiving an excess distribution (or recognizing gain treated as an excess distribution) with respect to the PFIC.

    Bona fide residents of non-mirror code jurisdictions (American Samoa and Puerto Rico) generally exclude territory-source income from U.S. federal gross income under sections 931 and 933, respectively. (American Samoa currently is the only territory to which section 931 applies because it is the only territory that has entered into an implementing agreement under sections 1271(b) and 1277(b) of the Tax Reform Act of 1986.) However, unlike mirror code jurisdictions, these bona fide residents generally are subject to U.S. income taxation, and have a related income tax return filing requirement with the United States, to the extent they have non-territory-source income or income from amounts paid for services performed as an employee of the United States or any agency thereof. See sections 931(a) and (d) and 933. Further, under the 1992 proposed regulations, certain excess distributions (or gains treated as excess distributions) from a PFIC would be exempt from taxation with respect to a shareholder who is a bona fide resident of Puerto Rico if the amounts distributed were derived from sources in Puerto Rico. Section 1.1291-1(f) of the 1992 proposed regulations. Accordingly, for example, if a bona fide resident of Puerto Rico is a shareholder of a PFIC and is treated as receiving an excess distribution (or recognizing gain treated as an excess distribution) with respect to the PFIC that is from sources outside of Puerto Rico, such shareholder would be subject to U.S. income tax under the PFIC provisions with respect to such amounts.

    The Treasury Department and the IRS have concluded that relieving section 1298(f) reporting for PFIC stock held by an individual who is a bona fide resident of a U.S. territory that is a mirror code jurisdiction who is not required to file a U.S. income tax return for one or more taxable years would not adversely impact tax enforcement efforts related to PFICs. This is because such individuals are not subject to U.S. income tax in such years, given that they have properly reported income and fully paid their income tax liability to the tax administration of their respective U.S. territory, and it is unlikely such individuals will ever be subject to tax under the PFIC provisions in the years they receive excess distributions (or recognize gain treated as excess distributions). As a result, these final regulations add § 1.1298-1(c)(8) to provide an exception from reporting under section 1298(f) for a taxable year in which the individual is a bona fide resident of Guam, the Northern Mariana Islands, or the United States Virgin Islands and is not required to file a U.S. income tax return.

    However, no exception from reporting is provided with respect to bona fide residents of Puerto Rico and American Samoa. Bona fide residents of Puerto Rico and American Samoa who are not required to file U.S. income tax returns in a given year may still be subject to tax under the PFIC provisions if they are shareholders of a PFIC and receive excess distributions (or recognize gain treated as excess distributions) in a later year. Thus, PFIC information reporting by these individuals can reasonably be expected to further PFIC tax compliance and enforcement.

    7. $25,000 and $5,000 Exceptions

    Under § 1.1298-1T(c)(2)(i), a shareholder generally is not required to file Form 8621 with respect to a section 1291 fund when the shareholder is not treated as receiving an excess distribution (or recognizing gain treated as an excess distribution) with respect to the section 1291 fund stock, and, as of the last day of the shareholder's taxable year, either the value of all PFIC stock considered owned by the shareholder is $25,000 (or $50,000 for shareholders that file a joint return) or less, or, if the stock of the section 1291 fund is owned indirectly, the value of the indirectly owned stock is $5,000 or less. Stock in a PFIC that is indirectly owned through another PFIC or United States person that is a shareholder of the PFIC is not taken into account in determining if the $25,000 (or $50,000 for joint returns) threshold is met. § 1.1298-1T(c)(2)(ii).

    A comment generally requested that the reporting exception thresholds in § 1.1298-1T(c)(2)(i) be increased for U.S. individuals living abroad. The apparent concern underlying the comment is the commenter's view that such persons often are not aware of the PFIC provisions. The Treasury Department and the IRS have determined that adopting an exception to the reporting requirements on this basis would adversely affect compliance with, and enforcement of, the PFIC provisions, because such individuals remain subject to tax under section 1291 regardless of the value of their PFIC stock, and a benefit of requiring reporting with respect to a section 1291 fund in a year in which a shareholder is not subject to tax under section 1291 is to enhance the shareholder's awareness of the PFIC requirements with respect to the section 1291 fund. The Treasury Department and the IRS proposed the dollar amounts for the reporting exception thresholds in the 2013 temporary regulations in order to balance administrative burdens with compliance and enforcement concerns. No comments were submitted that recommended a specific higher dollar amount or that provided a basis, consistent with the purposes of the PFIC provisions, for increasing the monetary thresholds. Accordingly, the final regulations do not increase the monetary thresholds for these exceptions.

    A separate comment requested that the reporting exceptions under § 1.1298-1T(c)(2) be expanded to apply when a United States person recognizes an excess distribution under section 1291 in a taxable year with respect to one or more PFICs, to the extent the PFICs are indirectly held through domestic pass-through entities and the total excess distribution income from the PFICs in the taxable year is less than $1,000, indexed for inflation. The comment explained that many United States persons hold indirect interests in section 1291 funds, particularly through partnerships, that generate only small amounts of excess distribution income, and exempting reporting for these PFIC shareholders would simplify PFIC reporting compliance. However, the section 1291 rules apply when a PFIC shareholder receives (or is treated as receiving) an excess distribution, regardless of the dollar amount of the excess distribution. After consideration of this comment, the Treasury Department and the IRS concluded that the request should not be adopted because of the potential for such a reporting exception to reduce compliance with the substantive section 1291 rules.

    C. Manner of Filing Form 8621 1. Filing Form 8621 When a Shareholder Is Not Otherwise Obligated To File a Return

    Section 1.1298-1T(d) generally provides that a United States person required to file Form 8621 under section 1298(f) with respect to a PFIC for a taxable year must attach the form to the person's U.S. income tax return (or information return, if applicable) for the relevant taxable year. The instructions for Form 8621 further provide that a United States person who is required to file Form 8621 for a taxable year in which the person does not file an income tax return (or other return) must send the Form 8621 to the IRS at a mailing addressed designated in the instructions.

    These final regulations clarify how a United States person files a Form 8621 (or successor form) when the United States person is not otherwise required to file a U.S. income tax return (or information return, if applicable). Section 1.1298-1(d) of the final regulations states that a United States person that is not otherwise required to file a U.S. income tax return must file the Form 8621 (or successor form) in accordance with the instructions for the form.

    2. Protective Filing Procedure for Form 8621

    A comment requested that the final regulations allow a “protective” Form 8621 to be filed under section 1298(f) with respect to a foreign corporation when a shareholder is unsure of its PFIC status due to factors beyond the control of the shareholder that prevent access to the books and records of the corporation necessary to make a PFIC determination. The purpose of the protective filing is to defer any potential section 1298(f) filing requirements so that the assessment period for the shareholder's entire return under section 6501(c)(8) would not be suspended if the foreign corporation is subsequently determined to have been a PFIC in the year to which the protective filing relates. The comment proposed that if the foreign corporation subsequently is determined to be a PFIC for a taxable year for which the protective filing was made, the shareholder would be subject to PFIC taxation in that year, and thus would be required to file Form 8621 for that year.

    The failure to file Form 8621 to properly report PFIC information under section 1298(f) for a taxable year suspends the period of limitation on assessment under section 6501(c)(8)(A) with respect to any tax return, event, or period to which the information relates until three years after the information is reported. However, if the failure to file the information is due to reasonable cause and not willful neglect, the period of limitation on assessment under section 6501(c)(8)(B) is suspended only with respect to items related to such failure. The Treasury Department and the IRS have concluded that the reasonable cause exception under section 6501(c)(8)(B) provides appropriate relief for a failure to file Form 8621. When a taxpayer can establish reasonable cause for a failure to file Form 8621, the assessment period is suspended only with respect to items related to the PFIC that were required to be reported on the Form 8621. Thus, the recommendation to add a protective filing rule to the final regulations is not adopted.

    3. Consolidated Filings for Forms 8621

    Two comments requested that the final regulations allow a United States person to file a consolidated Form 8621 that would include all of the person's PFICs and relevant information on a supporting schedule attached to the Form 8621. One of the comments explained that foreign investment partnerships commonly hold multiple PFIC investments, and, in such cases, a United States person who is a partner in the foreign partnership is required to file multiple Forms 8621 to report each underlying PFIC. This comment further noted that at least two commonly used commercial tax return preparation products, as of 2012, did not allow for electronic filing of a Form 1040 containing more than five Forms 8621, which is contrary to the IRS's goal of increasing e-filings of tax returns.

    The Treasury Department and the IRS have concluded that the expenditures needed to redesign and reprogram the IRS's processing system to gather, compile, and cross-reference information from a consolidated Form 8621 outweigh the marginal administrative burden for United States persons to file a separate Form 8621 with respect to each of their PFICs. Accordingly, the final regulations do not adopt the comment to permit consolidated filings.

    D. Form 5471 Filing Obligations

    The final regulations adopt the 2013 temporary regulations with respect to the removal of the requirement under sections 6038 and 6046 that certain United States persons file a statement in circumstances where the United States person qualifies for the constructive ownership exception, with certain clarifying changes to the language of the regulations.

    Effect on Other Documents

    Notice 2014-28, 2014-18 I.R.B. 990, is obsolete as of December 28, 2016.

    Notice 2014-51, 2014-40 I.R.B. 594, is obsolete as of December 28, 2016.

    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 assessment is not required. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

    It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is based on the fact that most small entities do not own an interest in a PFIC. Moreover, those small entities that are shareholders of a PFIC generally either make a qualified electing fund election under section 1295 or make a mark to market election under section 1296 and were therefore required to file Form 8621 with respect to the PFIC stock under the rules that preceded the 2013 temporary regulations. Thus, there is a limited class of small entities that are PFIC shareholders that were required to file Forms 8621 under the 2013 temporary regulations and that were not required to do so prior to the issuance of those regulations. The final regulations, as compared to the 2013 temporary regulations, provide additional exceptions that exempt certain PFIC shareholders, some of which could include certain small entities, from filing Form 8621. Accordingly, the collection of information required by these final regulations does not affect a substantial number of small entities.

    Further, the collection of information required under these final regulations will not have a significant economic impact on a substantial number of small entities because neither the time nor the costs necessary for shareholders to comply with the collection of information requirements is significant. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act is not required.

    Drafting Information

    The principal author of these regulations is Stephen M. Peng of the 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.

    Adoption of 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 entries for §§ 1.1291-1, 1.1291-9, and 1.1298-1, § 1.1298-1, and § 1.6046-1 in numerical order and revising the entry for § 1.6038-2 to read in part as follows: Authority:

    26 U.S.C. 7805 * * *

    Sections 1.1291-1, 1.1291-9, and 1.1298-1 also issued under 26 U.S.C. 1298(a) and (g).

    Section 1.1298-1 also issued under 26 U.S.C. 1298(f).

    Section 1.6038-2 also issued under 26 U.S.C. 6038(d).

    Section 1.6046-1 also issued 26 U.S.C. 6046(b).

    Par. 2. Section 1.1291-0 is amended by: 1. Revising the heading and entries for § 1.1291-1. 2. Revising the entry for § 1.1291-9(k).

    The revisions read as follows:

    § 1.1291-0 Treatment of shareholders of certain passive foreign investment companies; table of contents. § 1.1291-1 Taxation of U.S. persons that are shareholders of section 1291 funds.

    (a) through (b)(2)(i) [Reserved]

    (ii) Pedigreed QEF.

    (b)(2)(iii) and (iv) [Reserved]

    (v) Section 1291 fund.

    (3) through (6) [Reserved]

    (7) Shareholder.

    (8) Indirect shareholder.

    (i) In general.

    (ii) Ownership through a corporation.

    (A) Ownership through a non-PFIC foreign corporation.

    (B) Ownership through a PFIC.

    (C) Ownership through a domestic corporation.

    (iii) Ownership through pass-through entities.

    (A) Partnerships.

    (B) S Corporations.

    (C) Estates and nongrantor trusts.

    (D) Grantor trusts.

    (iv) Examples.

    (c) Coordination with other PFIC rules.

    (1) and (2) [Reserved]

    (3) Coordination with section 1296: Distributions and dispositions.

    (4) Coordination with mark to market rules under chapter 1 of the Internal Revenue Code other than section 1296.

    (i) In general.

    (ii) Coordination rule.

    (d) [Reserved]

    (e) Exempt organization as shareholder.

    (1) In general.

    (2) Ownership through certain tax-exempt organizations and accounts.

    (f) through (i) [Reserved]

    (j) Applicability dates.

    § 1.1291-9 Deemed dividend election.

    (k) Effective/applicability dates.

    § 1.1291-0T [Removed]
    Par. 3. Section 1.1291-0T is removed. Par. 4. Section 1.1291-1 is amended by: 1. Revising the section heading. 2. Adding paragraphs (b)(2)(ii) and (v), (b)(7), and (b)(8). 3. Revising paragraphs (e)(2) and (j).

    The revisions and additions read as follows:

    § 1.1291-1 Taxation of U.S. persons that are shareholders of section 1291 funds.

    (b) * * *

    (2) * * *

    (ii) Pedigreed QEF. A PFIC is a pedigreed QEF with respect to a shareholder if the PFIC has been a QEF with respect to the shareholder for all taxable years during which the corporation was a PFIC that are included wholly or partly in the shareholder's holding period of the PFIC stock.

    (v) Section 1291 fund. A PFIC is a section 1291 fund with respect to a shareholder unless the PFIC is a pedigreed QEF with respect to the shareholder or a section 1296 election is in effect with respect to the shareholder.

    (7) Shareholder. A shareholder is a United States person that directly owns stock of a PFIC (a direct shareholder), or that is an indirect shareholder (as defined in section 1298(a) and paragraph (b)(8) of this section), except as provided in paragraph (e) of this section. For purposes of sections 1291 and 1298, a domestic partnership or S corporation (as defined in section 1361(a)(1)) is not treated as a shareholder of a PFIC except for purposes of any information reporting requirements, including the requirement to file an annual report under section 1298(f). In addition, to the extent that a person is treated under sections 671 through 678 as the owner of a portion of a domestic trust, the trust is not treated as a shareholder of a PFIC with respect to PFIC stock held by that portion of the trust, except for purposes of the information reporting requirements of § 1.1298-1(b)(3)(i) (imposing an information reporting requirement on domestic liquidating trusts and fixed investment trusts).

    (8) Indirect shareholder—(i) In general. An indirect shareholder of a PFIC is a United States person that indirectly owns stock of a PFIC. A person indirectly owns stock when it is treated as owning stock of a corporation owned by another person, including another United States person, under this paragraph (b)(8). In applying this paragraph (b)(8), the determination of a person's indirect ownership is made on the basis of all the facts and circumstances in each case; the substance rather than the form of ownership is controlling, taking into account the purposes of sections 1291 through 1298.

    (ii) Ownership through a corporation—(A) Ownership through a non-PFIC foreign corporation. A person that directly or indirectly owns 50 percent or more in value of the stock of a foreign corporation that is not a PFIC is considered to own a proportionate amount (by value) of any stock owned directly or indirectly by the foreign corporation.

    (B) Ownership through a PFIC. A person that directly or indirectly owns stock of a PFIC is considered to own a proportionate amount (by value) of any stock owned directly or indirectly by the PFIC. Section 1297(d) does not apply in determining whether a corporation is a PFIC for purposes of this paragraph (b)(8)(ii)(B).

    (C) Ownership through a domestic corporation—(1) In general. Solely for purposes of determining whether a person satisfies the ownership threshold described in paragraph (b)(8)(ii)(A) of this section, a person that directly or indirectly owns 50 percent or more in value of the stock of a domestic corporation is considered to own a proportionate amount (by value) of any stock owned directly or indirectly by the domestic corporation.

    (2) Non-duplication. Paragraph (b)(8)(ii)(C)(1) of this section does not apply to treat a United States person as owning (other than for purposes of applying the ownership threshold in paragraph (b)(8)(ii)(A) of this section) stock of a PFIC that is directly owned or considered owned indirectly within the meaning of this paragraph (b)(8) by another United States person (determined without regard to paragraph (b)(8)(ii)(C)(1)). See Example 1 of paragraph (b)(8)(iv) of this section.

    (3) S corporations. The 50 percent limitation in paragraph (b)(8)(ii)(C)(1) of this section does not apply with respect to stock owned directly or indirectly by an S corporation. See paragraph (b)(8)(iii)(B) of this section for rules regarding stock owned directly or indirectly by an S corporation.

    (iii) Ownership through pass-through entities—(A) Partnerships. If a foreign or domestic partnership directly or indirectly owns stock, the partners of the partnership are considered to own such stock proportionately in accordance with their ownership interests in the partnership.

    (B) S Corporations. If an S corporation directly or indirectly owns stock, each S corporation shareholder is considered to own such stock proportionately in accordance with the shareholder's ownership interest in the S corporation.

    (C) Estates and nongrantor trusts. If a foreign or domestic estate or nongrantor trust (other than an employees' trust described in section 401(a) that is exempt from tax under section 501(a)) directly or indirectly owns stock, each beneficiary of the estate or trust is considered to own a proportionate amount of such stock. For purposes of this paragraph (b)(8)(iii)(C), a nongrantor trust is any trust or portion of a trust that is not treated as owned by one or more persons under sections 671 through 679.

    (D) Grantor trusts. If a foreign or domestic trust directly or indirectly owns stock, a person that is treated under sections 671 through 679 as the owner of any portion of the trust that holds an interest in the stock is considered to own the interest in the stock held by that portion of the trust.

    (iv) Examples. The rules of this paragraph (b)(8) are illustrated by the following examples:

    Example 1.

    A is a United States person who owns 49 percent of the stock of FC1, a foreign corporation that is not a PFIC, and separately all the stock of DC, a domestic corporation that is not an S corporation. DC, in turn, owns the remaining 51 percent of the stock of FC1, and FC1 owns 100 shares of stock in a PFIC that is not a controlled foreign corporation (CFC) within the meaning of section 957(a). DC is an indirect shareholder with respect to 51 percent of the PFIC stock held by FC1 under paragraph (b)(8)(ii)(A) of this section. In determining whether A owns 50 percent or more of the value of FC1 for purposes of applying paragraph (b)(8)(ii)(A) of this section, A is considered under paragraph (b)(8)(ii)(C)(1) of this section as indirectly owning all the stock of FC1 that DC directly owns. However, because 51 shares of the PFIC stock held by FC1 are indirectly owned by DC under paragraph (b)(8)(ii)(A) of this section, pursuant to the limitation imposed by paragraph (b)(8)(ii)(C)(2) of this section, only the remaining 49 shares of the PFIC stock are considered as indirectly owned by A under paragraph (b)(8) of this section.

    (e) * * *

    (2) Ownership through certain tax-exempt organizations and accounts. To the extent a United States person owns stock of a PFIC through an organization or account described in § 1.1298-1(c)(1), that person is not treated as a shareholder with respect to the PFIC stock.

    (j) Applicability dates. (1) Paragraphs (c)(3) and (4) of this section apply for taxable years beginning on or after May 3, 2004.

    (2) Paragraph (e)(1) of this section is applicable on and after April 1, 1992.

    (3) Paragraphs (b)(2)(ii), (b)(2)(v), (b)(7), (b)(8), and (e)(2) of this section apply to taxable years of shareholders ending on or after December 31, 2013.

    § 1.1291-1T [Removed]
    Par. 5. Section 1.1291-1T is removed. Par. 6. Section 1.1291-9 is amended by revising paragraphs (j)(3) and (k)(3) to read as follows:
    § 1.1291-9 Deemed dividend election.

    (j) * * *

    (3) A shareholder is a United States person that is a shareholder as defined in § 1.1291-1(b)(7) or an indirect shareholder as defined in § 1.1291-1(b)(8), except as provided in § 1.1291-1(e).

    (k) * * *

    (3) Paragraph (j)(3) of this section applies to taxable years of shareholders ending on or after December 31, 2013.

    § 1.1291-9T [Removed]
    Par. 7. Section 1.1291-9T is removed. Par. 8. Section 1.1298-0 is amended by: 1. Revising the section heading and introductory text. 2. Adding a heading and entries for § 1.1298-1.

    The revisions and additions read as follows:

    § 1.1298-0 Passive foreign investment company—table of contents.

    This section contains a listing of the paragraph headings for §§ 1.1298-1 and 1.1298-3.

    § 1.1298-1 Section 1298(f) annual reporting requirements for United States persons that are shareholders of a passive foreign investment company.

    (a) Overview.

    (b) Requirement to file.

    (1) General rule.

    (2) Additional requirement to file for certain indirect shareholders.

    (i) General rule.

    (ii) Exception to indirect shareholder reporting for certain QEF inclusions and MTM inclusions.

    (3) Special rules for estates and trusts.

    (i) Domestic liquidating trusts and fixed investment trusts.

    (ii) Beneficiaries of foreign estates and trusts.

    (c) Exceptions.

    (1) Exception if shareholder is a tax-exempt entity.

    (2) Exception if aggregate value of shareholder's PFIC stock is $25,000 or less, or value of shareholder's indirect PFIC stock is $5,000 or less.

    (i) General rule.

    (ii) Determination of the $25,000 threshold in the case of indirect ownership.

    (iii) Application of the $25,000 exception to shareholders who file a joint return.

    (iv) Reliance on periodic account statements.

    (3) Exception for PFIC stock marked to market under a provision other than section 1296.

    (4) Exception for PFIC stock held through certain foreign pension funds.

    (5) Exception for certain shareholders who are dual resident taxpayers.

    (i) General rule.

    (ii) Dual resident taxpayer filing as nonresident alien at end of taxable year.

    (iii) Dual resident taxpayer filing as resident alien at end of taxable year.

    (6) Exception for certain domestic partnerships.

    (7) Exception for certain short-term ownership of PFIC stock.

    (8) Exception for certain bona fide residents of U.S. territories.

    (9) Exception for taxable years ending before December 31, 2013.

    (d) Time and manner for filing.

    (e) Separate annual report for each PFIC.

    (1) General rule.

    (2) Special rule for shareholders who file a joint return.

    (f) Coordination rule.

    (g) Examples.

    (h) Applicability date.

    § 1.1298-0T [Removed]
    Par. 9. Section 1.1298-0T is removed. Par. 10. Section 1.1298-1 is added to read as follows:
    § 1.1298-1 Section 1298(f) annual reporting requirements for United States persons that are shareholders of a passive foreign investment company.

    (a) Overview. This section provides rules regarding the reporting requirements under section 1298(f) applicable to a United States person that is a shareholder (as defined in § 1.1291-1(b)(7)) of a passive foreign investment company (PFIC). Paragraph (b) of this section provides the section 1298(f) annual reporting requirements generally applicable to United States persons. Paragraph (c) of this section sets forth exceptions to reporting for certain shareholders. Paragraph (d) of this section provides rules regarding the time and manner of filing the annual report. Paragraph (e) of this section sets forth the requirement to file a separate annual report with respect to each PFIC. Paragraph (f) of this section coordinates the requirement to file an annual report under section 1298(f) with the requirement to file an annual report under other provisions of the Internal Revenue Code (Code). Paragraph (g) of this section sets forth examples illustrating the application of this section. Paragraph (h) of this section provides effective/applicability dates.

    (b) Requirement to file—(1) General rule. Except as otherwise provided in this section, a United States person that is a shareholder of a PFIC must complete and file Form 8621, “Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund” (or successor form), under section 1298(f) and these regulations for the PFIC if, during the shareholder's taxable year, the shareholder—

    (i) Directly owns stock of the PFIC;

    (ii) Is an indirect shareholder under § 1.1291-1(b)(8) that holds any interest in the PFIC through one or more entities, each of which is foreign; or

    (iii) Is an indirect shareholder under § 1.1291-1(b)(8)(iii)(D) that is treated under sections 671 through 678 as the owner of any portion of a trust described in section 7701(a)(30)(E) that owns, directly or indirectly through one or more entities, each of which is foreign, any interest in the PFIC.

    (2) Additional requirement to file for certain indirect shareholders—(i) General rule. Except as otherwise provided in this section, an indirect shareholder that owns an interest in a PFIC through one or more United States persons also must file Form 8621 (or successor form) with respect to the PFIC under section 1298(f) and these regulations if, during the indirect shareholder's taxable year, the indirect shareholder is—

    (A) Treated as receiving an excess distribution (within the meaning of section 1291(b)) with respect to the PFIC;

    (B) Treated as recognizing gain that is treated as an excess distribution (under section 1291(a)(2)) as a result of a disposition of the PFIC;

    (C) Required to include an amount in income under section 1293(a) with respect to the PFIC (QEF inclusion);

    (D) Required to include or deduct an amount under section 1296(a) with respect to the PFIC (MTM inclusion); or

    (E) Required to report the status of a section 1294 election with respect to the PFIC (see § 1.1294-1T(h)).

    (ii) Exception to indirect shareholder reporting for certain QEF inclusions and MTM inclusions. Except as otherwise provided in this paragraph (b)(2)(ii), the filing requirements under paragraph (b) of this section do not apply with respect to an interest in a PFIC owned by an indirect shareholder described in paragraph (b)(2)(i)(C) or (D) of this section if another shareholder through which the indirect shareholder owns such interest in the PFIC timely files Form 8621 (or successor form) with respect to the PFIC under paragraph (b)(1) or (2) of this section. However, the exception in this paragraph (b)(2)(ii) does not apply with respect to a PFIC owned by an indirect shareholder described in paragraph (b)(2)(i)(C) of this section that owns the PFIC through a domestic partnership or S corporation if the domestic partnership or S corporation does not make a qualified electing fund election with respect to the PFIC (see § 1.1293-1(c)(2)(ii), addressing QEF stock transferred to a pass through entity that does not make a section 1295 election).

    (3) Special rules for estates and trusts—(i) Domestic liquidating trusts and fixed investment trusts. A United States person that is treated under sections 671 through 678 as the owner of any portion of a trust described in section 7701(a)(30)(E) that owns, directly or indirectly, any interest in a PFIC is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to the PFIC if the trust is either a domestic liquidating trust under § 301.7701-4(d) of this chapter created pursuant to a court order issued in a bankruptcy under Chapter 7 (11 U.S.C. 701 et seq.) of the Bankruptcy Code or a confirmed plan under Chapter 11 (11 U.S.C. 1101 et seq.) of the Bankruptcy Code, or a widely held fixed investment trust under § 1.671-5. Such a trust itself is treated as a shareholder for purposes of section 1298(f) and these regulations, and thus, except as otherwise provided in this section, the trust is required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to the PFIC as provided in paragraphs (b)(1) and (2) of this section.

    (ii) Beneficiaries of foreign estates and trusts. A United States person that is considered to own an interest in a PFIC because it is a beneficiary of an estate described in section 7701(a)(31)(A) or a trust described in section 7701(a)(31)(B) that owns, directly or indirectly, stock of a PFIC, and that has not made an election under section 1295 or 1296 with respect to the PFIC, is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to the stock of the PFIC that it is considered to own through the estate or trust if, during the beneficiary's taxable year, the beneficiary is not treated as receiving an excess distribution (within the meaning of section 1291(b)) or as recognizing gain that is treated as an excess distribution (under section 1291(a)(2)) with respect to the stock.

    (c) Exceptions—(1) Exception if shareholder is a tax-exempt entity. A shareholder that is an organization exempt under section 501(a) to the extent that it is described in section 501(c), 501(d), or 401(a), a state college or university described in section 511(a)(2)(B), a plan described in section 403(b) or 457(b), an individual retirement plan or annuity as defined in section 7701(a)(37), or a qualified tuition program described in section 529, a qualified ABLE program described in 529A, or a Coverdell education savings account described in section 530 is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC unless the income derived with respect to the PFIC stock would be taxable to the organization under subchapter F of Subtitle A of the Code.

    (2) Exception if aggregate value of shareholder's PFIC stock is $25,000 or less, or value of shareholder's indirect PFIC stock is $5,000 or less—(i) General rule. A shareholder is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a section 1291 fund (as defined in § 1.1291-1(b)(2)(v)) for a shareholder's taxable year if—

    (A) On the last day of the shareholder's taxable year:

    (1) The value of all PFIC stock owned directly or indirectly under section 1298(a) and § 1.1291-1(b)(8) by the shareholder is $25,000 or less; or

    (2) The section 1291 fund stock is indirectly owned by the shareholder under section 1298(a)(2)(B) and § 1.1291-1(b)(8)(ii)(B), and the value of the section 1291 fund stock indirectly owned by the shareholder is $5,000 or less;

    (B) The shareholder is not treated as receiving an excess distribution (within the meaning of section 1291(b)) with respect to the section 1291 fund during the taxable year or as recognizing gain treated as an excess distribution under section 1291(a)(2) as the result of a disposition of the section 1291 fund during the taxable year; and

    (C) An election under section 1295 has not been made to treat the section 1291 fund as a qualified electing fund with respect to the shareholder.

    (ii) Determination of the $25,000 threshold in the case of indirect ownership. For purposes of determining the value of stock held by a shareholder for purposes of paragraph (c)(2)(i)(A)(1) of this section, the shareholder must take into account the value of all PFIC stock owned directly or indirectly under section 1298(a) and § 1.1291-1(b)(8), except for PFIC stock that is—

    (A) Owned through another United States person that itself is a shareholder of the PFIC (including a domestic partnership or S corporation treated as a shareholder of a PFIC for purposes of information reporting requirements applicable to a shareholder);

    (B) Owned through a PFIC under section 1298(a)(2)(B) and § 1.1291-1(b)(8)(ii)(B); or

    (C) Marked to market for the shareholder's taxable year under any provision of chapter 1 of the Internal Revenue Code other than section 1296, provided the rules of § 1.1296-1(i)(2) and (3) do not apply to the shareholder with respect to the PFIC stock pursuant to § 1.1291-1(c)(4)(ii) for the shareholder's taxable year.

    (iii) Application of the $25,000 exception to shareholders who file a joint return. In the case of a joint return, the exception described in paragraph (c)(2)(i)(A)(1) of this section shall apply if the value of all PFIC stock owned directly or indirectly (as determined under section 1298(a), § 1.1291-1(b)(8), and paragraph (c)(2)(ii) of this section) by both spouses is $50,000 or less, and all of the other applicable requirements of paragraph (c)(2) of this section are met.

    (iv) Reliance on periodic account statements. A shareholder may rely upon periodic account statements provided at least annually to determine the value of a PFIC unless the shareholder has actual knowledge or reason to know based on readily accessible information that the statements do not reflect a reasonable estimate of the PFIC's value.

    (3) Exception for PFIC stock marked to market under a provision other than section 1296. A shareholder is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC for any taxable year in which the PFIC is marked to market under any provision of chapter 1 of the Internal Revenue Code other than section 1296, provided the rules of § 1.1296-1(i)(2) and (3) do not apply to the shareholder with respect to the PFIC pursuant to § 1.1291-1(c)(4)(ii) for the taxable year.

    (4) Exception for PFIC stock held through certain foreign pension funds. A shareholder who is a member or beneficiary of, or participant in, a plan, trust, scheme, or other arrangement that is treated as a foreign pension fund (or equivalent) under an income tax treaty to which the United States is a party and that owns, directly or indirectly, an interest in a PFIC is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to the PFIC interest if, pursuant to the applicable income tax treaty, the income earned by the foreign pension fund may be taxed as the income of the shareholder only when and to the extent the income is paid to, or for the benefit of, the shareholder.

    (5) Exception for certain shareholders who are dual resident taxpayers—(i) General rule. Subject to the provisions of paragraphs (c)(5)(ii) and (iii) of this section, a shareholder is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC for a taxable year, or the portion of a taxable year, in which the shareholder is a dual resident taxpayer (within the meaning of § 301.7701(b)-7(a)(1) of this chapter) who is treated as a nonresident alien of the United States for purposes of computing his or her United States income tax liability pursuant to § 301.7701(b)-7 of this chapter.

    (ii) Dual resident taxpayer filing as a nonresident alien at end of taxable year. If a shareholder to whom this paragraph (c)(5) applies computes his or her U.S. income tax liability as a nonresident alien on the last day of the taxable year and complies with the filing requirements of § 301.7701(b)-7(b) and (c) of this chapter and, in particular, such individual timely files with the Internal Revenue Service Form 1040NR, “U.S. Nonresident Alien Income Tax Return,” or Form 1040NR-EZ, “U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents,” as applicable, and attaches thereto a properly completed Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b),” and the schedule required by § 1.6012-1(b)(2)(ii)(b) (if applicable), such shareholder will not be required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to the taxable year, or the portion of the taxable year, covered by Form 1040NR (or Form 1040NR-EZ).

    (iii) Dual resident taxpayer filing as resident alien at end of taxable year. If a shareholder to whom this paragraph (c)(5) applies computes his or her U.S. income tax liability as a resident alien on the last day of the taxable year and complies with the filing requirements of § 1.6012-1(b)(2)(ii)(a) and, in particular such shareholder timely files with the Internal Revenue Service Form 1040, “U.S. Individual Income Tax Return,” or Form 1040EZ, “Income Tax Return for Single and Joint Filers With No Dependents,” as applicable, and attaches a properly completed Form 8833 to the schedule required by § 1.6012-1(b)(2)(ii)(a), such shareholder will not be required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to the portion of the taxable year reflected on the schedule to such Form 1040 or Form 1040EZ required by § 1.6012-1(b)(2)(ii)(a).

    (6) Exception for certain domestic partnerships. A shareholder that is a domestic partnership is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC directly or indirectly held by the domestic partnership for a taxable year if each person that directly or indirectly owns an interest in the domestic partnership for its taxable year in which or with which the taxable year of the partnership ends is either—

    (i) Not a shareholder of the PFIC as defined by § 1.1291-1(b)(7);

    (ii) A tax-exempt entity or account not required to file Form 8621 with respect to the stock of the PFIC under paragraph (c)(1) of this section;

    (iii) A dual resident taxpayer not required to file Form 8621 with respect to the stock of the PFIC under paragraph (c)(5) of this section; or

    (iv) A domestic partnership not required to file Form 8621 with respect to the stock of the PFIC under this paragraph (c)(6).

    (7) Exception for certain short-term ownership of PFIC stock. A shareholder is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a section 1291 fund (as defined in § 1.1291-1(b)(2)(v)) for a taxable year when the shareholder—

    (i) Acquires the section 1291 fund in the taxable year or the immediately preceding taxable year;

    (ii) Is a shareholder of the section 1291 fund for a total of 30 days or less during the period beginning 29 days before the first day of the shareholder's taxable year and ending 29 days after the close of the shareholder's taxable year; and

    (iii) Is not treated as receiving an excess distribution (within the meaning of section 1291(b)) with respect to the section 1291 fund, including any gain recognized that is treated as an excess distribution under section 1291(a)(2) as a result of the disposition of the section 1291 fund.

    (8) Exception for certain bona fide residents of certain U.S. territories. A shareholder is not required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC for a taxable year when the shareholder—

    (i) Is a bona fide resident (as defined by section 937(a)) of Guam, the Northern Mariana Islands, or the United States Virgin Islands; and

    (ii) Is not required to file an income tax return with the Internal Revenue Service with respect to such taxable year.

    (9) Exception for taxable years ending before December 31, 2013. A United States person is not required under section 1298(f) and these regulations to file an annual report with respect to a PFIC for a taxable year of the United States person ending before December 31, 2013.

    (d) Time and manner for filing. A United States person required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to a PFIC must attach the form to its Federal income tax return (or information return, if applicable) for the taxable year to which the filing obligation relates on or before the due date (including extensions) for the filing of the return, or must separately file the form in accordance with the instructions for the form when the United States person is not required to file a Federal income tax return (or information return, if applicable) for the taxable year. In the case of any failure to report information that is required to be reported pursuant to section 1298(f) and these regulations, the time for assessment of tax will be extended pursuant to section 6501(c)(8).

    (e) Separate annual report for each PFIC—(1) General rule. If a United States person is required under section 1298(f) and these regulations to file Form 8621 (or successor form) with respect to more than one PFIC, the United States person must file a separate Form 8621 (or successor form) for each PFIC.

    (2) Special rule for shareholders who file a joint return. United States persons that file a joint return may file a single Form 8621 (or successor form) with respect to a PFIC in which they jointly or individually own an interest.

    (f) Coordination rule. A United States person that is a shareholder of a PFIC may file a single Form 8621 (or successor form) with respect to the PFIC that contains all of the information required to be reported pursuant to section 1298(f) and these regulations and any other information reporting requirements or election rules under other provisions of the Code.

    (g) Examples. The following examples illustrate the rules of this section:

    Example 1.

    General requirement to file. (i) Facts. In 2013, J, a United States citizen, directly owns an interest in Partnership X, a domestic partnership, which, in turn, owns an interest in A Corp, which is a PFIC. In addition, J directly owns an interest in Partnership Y, a foreign partnership, which, in turn, owns an interest in A Corp. Neither J nor Partnership X has made a qualified electing fund election under section 1295 or a mark to market election under section 1296 with respect to A Corp. As of the last day of 2013, the value of Partnership X's interest in A Corp is $200,000, and the value of J's proportionate share of Partnership Y's interest in A Corp is $100,000. During 2013, J is not treated as receiving an excess distribution or recognizing gain treated as an excess distribution with respect to A Corp. Partnership X timely files a Form 8621 under section 1298(f) and paragraph (b)(1) of this section with respect to A Corp for 2013.

    (ii) Results. J is the first United States person in the chain of ownership with respect to J's interest in A Corp held through Partnership Y. Under paragraph (b)(1) of this section, J must file a Form 8621 under section 1298(f) with respect to J's interest in A Corp held through Partnership Y because J is an indirect shareholder of A Corp under § 1.1291-1(b)(8) that holds PFIC stock through a foreign entity (Partnership Y), and there are no other United States persons in the chain of ownership. The fact that Partnership X filed a Form 8621 with respect to A Corp does not relieve J of the obligation under paragraph (b)(1) of this section to file a Form 8621 with respect to J's interest in A Corp held through Partnership Y. J has no filing obligation under section 1298(f) and paragraph (b)(2) of this section with respect to J's proportionate share of Partnership X's interest in A Corp.

    Example 2.

    Application of the $25,000 exception. (i) Facts. In 2013, J, a United States citizen, directly owns stock of A Corp, B Corp, and C Corp, all of which were PFICs during 2013. As of the last day of 2013, the value of J's interests was $5,000 in A Corp, $10,000 in B Corp, and $4,000 in C Corp. J timely filed an election under section 1295 to treat A Corp as a qualified electing fund for the first year in which A Corp qualified as a PFIC, and a mark-to-market election under section 1296 with respect to the stock of B Corp. J did not make a qualified electing fund election under section 1295 or a mark to market election under section 1296 with respect to C Corp. J did not receive an excess distribution or recognize gain treated as an excess distribution in respect of C Corp during 2013.

    (ii) Results. Under paragraph (b)(1) of this section, J must file separate Forms 8621 with respect to A Corp and B Corp for 2013. However, J is not required to file a Form 8621 with respect to C Corp because J owns, in the aggregate, PFIC stock with a value of less than $25,000 on the last day of J's taxable year, C Corp is not subject to a qualified electing fund election or mark to market election with respect to J, and J did not receive an excess distribution in respect of C Corp or recognize gain treated as an excess distribution in respect of C Corp during 2013. Therefore, J qualifies for the $25,000 exception in paragraph (c)(2) of this section with respect to C Corp.

    Example 3.

    Application of the $25,000 exception to indirect shareholder. (i) Facts. E, a United States citizen, directly owns an interest in Partnership X, a domestic partnership. Partnership X, in turn, directly owns an interest in A Corp and B Corp, both of which are PFICs. Partnership X timely filed an election under section 1295 to treat B Corp as a qualified electing fund for the first year in which B Corp qualified as a PFIC. In addition, E directly owns an interest in C Corp, which is a PFIC. C Corp, in turn, owns an interest in D Corp, which is a PFIC. E has not made a qualified electing fund election under section 1295 or a mark to market election under section 1296 with respect to A Corp, C Corp, or D Corp. As of the last day of 2013, the value of Partnership X's interest in A Corp is $30,000, the value of Partnership X's interest in B Corp is $30,000, the value of E's indirect interest in A Corp is $10,000, the value of E's indirect interest in B Corp is $10,000, the value of E's interest in C Corp is $20,000, and the value of C Corp's interest in D Corp is $10,000. During 2013, E did not receive an excess distribution, or recognize gain treated as an excess distribution, with respect to A Corp, C Corp, or D Corp. Partnership X timely files Forms 8621 under section 1298(f) and paragraph (b)(1) of this section with respect to A Corp and B Corp for 2013.

    (ii) Results. Under paragraph (b) of this section, E does not have to file a Form 8621 under section 1298(f) and these regulations with respect to A Corp because E is not the United States person that is at the lowest tier in the chain of ownership with respect to A Corp and E did not receive an excess distribution or recognize gain treated as an excess distribution with respect to A Corp. Furthermore, under paragraph (b)(2)(ii) of this section, E does not have to file a Form 8621 under section 1298(f) and these regulations with respect to B Corp because Partnership X timely filed a Form 8621 with respect to B Corp. In addition, under paragraph (c)(2)(ii)(A) of this section, E does not take into account the value of A Corp and B Corp, which E owns through Partnership X, in determining whether E qualifies for the $25,000 exception. Further, under paragraph (c)(2)(ii)(B) of this section, E does not take into account the value of D Corp in determining whether E qualifies for the $25,000 exception. Therefore, even though E is the United States person that is at the lowest tier in the chain of ownership with respect to C Corp and D Corp, E does not have to file a Form 8621 with respect to C Corp or D Corp because E qualifies for the $25,000 exception set forth in paragraph (c)(2)(i)(A)(1) of this section.

    Example 4.

    Indirect shareholder's requirement to file. (i) Facts. The facts are the same as in Example 3 of this paragraph (g), except that the value of E's interest in C Corp is $30,000 and the value of E's proportionate share of C Corp's interest in D Corp is $3,000.

    (ii) Results. The results are the same as in Example 3 of this paragraph (g) with respect to E having no requirement to file a Form 8621 under section 1298(f) and these regulations with respect to A Corp and B Corp. However, under the facts in this Example 4, E does not qualify for the $25,000 exception under paragraph (c)(2)(i)(A)(1) of this section with respect to C Corp because the value of E's interest in C Corp is $30,000. Accordingly, E must file a Form 8621 under section 1298(f) and these regulations with respect to C Corp. However, E does qualify for the $5,000 exception under paragraph (c)(2)(i)(A)(2) of this section with respect to D Corp, and thus does not have to file a Form 8621 with respect to D Corp.

    Example 5.

    Application of the domestic partnership exception. (i) Facts. Tax Exempt Entity A and Tax Exempt Entity B are both organizations exempt under section 501(a) because they are described in section 501(c). Tax Exempt Entity A and Tax Exempt Entity B own all the interests in Partnership X, a domestic partnership, which, in turn, owns, an interest in Partnership Y, also a domestic partnership. The remaining interests in Partnership Y are owned by F Corp, a foreign corporation owned solely by individuals that are not residents or citizens of the United States. Partnership Y owns an interest in A Corp, which is a PFIC. Any income derived with respect to A Corp would not be taxable to Tax Exempt Entity A or Tax Exempt Entity B under subchapter F of Subtitle A of the Code. Tax Exempt Entity A, Tax Exempt Entity B, Partnership X, and Partnership Y all are calendar year taxpayers.

    (ii) Results. Under paragraph (c)(1) of this section, Tax Exempt Entity A and Tax Exempt Entity B do not have to file Form 8621 under section 1298(f) and these regulations with respect to A Corp because neither entity would be subject to tax under subchapter F of Subtitle A of the Code with respect to income derived from A Corp. In addition, under paragraph (c)(6) of this section, neither Partnership X nor Partnership Y is required to file Form 8621 under section 1298(f) and these regulations with respect to A Corp because all of the direct and indirect interests in Partnership X and Partnership Y are owned by persons described in paragraph (c)(1) of this section or persons that are not a shareholder of A Corp as defined by § 1.1291-1(b)(7).

    (h) Applicability dates. (1) Except as provided in paragraph (h)(2) of this section, this section applies to taxable years of shareholders ending on or after December 31, 2013.

    (2) Paragraph (c)(9) of this section applies to taxable years of shareholders ending before December 31, 2013.

    § 1.1298-1T [Removed]
    Par. 11. Section 1.1298-1T is removed. Par. 12. Section 1.6038-2 is amended by revising paragraphs (j)(3) and (m) to read as follows:
    § 1.6038-2 Information returns required of United States persons with respect to annual accounting periods of certain foreign corporations beginning after December 31, 1962.

    (j) * * *

    (3) Statement required. Any United States person required to furnish information under this section with his return who does not do so by reason of the provisions of paragraph (j)(1) of this section shall file a statement with his income tax return indicating that such requirement has been (or will be) satisfied and identifying the return with which the information was or will be filed and the place of filing.

    (m) Applicability dates. Except as otherwise provided, this section applies with respect to information for annual accounting periods beginning on or after June 21, 2006. Paragraphs (k)(1) and (5) Examples 3 and 4 of this section apply June 21, 2006. Paragraph (d) of this section applies to taxable years ending after April 9, 2008. Paragraph (j)(3) of this section applies to returns filed on or after December 31, 2013.

    § 1.6038-2T [Removed]
    Par. 13. Section 1.6038-2T is removed. Par. 14. Section 1.6046-1 is amended by revising paragraph (e)(5) and adding paragraph (l)(3) to read as follows:
    § 1.6046-1 Returns as to organizations or reorganizations of foreign corporations and as to acquisitions of their stock.

    (e) * * *

    (5) Persons excepted from furnishing items of information. Any person required to furnish any item of information under paragraph (b) or (c) of this section with respect to a foreign corporation may, if such item of information is furnished by another person having an equal or greater stock interest (measured in terms of either the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation) in such foreign corporation, satisfy such requirement by filing a statement with his return on Form 5471 indicating that such requirement has been satisfied and identifying the return in which such item of information was included. This paragraph (e)(5) does not apply to persons excepted from filing a return by reason of the provisions of paragraph (e)(4) of this section.

    (l) * * *

    (3) Paragraph (e)(5) of this section applies to returns filed on or after December 31, 2013. See paragraph (e)(5) of § 1.6046-1, as contained in 26 CFR part 1 revised as of April 1, 2012, for returns filed before December 31, 2013.

    § 1.6046-1T [Removed]
    Par. 15. Section 1.6046-1T is removed. John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: December 13, 2016. Mark D. Mazur, Assistant Secretary of the Treasury (Tax Policy).
    [FR Doc. 2016-30712 Filed 12-27-16; 8:45 am] BILLING CODE 4830-01-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9792] RIN 1545-BJ48 United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in the Active Conduct of a Trade or Business; Correction AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Final regulations; correction.

    SUMMARY:

    This document contains corrections to the final regulations (TD 9792) that were published in the Federal Register on Thursday, November 3, 2016 (81 FR 76497). The final regulations provide rules regarding the treatment as United States property of property held by a controlled foreign corporation (CFC) in connection with certain transactions involving partnerships.

    DATES:

    This correction is effective December 28, 2016 and is applicable on or after November 3, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Rose E. Jenkins, at (202) 317-6934 (not a toll-free number).

    SUPPLEMENTARY INFORMATION: Background

    The final regulations (TD 9792) that are the subject of this correction are under sections 954 and 956 of the Internal Revenue Code.

    Need for Correction

    As published, the final regulations (TD 9792) contain errors that may prove to be misleading and are in need of clarification.

    Correction of Publication

    Accordingly, the final regulations (TD 9792), that are the subject of FR Doc. 2016-26425, are corrected as follows:

    1. On page 76499, third column, in the preamble, the eighth line from the bottom of the last paragraph, the language “generally is consistent with § 1.956-” is corrected to read “generally is consistent with existing § 1.956-”.

    2. On page 76500, first column, in the preamble, the fourth line from the top of the page, the language “that is not included in the final or” is corrected to read “that is not included in the existing final or”.

    3. On page 76500, first column, in the preamble, the seventh line in the first full paragraph, the language “§ 1.956-2(a)(3) nor proposed § 1.956-” is corrected to read “existing § 1.956-2(a)(3) nor proposed § 1.956-”.

    4. On page 76500, first column, in the preamble, the eighth line in the first full paragraph, the language “4(b) include the limitation. A comment” is corrected to read “4(b) includes the limitation. A comment”.

    5. On page 76500, third column, in the preamble, the eleventh line from the top of the first full paragraph, the language is corrected to read “book-up”.

    6. On page 76501, first column, in the preamble, the eighth line of the first full paragraph, the language is corrected to read “§ 1.956-4(b)(2)(ii)”.

    Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration).
    [FR Doc. 2016-31364 Filed 12-27-16; 8:45 am] BILLING CODE 4830-01-P
    DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9792] RIN 1545-BJ48 United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in the Active Conduct of a Trade or Business; Correction AGENCY:

    Internal Revenue Service (IRS), Treasury.

    ACTION:

    Correcting amendment.

    SUMMARY:

    This document contains corrections to the final regulations (TD 9792) that were published in the Federal Register on Thursday, November 3, 2016 (81 FR 76497). The final regulations provide rules regarding the treatment as United States property of property held by a controlled foreign corporation (CFC) in connection with certain transactions involving partnerships.

    DATES:

    This correction is effective December 28, 2016 and is applicable on or after November 3, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Rose E. Jenkins, at (202) 317-6934 (not a toll-free number).

    SUPPLEMENTARY INFORMATION: Background

    The final regulations (TD 9792) that are the subject of these corrections are under sections 954 and 956 of the Internal Revenue Code.

    Need for Correction

    As published, the final regulations (TD 9792) contain errors that may prove to be misleading and are in need of clarification.

    List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

    Amendments to the Regulations

    Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

    PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by deleting the entry for § 1.956-3T to read in part as follows: Authority:

    26 U.S.C. 7805 * * *

    § 1.954-2 [Amended]
    Par. 2. Section 1.954-2 is amended by removing paragraph (j). Par. 3. Section 1.956-1T is amended by revising the section heading and the paragraph headings for paragraphs (a)(5) and (f) to read as follows:
    § 1.956-1T Shareholder's pro rata share of the average of the amounts of United States property held by a controlled foreign corporation (temporary).

    (a) * * *

    (5) Exclusion for certain recourse obligations. * * *

    (f) Effective/applicability date. * * *

    Par. 4. Section 1.956-4 is amended by revising paragraphs (b)(2)(ii), (b)(3) introductory text, and (c)(3)(i) introductory text, and in paragraph (c)(4), Example 3, by removing “U.S.C.” each place that it appears and adding in its place, “USP2”.

    The revisions read as follows:

    § 1.956-4 Certain rules applicable to partnerships.

    (b) * * *

    (2) * * *

    (ii) Special allocations. For purposes of paragraph (b)(1) of this section, if a partnership agreement provides for the allocation of book income (or, where appropriate, book gain) from a subset of the property of the partnership to a partner other than in accordance with the partner's liquidation value percentage in a particular taxable year (a special allocation), then the partner's attributable share of that property is determined solely by reference to the partner's special allocation with respect to the property, provided the special allocation will be respected for federal income tax purposes under section 704(b) and the regulations thereunder and does not have a principal purpose of avoiding the purposes of section 956.

    (3) Examples. The following examples illustrate the rules of this paragraph (b): * * *

    (c) * * *

    (3) * * *

    (i) General rule. For purposes of determining a partner's share of a foreign partnership's obligation under section 956, if the foreign partnership distributes an amount of money or property to a partner that is related to a controlled foreign corporation within the meaning of section 954(d)(3) and whose obligation would be United States property if held (or if treated as held) by the controlled foreign corporation, and the foreign partnership would not have made the distribution but for a funding of the partnership through an obligation held (or treated as held) by the controlled foreign corporation, notwithstanding § 1.956-1(e), the partner's share of the partnership obligation is the greater of—

    Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).
    [FR Doc. 2016-31411 Filed 12-27-16; 8:45 am] BILLING CODE 4830-01-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R09-OAR-2016-0444; FRL-9955-94-Region 9] Approval of California Air Plan Revisions, South Coast Air Quality Management District AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is taking final action to approve revisions to the South Coast Air Quality Management District (SCAQMD) portion of the California State Implementation Plan (SIP). These revisions concern emissions of oxides of nitrogen (NOX) from ovens, dryers, dehydrators, heaters, kilns, calciners, furnaces, crematories, incinerators, heated pots, cookers, roasters, smokers, fryers, closed and open heated tanks and evaporators, distillation units, afterburners, degassing units, vapor incinerators, catalytic or thermal oxidizers, soil and water remediation units, and other combustion equipment. We are finalizing our approval of local rules that regulate these emission sources under the Clean Air Act (CAA or the Act).

    DATES:

    These rules will be effective on January 27, 2017.

    ADDRESSES:

    The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2016-0444. All documents in the docket are listed on 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 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:

    Nicole Law, EPA Region IX, (415) 947-4126, [email protected].

    SUPPLEMENTARY INFORMATION:

    Throughout this document, “we,” “us” and “our” refer to the EPA.

    Table of Contents I. Proposed Action II. Public Comments and EPA Responses III. EPA Action IV. Incorporation by Reference V. Statutory and Executive Order Reviews I. Proposed Action

    On September 16, 2016, the EPA proposed to approve the following rules into the California SIP. 81 FR 63732.

    Local agency Rule No. Rule title Adopted/amended/
  • revised
  • Submitted
    SCAQMD 1147 NOx Reductions from Miscellaneous Sources 09/09/2011 02/06/2013 SCAQMD 1153.1 Emissions of Oxides of Nitrogen from Commercial Food Ovens 09/07/2014 04/07/2015

    We proposed to approve these rules because we determined that they complied with the relevant CAA requirements. Our proposed action contains more information on the rules and our evaluation.

    II. Public Comments and EPA Responses

    The EPA's proposed action provided a 30-day public comment period. During this period, we received one comment regarding EPA's proposed approval of Rule 1153.1 that was submitted anonymously.

    Comment: The comment generally supports EPA's proposal to approve Rule 1153.1. The commenter acknowledges Rule 1153.1 was designed to address delays in emission reduction technology development. However, the comment letter expressed a concern regarding the exemption for units with daily NOX emissions of 1 pound per day or less. The commenter states, “burners could be replaced with larger emission burners and it could easily go unknown by the enforcing agency.” Additionally, the commenter makes a recommendation for “a testing schedule that is less strict for the small emission burners compared to the larger ones.”

    Response: The EPA appreciates the comment letter's general support of our approval of Rule 1153.1. The exemption discussed in the comment is found in section (g)(2) of Rule 1153.1. Sections (g)(2)(A)-(g)(2)(E) of Rule 1153.1 describe the documentation required of units with daily NOX emissions of 1 pound per day or less. These requirements ensure the exempted units are rated at a heat input capacity of less than 325,000 BTU per hour, comply with a permit condition limiting NOX emissions to 1 pound per day or less, and keep daily records of unit operation and fuel gas consumption. Because of these requirements, we disagree that the enforcing agency would not know about these units. The rule exempts these units from requirements to comply with the limits for larger units and testing requirements associated with those units. The testing required is used to confirm compliance with the limits in Table 1 of the rule. If the commenter's recommendation for a less strict testing schedule were implemented for the smaller units, it is unclear what would be tested, since the exempted units do not have emissions limits in the rule to comply with. As noted above, the comment letter generally supports our approval of Rule 1153.1 and does not request or recommend any specific changes to our proposed action. The comment letter recognizes that Rule 1153.1 will decrease NOX emissions. For these reasons, the EPA is finalizing its proposed approval of Rule 1153.1 without change based on the comment.

    III. EPA Action

    No comments were submitted that change our assessment of the rules as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, the EPA is fully approving these rules into the California SIP.

    IV. Incorporation by Reference

    In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the SCAQMD rules described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents available through www.regulations.gov and at the EPA Region IX Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information).

    V. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. 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 Clean Air Act; and

    • does not provide the 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 the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

    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. The 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 Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 27, 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, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements.

    Dated: November 21, 2016. Alexis Strauss, Acting Regional Administrator, Region IX.

    Part 52, Chapter I, Title 40 of the Code of Federal Regulations 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 F—California 2. Section 52.220 is amended by adding paragraphs (c)(379)(i)(A)(7), (c)(428)(i)(D)(2), and (c)(461)(i)(C)(3) to read as follows:
    § 52.220 Identification of plan—in part.

    (c) * * *

    (379) * * *

    (i) * * *

    (A) * * *

    (7) Previously approved on August 4, 2010 in paragraph (c)(379)(i)(A)(4) of this section and now deleted with replacement in paragraph (c)(428)(i)(D)(2), Rule 1147, “NOX Reductions from Miscellaneous Sources,” adopted on December 5, 2008.

    (428) * * *

    (i) * * *

    (D) * * *

    (2) Rule 1147, “NOX Reductions from Miscellaneous Sources,” amended on September 9, 2011.

    (461) * * *

    (i) * * *

    (C) * * *

    (3) Rule 1153.1, “Emissions of Oxides of Nitrogen from Commercial Food Ovens,” adopted on November 7, 2014.

    [FR Doc. 2016-31226 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R09-OAR-2016-0393; FRL-9955-62-Region 9] Approval of California Air Plan Revisions, Great Basin Unified Air Pollution Control District AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is taking final action to approve a revision to the Great Basin Unified Air Pollution Control District (GBUAPCD) portion of the California State Implementation Plan (SIP). This revision concerns emissions of particulate matter at Owens Lake, CA. We are approving a local rule that regulates these emissions under the Clean Air Act (CAA or the Act).

    DATES:

    This rule will be effective on January 27, 2017.

    ADDRESSES:

    The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2016-0393. All documents in the docket are listed on the http://www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., CBI 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 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:

    Christine Vineyard, EPA Region IX, (415) 947-4125, [email protected]

    SUPPLEMENTARY INFORMATION:

    Throughout this document, “we,” “us” and “our” refer to the EPA.

    Table of Contents I. Proposed Action II. Public Comments and EPA Responses III. EPA Action IV. Incorporation by Reference V. Statutory and Executive Order Reviews I. Proposed Action

    On September 13, 2016 (81 FR 62849), the EPA proposed to approve the following rule into the California SIP.

    Local agency Rule No. Rule title Adopted Submitted GBUAPCD 433 Control of Particulate Emissions at Owens Lake 04/13/16 06/09/16

    We proposed to approve this rule because we determined that it complied with the relevant CAA requirements. Our proposed action contains more information on the rule and our evaluation.

    II. Public Comments and EPA Responses

    The EPA's proposed action provided a 30-day public comment period. During this period, we received one comment that was submitted anonymously.

    Comment: The comment begins, “I don't see why this would not be approved right away,” and generally supports the EPA's proposal to approve Rule 433. The comment also includes general statements and questions such as “the fact that `Indian' is still the term being used in this proposed rule is troublesome,” “it would be nice to see them go above and beyond the EPA's suggested guidelines,” “what does this mean for the Indigenous land,” “who is in charge of regulation,” “how will this alter the particle [sic] matters given off by this lakebed,” “what happened to cause this lakebed to behave in such a way . . . shouldn't that be looked into instead of altering the way nature is now,” and “instead of being a reactive society we should be more proactive and investigate into `unintended consequences' more so than we do now.”

    Response: The comment generally supports EPA's proposed approval of Rule 433. The comment does not provide specific information related to the basis for EPA's proposed approval and does not request any changes to our proposed action. In addition, most of the statements and questions in the comment are not relevant to EPA's action approving Rule 433 or are outside of the scope of this action. For those reasons, the EPA is finalizing its proposed approval of Rule 433 without change based on the comment.

    III. EPA Action

    No comments were submitted that change our assessment of the rule as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, the EPA is fully approving this rule into the California SIP.

    IV. Incorporation by Reference

    In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the GBUAPCD rule described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents available through www.regulations.gov and at the EPA Region IX Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information).

    V. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. 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 (Public Law 104-4);

    • does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

    • is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

    • is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

    • is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

    • does not provide the 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 the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

    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. The 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 Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 27, 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, Incorporation by reference, Intergovernmental relations, Particulate matter, Reporting and recordkeeping requirements.

    Dated: November 10, 2016. Alexis Strauss, Acting Regional Administrator, Region IX.

    Part 52, Chapter I, Title 40 of the Code of Federal Regulations 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 F—California 2. Section 52.220 is amended by adding paragraph (c)(483) to read as follows:
    § 52.220 Identification of plan—in part.

    (c) * * *

    (483) A new regulation was submitted on June 9, 2016 by the Governor's Designee.

    (i) Incorporation by Reference.

    (A) Great Basin Unified Air Pollution Control District.

    (1) Rule 433, “Control of Particulate Emissions at Owens Lake,” adopted on April 13, 2016.

    [FR Doc. 2016-31225 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R05-OAR-2016-0502; FRL-9955-89-Region 5] Air Plan Approval; Illinois; Volatile Organic Compounds Definition AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Direct final rule.

    SUMMARY:

    Under the Clean Air Act (CAA), the Environmental Protection Agency (EPA) is approving a state submission as a revision to the Illinois State Implementation Plan (SIP). The revision amends the Illinois Administrative Code (IAC) by updating the definition of volatile organic material (VOM), otherwise known as volatile organic compounds (VOC), to exclude 2-amino-2-methyl-1-propanol (AMP). This revision is in response to an EPA rulemaking in 2014 which exempted this compound from the Federal definition of VOC on the basis that the compound makes a negligible contribution to tropospheric ozone formation.

    DATES:

    This direct final rule will be effective February 27, 2017, unless EPA receives adverse comments by January 27, 2017. If adverse comments are received, EPA will publish a timely withdrawal of the direct final rule in the Federal Register informing the public that the rule will not take effect.

    ADDRESSES:

    Submit your comments, identified by Docket ID No. EPA-R05-OAR-2016-0502 at http://www.regulations.gov or via email to [email protected] For comments submitted at Regulations.gov, follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. For either manner of submission, EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. EPA will generally not consider comments or comment contents located outside of the primary submission (i.e. on the web, cloud, or other file sharing system). For additional submission methods, please contact the person identified in the FOR FURTHER INFORMATION CONTACT section. For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

    FOR FURTHER INFORMATION CONTACT:

    Michelle Becker, Life Scientist, Attainment Planning and Maintenance Section, Air Programs Branch (AR-18J), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604, (312) 886-3901, [email protected]

    SUPPLEMENTARY INFORMATION:

    Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

    I. What is the background for this action? II. What is EPA's analysis of the SIP Revision? III. What action is EPA taking? IV. Incorporation by Reference V. Statutory and Executive Order Reviews I. What is the background for this action?

    The Illinois Environmental Protection Agency (IEPA) submitted a revision to the Illinois SIP to EPA for approval on August 9, 2016. The SIP revision excludes the chemical compound 2-amino-2-methyl-1-propanol (AMP) from the definition of VOM or VOC at 35 IAC Part 211, Subpart B, Section 211.7150(a).

    The Illinois Pollution Control Board (IPCB) held a public hearing on the proposed SIP revision on January 8, 2015. There were no public comments received at the public hearing. IPCB received one comment from the American Coatings Association in a letter dated December 16, 2014, supporting the exemption of AMP from the Illinois regulated VOCs. IPCB adopted the amendment to 35 IAC 211.7150(a) on March 5, 2015. IPCB also adopted minor administrative changes such as alphabetizing compound names, adding a subpart heading previously omitted, and replacing the word “above” with “of this Section” in 35 IAC 211.7150(d) for ease of cross-referencing within a section of the regulations.

    II. What is EPA's analysis of the SIP Revision?

    In 2012, EPA received a petition requesting that AMP be exempted from VOC control based on its low reactivity to ethane. On March 27, 2014 (79 FR 17037), EPA responded to the petition by amending 40 CFR 51.100(s)(1) to exclude this chemical compound from the definition of VOC for purposes of preparing SIPs to attain the national ambient air quality standard for ozone under title I of the CAA (78 FR 9823). Based on the mass maximum incremental reactivity value for the compound being equal to or less than that of ethane, EPA concluded that this compound makes negligible contributions to tropospheric ozone formation. (79 FR 17037). Additionally, EPA considered risks not related to tropospheric ozone associated with currently allowed uses of the chemical to be acceptable. EPA's action became effective on June 25, 2014. IEPA's SIP revision is consistent with EPA's action amending the definition of VOC at 40 CFR 51.100(s).

    III. What action is EPA taking?

    EPA is approving into the Illinois SIP revisions to 35 IAC 211 contained in the August 9, 2016, submittal. We are publishing this action without prior proposal because we view this as a noncontroversial amendment and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the state plan if relevant adverse written comments are filed. This rule will be effective February 27, 2017 without further notice unless we receive relevant adverse written comments by January 27, 2017. If we receive such comments, we will withdraw this action before the effective date by publishing a subsequent document that will withdraw the final action. All public comments received will then be addressed in a subsequent final rule based on the proposed action. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. If we do not receive any comments, this action will be effective February 27, 2017.

    IV. 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 the Illinois Regulations described in the amendments to 40 CFR part 52 set forth below. EPA has made, and will continue to make, these documents generally available through www.regulations.gov, and/or at the National Archives and Records Administration (NARA), and/or at the EPA Region 5 Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information). For information on the availability of this material at NARA, go to: www.archives.gov/federal-register/cfr/ibr-locations.html.

    V. Statutory and Executive Order Reviews

    Under the CAA, 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 (Public Law 104-4);

    • Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

    • Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

    • Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

    • Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

    • Does not provide EPA with the discretionary authority to address, 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, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

    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 27, 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. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of today's Federal Register, rather than file an immediate petition for judicial review of this direct final rule, so that EPA can withdraw this direct final rule and address the comment in the proposed rulemaking. 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, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.

    Dated: November 18, 2016. Robert A. Kaplan, Acting Regional Administrator, Region 5.

    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.

    2. Section 52.720 is amended by adding paragraph (c)(209) to read as follows:
    § 52.720 Identification of plan.

    (c) * * *

    (209) On August 9, 2016, the state submitted a proposed revision to the Illinois SIP updating the definition of Volatile Organic Material (VOM) or Volatile Organic Compound (VOC) to exclude the chemical compound 2-amino-2-methyl-1-propanol (AMP), along with minor administrative revisions.

    (i) Incorporation by reference. Illinois Administrative Code, Title 35: Environmental Protection, Subtitle B: Air Pollution, Chapter I: Pollution Control Board, Subchapter c: Emissions Standards and Limitations for Station Sources, Part 211: Definitions and General Provisions, Subpart B: Definitions, Section 211.7150 Volatile Organic Material (VOM) or Volatile Organic Compounds (VOC), effective March 24, 2015.

    [FR Doc. 2016-31227 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R06-OAR-2014-0513; FRL-9956-45-Region 6] Approval and Promulgation of Implementation Plans; Louisiana; State Boards AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Direct final rule.

    SUMMARY:

    Pursuant to the Federal Clean Air Act (CAA or Act), the Environmental Protection Agency (EPA) is approving revisions to the Louisiana State Implementation Plan (SIP) that address requirements in CAA Section 128 regarding State Board composition and Conflict of Interest and Disclosure requirements.

    DATES:

    This rule is effective on February 27, 2017 without further notice, unless the EPA receives relevant adverse comment by January 27, 2017. If the EPA receives such comment, the EPA will publish a timely withdrawal in the Federal Register informing the public that this rule will not take effect.

    ADDRESSES:

    Submit your comments, identified by Docket No. EPA-R06-OAR-2014-0513, at http://www.regulations.gov or via email to [email protected]. Follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. The EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (i.e. on the web, cloud, or other file sharing system). For additional submission methods, please contact Tracie Donaldson, 214-665-6633, [email protected]. For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

    Docket: The index to the docket for this action is available electronically at www.regulations.gov and in hard copy at EPA Region 6, 1445 Ross Avenue, Suite 700, Dallas, Texas. While all documents in the docket are listed in the index, some information may be publicly available only at the hard copy location (e.g., copyrighted material), and some may not be publicly available at either location (e.g., CBI).

    FOR FURTHER INFORMATION CONTACT:

    Tracie Donaldson, 214-665-6633, [email protected]. To inspect the hard copy materials, please schedule an appointment with Tracie Donaldson or Mr. Bill Deese at 214-665-7253.

    SUPPLEMENTARY INFORMATION:

    Throughout this document “we,” “us,” and “our” means the EPA.

    I. Background A. CAA and Section 128: State Boards and Heads of Executive Agency, Conflicts of Interest

    Section 128 of the CAA requires SIPs to comply with the requirements regarding State Boards. Section 110(a)(2)(E)(ii) of the CAA also references these requirements. Section 128(a) of the CAA requires SIPs to contain provisions that: (1) Any board or body which approves permits or enforcement orders under the CAA have at least a majority of its members represent the public interest and not derive any significant portion of their income from persons subject to permits or enforcement orders under the CAA; and (2) any potential conflict of interest by members of such board or body or the head of an executive agency with similar powers be adequately disclosed.

    The requirements of CAA section 128(a)(1) are not applicable to Louisiana because it does not have any board or body which approves air quality permits or enforcement orders. The requirements of CAA section 128(a)(2), however, are applicable to Louisiana because LDEQ's cabinet level Secretary (i.e., the head of an executive agency) makes the referenced decisions. Under Louisiana Revised Statutes at Title 30; Subtitle 2. Environmental Quality; Chapter 2; Department of Environmental Quality, and Chapter 3; Louisiana Air Control Law, the Secretary of the Louisiana Department of Environmental Quality (LDEQ), has the power and duty to, among other things, grant or deny air quality related permits.

    B. Louisiana's Submittal

    On April 30, 1997 Louisiana submitted a SIP revision that contains revisions to the Louisiana Revised Statutes for inclusion into the SIP. The revisions that are necessary for inclusion into the State's SIP address the requirements of CAA section 128 in relation to State Boards/Head of Executive Agency and Conflicts of Interest/Disclosure. The specific Louisiana statutes governing the relevant CAA section 128 requirements are found in Title 42, Chapter 15 Code of Governmental Ethics and Title 30 Minerals, Oil, Gas and Environmental Quality, Subtitle 2, Environmental Quality, as detailed below: The relevant provisions of those Titles in the Louisiana SIP to meet these CAA requirements are the following: Louisiana Revised Statutes at Title 30; Chapter 2 Sections 2014.1(A)-(D): Permit review; Prohibition; Title 42; Chapter 15: Code of Governmental Ethics; Part 1, General Provisions, Section 1102 Definitions, Section 1102(3) “Agency Head;” Section 1102(13) “Immediate Family;” Section 1102(22)(a) “Thing of Economic Value;” Section 1102(19) “Public Servant;” Section 1102(23), “Transaction involving governmental entity;” Section 1112 “Participation in Certain Transaction Involving the Governmental Entity;” Sections 1114(A)(1)-(4) and (C) “Financial disclosure.”

    II. The EPA's Evaluation

    CAA section 128 requires that each state's SIP demonstrate how State Boards or the head of an executive agency who approves CAA permits or enforcement orders disclose any potential conflicts of interest. The LDEQ Secretary is subject to the requirements of the relevant conflict of interest and disclosure provisions as the head of an Executive Agency.

    LDEQ approves all CAA permits and enforcement orders in Louisiana. LDEQ is an executive agency that acts through its Secretary. LDEQ submits that public disclosure of any potential conflict in the SIP as required by CAA sections 128 and 110(a)(2)(E)(ii) pursuant to the requirements that if such person derives anything of economic value that such person should be aware, he/she must disclose specified elements under Title 42; Chapter 15: Code of Governmental Ethics; Section 1114(A)(1)-(4) and (C) “Financial disclosure.” In addition, if the Secretary of LDEQ receives or had received, during the previous two years, a significant portion of income directly or indirectly from a permit applicant, among other specified prohibitions, such individual must be recused from the permit approval process for that permit under Title 30; Chapter 2, Sections 2014.1(A)-(D): Permit review; Prohibition. The SIP revision through submittal of these relevant revised statutes demonstrates that Louisiana complies with the requirements of CAA sections 128 and 110(a)(2)(E)(ii).

    It is necessary to act on the above-cited provisions to meet the requirements of the CAA Section 128 which sets forth requirements for State Boards and Agency Head and Conflicts of Interest/Disclosure. We find that the cited provisions are approvable and meet the requirements of CAA Section 128. This submittal included other Louisiana Revised Statutes that are unnecessary for inclusion into the Louisiana SIP as they do not relate to the CAA 128 and the Conflict of Interest/Disclosure provisions and thus not relevant for inclusion into the SIP.

    We are also approving a ministerial change to remove language from 40 CFR part 52.2270(e) concerning Title 40: Chapter 12, EPA Approved Statutes in the Louisiana SIP. This will correct a citation that was included in the CFR when the format of part 52 was converted and was not previously approved into the SIP.

    III. Final Action

    We are approving revisions to the Louisiana SIP that contain several provisions of the Louisiana Revised Statutes to update the federally approved Louisiana SIP. Those are the following: Louisiana Revised Statutes at Title 30; Chapter 2 Sections 2014.1(A)-(D): Permit review; Prohibition; Title 42; Chapter 15: Code of Governmental Ethics; Part 1, General Provisions, Section 1102 Definitions, Section 1102(3) “Agency Head;” Section 1102(13) “Immediate Family;” Section 1102(22)(a) “Thing of Economic Value;” Section 1102(19) “Public Servant;” Section 1102(23), “Transaction involving governmental entity;” Section 1112 “Participation in Certain Transaction Involving the Governmental Entity;” Sections 1114(A)(1)-(4) and (C) “Financial disclosure.” We are also approving a ministerial change to remove language from 40 CFR part 52.2270(e).

    The EPA is publishing this rule without prior proposal because we view this as a non-controversial amendment and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the SIP revision if relevant adverse comments are received. This rule will be effective on February 27, 2017 without further notice unless we receive relevant adverse comment by January 27, 2017. If we receive relevant adverse comments, we will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect. We will address all public comments in a subsequent final rule based on the proposed rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so now. Please note that if we receive relevant adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, we may adopt as final those provisions of the rule that are not the subject of an adverse comment.

    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. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

    • Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive 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, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

    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. The EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. 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 27, 2017. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule 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).)

    Samuel Coleman was designated the Acting Regional Administrator on December 21, 2016 through the order of succession outlined in Regional Order R6-1110.1, a copy of which is included in the docket for this action.

    List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by reference, Government employees.

    Dated: December 21, 2016. Samuel Coleman, Acting Regional Administrator, Region 6.

    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 T—Louisiana 2. In § 52.970(e), the table titled “EPA Approved Statutes in the Louisiana SIP” is amended by removing the centered heading and the entries for “LA of R.S. of 1950. Title 40, Chapter 12. The Louisiana Air Control Law, Part 1, Louisiana Air Control Commission” and adding centered headings and entries for “Louisiana Revised Statutes (La. R.S. of 1993) Title 30” and “Louisiana Revised Statutes (La. R.S. of 1972) Title 42” at the end of the table.

    The amendments read as follows:

    § 52.970 Identification of plan.

    (e) * * *

    EPA Approved Statutes in the Louisiana SIP State citation Title/subject State
  • approval/
  • effective
  • date
  • EPA approval date Comments
    *         *         *         *         *         *         * Louisiana Revised Statutes (La. R.S. of 1993). Title 30, Minerals, oil, gas and environmental quality, Subtitle II. Environmental Quality, Chapter 2. Department of Environment Quality; Permit Review; Prohibition Title 30: Subtitle II, Permit Review, Ch. 2, Permit Review; Prohibition, Section 2014.1(A) and (B) Permit review; Prohibition 06/10/1993 12/28/2016, [Insert Federal Register citation] Louisiana Revised Statutes (La. R.S. of 1972). Title 42, Public Officers and Employees, Chapter 15 Code of Governmental Ethics Part 1, General Provisions and Part 2 Ethical Standards for Public Servants Title 42 Part 1, General Provisions Definitions 04/01/1980 12/28/2016, [Insert Federal Register citation] 1102(3) Agency Head 04/01/1980 12/28/2016, [Insert Federal Register citation] 1102(13) Immediate Family 04/01/1980 12/28/2016, [Insert Federal Register citation] 1102(19) Public Servant 04/01/1980 12/28/2016, [Insert Federal Register citation] 1102(22)(a) Thing of Economic Value 04/01/1980 12/28/2016, [Insert Federal Register citation] 1102(23) Transaction Involving Government Entity 04/01/1980 12/28/2016, [Insert Federal Register citation] Section 1112 Participation in Certain Transactions Involving the Governmental Entity 04/01/1980 12/28/2016, [Insert Federal Register citation] Title 42 Part 2, Ethical Standards for Public Servants Financial disclosure 04/01/1980 12/28/2016, [Insert Federal Register citation] Section 1114(A)(1-4) Financial Disclosures 04/01/1980 12/28/2016, [Insert Federal Register citation] Section 1114(C) Financial Disclosures 04/01/1980 12/28/2016, [Insert Federal Register citation]
    [FR Doc. 2016-31332 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 147 [EPA-HQ-OW-2015-0372; FRL 9957-48-OW] State of Kentucky Underground Injection Control (UIC) Class II Program; Primacy Approval AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    The Environmental Protection Agency (EPA) is taking this action to approve the Commonwealth of Kentucky's Underground Injection Control (UIC) Class II Program for primacy. EPA determined that the state's program represents an effective program to prevent underground injection activities that endanger underground sources of drinking water (USDWs), as required under section 1425 of the Safe Drinking Water Act (SDWA). EPA's approval allows the state to implement and enforce state regulations for UIC Class II injection wells located within the state. The Commonwealth's authority excludes the regulation of injection well Classes I, III, IV, V and VI and all wells on Indian lands, as required by rule under the SDWA.

    DATES:

    This rule is effective on January 27, 2017. For judicial purposes, this final rule is promulgated as of January 27, 2017. The incorporation by reference of certain publications listed in the rule is approved by the Director of the Federal Register as of January 27, 2017.

    ADDRESSES:

    The EPA has established a docket for this action under Docket ID No. EPA-HQ-OW-2015-0372, to the Federal eRulemaking Portal: http://www.regulations.gov. All documents in the docket are listed on the http://www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., CBI 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 electronically through http://www.regulations.gov.

    FOR FURTHER INFORMATION CONTACT:

    Holly S. Green, Drinking Water Protection Division, Office of Ground Water and Drinking Water (4606M), U.S. Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number: (202) 566-0651; fax number: (202) 564-3754; email address: [email protected]; or Nancy H. Marsh, Safe Drinking Water Branch, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303; telephone number (404) 562-9450; fax number: (404) 562-9439; email address: [email protected].

    SUPPLEMENTARY INFORMATION: I. Why is EPA issuing this final rule?

    On October 28, 2016, EPA published Kentucky's Class II primacy approval via a direct final rule with a parallel proposal. The EPA stated in the direct final rule that if we received adverse comment, the direct final rule would not take effect and we would publish a timely withdrawal in the Federal Register. During the 30-day comment period, which ended on November 28, 2016, the EPA received three adverse comment letters questioning Kentucky's capacity to run the Class II program, along with some technical concerns regarding the state's program. As a result, EPA withdrew the direct final rule in the Federal Register in a separate notice on December 28, 2016, Insert Federal Register Citation. As stated in the direct final rule and the parallel proposed rule, EPA indicated that it will address the public comments in any subsequent final action, which will be based on the parallel proposed rule, and will not institute a second comment period on this action.

    EPA has responded in detail to the public comments received and has placed the response to comment document in the docket for this action. A summary of the comments received and EPA response can be found in section V of this action.

    II. Does this action apply to me? Regulated Entities Category Examples of potentially regulated entities North American industry
  • classification system
  • Industry Private owners and operators of Class II injection wells located within the state (Enhance Recovery, Produce Fluid Disposal and Hydrocarbon Storage) 211111 & 213111.

    This table is intended to be a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated by this action. If you have questions regarding the applicability of this action to a particular entity, consult the persons listed in the preceding FOR FURTHER INFORMATION CONTACT section.

    III. Legal Authorities

    The state applied to EPA for primacy (primary implementation and enforcement authority) under section 1425 of the SDWA, 42 U.S.C. Sections 300h-4, for all Class II injection wells within the state except those on Indian lands. EPA approves the Commonwealth of Kentucky's UIC Program primacy application for these Class II injection wells by rule, as required under the SDWA, finding that it represents an “effective” program to prevent underground injection activities that endanger USDWs. Accordingly, EPA codifies the state's program in the Code of Federal Regulations (CFR) at 40 CFR part 147, under the authority of the SDWA, sections 1425, 42 U.S.C. 300h-4.

    EPA's approval is based on a legal and technical review of the state's primacy application as directed at 40 CFR part 145 and the requirements for state permitting and compliance evaluation programs, enforcement authority and information sharing to determine that the state's program is effective. EPA oversees the state's administration of the UIC program; part of the agency's oversight responsibility requires quarterly reports of non-compliance and annual UIC performance reports pursuant to 40 CFR 144.8. The Memorandum of Agreement between EPA and the Commonwealth of Kentucky, signed by the Regional Administrator on October 20, 2015, provides EPA with the opportunity to review and comment on all permits. Under section 1422 of the SDWA, EPA continues to administer the UIC program for Class I, III, IV, V and VI injection wells in the state and all wells on Indian lands (if any such lands exist in the state in the future).

    IV. Kentucky's Application A. Public Participation Activities Conducted by the Commonwealth of Kentucky

    As part of the primacy application requirements, the state held a public hearing on the state's intent to apply for primacy. The hearing was held on September 23, 2014, in the city of Frankfort, Kentucky. Both oral and written comments received for the hearing were generally supportive of the state pursuing primacy for the UIC Class II injection well program.

    B. Public Participation Activities Conducted by EPA

    On November 10, 2015, EPA published a notice of the state's application in the Federal Register (80 FR 69629). This notice provided a comment period and that a public hearing would be held if requested. EPA received one comment during the comment period, and no requests for a public hearing. An anonymous commenter suggested the state agency give permission to construct these Class II wells so that energy dependency and job creation remain domestic and that extraction of oil and gas resources be done in an environmentally sound manner. EPA determined that the issue was outside the scope of the UIC program and not relevant as to whether the state's regulations are effective to manage the UIC Class II injection well program in accordance with section 1425 of the Safe Drinking Water Act.

    C. Incorporation by Reference

    This final rule amends 40 CFR part 147 and incorporates by reference EPA-approved state statutes and regulations. The provisions of the Commonwealth of Kentucky Code that contain standards, requirements and procedures applicable to owners or operators of UIC Class II wells are incorporated by reference into 40 CFR part 147. Any provisions incorporated by reference, as well as all permit conditions or permit denials issued pursuant to such provisions, will be enforceable by EPA pursuant to the SDWA, section 1423 and 40 CFR 147.1(e).

    In order to better serve the public, the agency is reformatting the codification of the EPA-approved state statutes and regulations. Instead of codifying the Commonwealth of Kentucky's Statutes and Regulations as separate paragraphs in the text of 40 CFR part 147, EPA is now codifying a binder that contains the “EPA-Approved Commonwealth of Kentucky Safe Drinking Water Act § 1425 Underground Injection Control (UIC) Program Statutes and Regulations for Class II wells.” This binder will be incorporated by reference into 40 CFR part 147 and available at www.regulations.gov in the docket for this rule. The agency is also codifying a table listing the “EPA-Approved Commonwealth of Kentucky Safe Drinking Water Act § 1425 Underground Injection Control (UIC) Program Statutes and Regulations for Class II wells” in 40 CFR part 147.

    V. Summary of Response to Comments A. Resources

    Commenters believe that Kentucky does not have adequate resources to implement the Class II UIC Program. Kentucky is planning on filling two new positions once primacy is granted. Kentucky has 16 inspectors as compared to EPA's 2 full-time inspectors. EPA evaluated proposed resources and determined that they are adequate for an effective program to prevent endangerment to USDWs.

    B. Administrative Procedures for Processing Permits

    One commenter does not believe that Kentucky has the same regulatory requirements as the EPA for providing public participation in the permitting process. The commenter has concerns that the public was not provided access to the draft permit or statement of basis and that Kentucky was not required to provide a written response to comments received during the public comment period. For primacy approval under Section 1425, the state's regulations do not have to be as stringent as the federal regulations; therefore, Kentucky's public notice process does not need to mirror EPA's public notice process. Kentucky's public notice, which is included in the Program Description, provides the opportunity to request a copy of the draft permit and statement of basis. Commenters and those that attend a public hearing are notified if their comments do not result in a change to the final permit. An additional public notice is issued if comments do result in a change to the final permit. The public notice also provides an opportunity to petition the state for review of the permit and any conditions therein. Accordingly, the EPA has determined that Kentucky's administrative permitting procedures are effective for protecting USDWs.

    C. Area of Review

    One commenter is concerned that Kentucky does not have criteria for the applicant to use in determining whether the minimum 1/4 mile fixed radius area of review around the project or an evaluation of a zone of endangering influence (ZEI) is required to ensure that USDWs are not endangered. The commenter is also concerned that it is the applicant, not the agency, that is required to make the determination on whether a ZEI is appropriate. With respect to the commenter's first concern, the state's regulations are not inconsistent with the federal regulations, which similarly lack criteria for determining whether to use fixed radius or ZEI for the area of review, providing only that the permit writer may solicit input from well owners/operators as to which method is most appropriate. 40 CFR 146.6. With respect to the commenter's concern about the applicant, not the agency, selecting the method, this is not entirely consistent with EPA's Class II regulations, which require this determination to be made by the agency. However, a state applying for primacy under SDWA section 1425 is required to demonstrate only that its regulations are “effective,” not that they are equivalent to the federal regulations. EPA guidance on state submissions under SDWA section 1425 provides that an “effective” state program would be expected to incorporate an area of review of not less than 1/4 mile, or a ZEI in lieu of this fixed radius. Kentucky has included both the fixed radius and ZEI methods as options, which goes beyond the recommendations provided in the guidance, and is consistent with the two options provided in EPA's regulations. Moreover, under the state's proposed program, the applicant has the burden of proof to provide information to the state to ensure that the injection operation does not endanger a USDW. Kentucky has stated in its response to comments that it has statutory authority to require owners/operators of Class II wells to ensure that their operations do not endanger any USDWs, which could include the authority to require the applicant to calculate the area of review based on the ZEI method, if necessary to prevent endangerment to USDWs.

    D. Hydraulic Fracturing

    Commenters are concerned with how the state would regulate hydraulic fracturing activities. Under the SDWA, only wells that use diesel fuels for hydraulic fracturing are subject to regulation under the federal underground injection control program. Therefore, this Class II UIC primacy approval would give the state primacy only over this small subset of hydraulic fracturing wells. To the extent that there are any such wells, they would be subject to Kentucky's Class II program regulations, which EPA has found to be effective to prevent endangerment to USDWs. In addition, Kentucky has indicated in its application that it will consider, as appropriate, EPA's permitting guidance on diesel fuels hydraulic fracturing in regulating these wells. The state has regulatory authority over all other types of hydraulic fracturing.

    VI. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

    This action is exempt from review by the Office of Management and Budget (OMB) because OMB has determined that the approval of state UIC primacy for Class II rules are not significant regulatory actions.

    B. Paperwork Reduction Act

    This action does not impose any new information collection burden. EPA determined that there is no need for an Information Collection Request under the Paperwork Reduction Act because this final rule does not impose any new federal reporting or recordkeeping requirements. Reporting or recordkeeping requirements are based on the Commonwealth of Kentucky's UIC Regulations, and the state is not subject to the Paperwork Reduction Act. However, OMB has previously approved the information collection requirements contained in the existing UIC regulations at 40 CFR parts 144-148 for SDWA section 1422 states and also for section 1425 states under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and assigned OMB control number 2040-0042. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

    C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to the rule. This action does not impose any new requirements on any regulated entities. It simply codifies the Commonwealth of Kentucky's UIC Program regulations, which meets the effectiveness standard under SDWA section 1425 for regulating a Class II well program. I have therefore concluded that this action will have no net regulatory burden for any directly regulated small entities.

    D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate as described in UMRA, 2 U.S.C. 1521-1538. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.

    E. Executive Order 13132—Federalism

    This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

    F. Executive Order 13175—Consultation and Coordination With Indian Tribal Governments

    This action does not have tribal implications as specified in Executive Order 13175 as explained in section V.C. Thus, Executive Order 13175 does not apply to this action.

    G. Executive Order 13045: Protection of Children From Environmental Health & Safety Risks

    EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it approves a state action as explained in section V.C.

    H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use

    This action is not subject to Executive Order 13211 because it is not a significant regulatory action under Executive Order 12866.

    I. National Technology Transfer and Advancement Act 10(NTTAA)

    This rulemaking does not involve technical standards.

    J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations

    EPA believes the human health or environmental risk addressed by this action will not have potential disproportionately high and adverse human health or environmental effects on minority, low-income or indigenous populations because the rule does not change the level of protection provided to human health or the environment.

    K. Congressional Review Act (CRA)

    This action is subject to the CRA, and EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

    List of Subjects in 40 CFR Part 147

    Environmental protection, Appeals, Incorporation by reference, Penalties, Protection for USDWs, Requirements for plugging and abandonment, Underground injection control.

    Dated: December 20, 2016. Gina McCarthy, Administrator.

    For the reasons set out in the preamble, title 40 of the Code of Federal Regulations is amended as follows:

    PART 147—STATE, TRIBAL, AND EPA-ADMINISTERED UNDERGROUND INJECTION CONTROL PROGRAMS 1. The authority citation for Part 147 is revised to read as follows: Authority:

    42 U.S.C. 300h-4.

    Subpart S—Kentucky 2. Section 147.900 is added to read as follows:
    § 147.900 State-administered program—Class II wells.

    The UIC program for Class II injection wells in the Commonwealth of Kentucky, except for those on Indian lands, is the program administered by the Kentucky Department of Natural Resources, Division of Oil and Gas approved by the EPA pursuant to section 1425 of the SDWA. Notification of this approval was published in the Federal Register on December 28, 2016; the effective date of this program is January 27, 2017. Table 1 to paragraph (a) of this section is the table of contents of the Kentucky state statutes and regulations incorporated as follows by reference. This program consists of the following elements, as submitted to the EPA in the state's program application.

    (a) Incorporation by reference. The requirements set forth in the Kentucky State statutes and regulations cited in the binder entitled “EPA-Approved Commonwealth of Kentucky Safe Drinking Water Act § 1425 Underground Injection Control (UIC) Program Statutes and Regulations for Class II wells,” dated August 2016 is hereby incorporated by reference and made a part of the applicable UIC program under the SDWA for the Commonwealth of Kentucky. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies of the Kentucky regulations may be obtained or inspected at the Kentucky Department of Natural Resources, Division of Oil and Gas, 3th Floor, 300 Sower Blvd., Frankfort, Kentucky 40601, (315) 532-0191; at the U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303-8960, (404) 562-8190; or at the National Archives and Records Administration (NARA). For information on availability of this material at NARA, call (202) 741-6030, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Table 1 to Paragraph (a)—EPA-Approved Kentucky SDWA § 1425 Underground Injection Control Program Statutes and Regulations for Class II Wells State citation Title/subject State effective date EPA approval date 1 Kentucky Revised Statutes Chapter 13B Kentucky Administrative Procedures Act KRS 13B.005 to 13B.170 June 15, 1994 [Insert Federal Register citation]. Kentucky Revised Statutes 353.180 Requirements for plugging abandoned well—Bids—Remedy for possessor of adjacent land or for department June 24, 2015 [Insert Federal Register citation]. Kentucky Revised Statutes 353.510 Definition of KRS 353.500 to 353.720 July 15, 2010 [Insert Federal Register citation]. Kentucky Revised Statutes 353.520 Territorial application of KRS 353.500 to 353.720—Waste of oil and gas prohibited June 24, 2003 [Insert Federal Register citation]. Kentucky Revised Statutes 353.550 Specific authority over oil and gas operators July 15, 1996 [Insert Federal Register citation]. Kentucky Revised Statutes 353.570 Permit Required—May authorize operation prior to issuance of permit July 15, 1998 [Insert Federal Register citation]. Kentucky Revised Statutes 353.590 Application for permit—Fees-Plat-Bond to insure plugging—Schedule—Blanket bonds-Corporate guarantee—Use of forfeited funds—Oil and gas well. plugging fund—Wells not included in “water supply well.” July 15, 2010 [Insert Federal Register citation]. Kentucky Revised Statutes 353.591 Purpose and application of KRS 353.592 and 353.593 July 15, 1986 [Insert FR citation]. Kentucky Revised Statutes 353.592 Powers of the department June 24, 2015 [Insert FR citation]. Kentucky Revised Statutes 353.593 Appeals July 15, 1996 [Insert FR citation]. Kentucky Revised Statutes 353.992 Penalties July 15, 1986 [Insert FR citation]. 805 Kentucky Administrative Regulations 1:020 Providing Protection for USDWs August 9, 2007 [Insert FR citation]. 805 Kentucky Administrative Regulations 1:030 Well location and as-drilled location plat, preparation, form and contents October 23, 2009 [Insert FR citation]. 805 Kentucky Administrative Regulations 1:060 Plugging wells; non-coal-bearing strata June 11, 1975 [Insert FR citation]. 805 Administrative Regulations 1:070 Plugging wells; coal bearing strata October 23, 1975 [Insert FR citation]. 805 Kentucky Administrative Regulations 1:110 Underground Injection Control April 4, 2008 [Insert FR citation]. 1 In order to determine the EPA effective date for a specific provision listed in this table, consult the Federal Register document cited in this column for the particular provision.

    (b) Memorandum of Agreement (MOA). The MOA between EPA Region 4 and the Commonwealth of Kentucky Department of Natural Resources signed by EPA Regional Administrator on October 20, 2015.

    (c) Statements of Legal Authority. “Underground Injection Control Program, Attorney General's Statement,” signed by General Counsel of Kentucky Energy and Environmental Cabinet on June 7, 2010.

    (d) Program Description. The Program Description submitted as part of Kentucky's application, and any other materials submitted as part of this application or as a supplement thereto.

    3. Section 147.901 is amended by revising the section heading and the first sentence of paragraph (a) to read as follows:
    § 147.901 EPA-administered program—Class I, III, IV, V, and VI wells and Indian lands.

    (a) Contents. The UIC program for Class I, III, IV, V and VI wells and all wells on Indian lands in the Commonwealth of Kentucky is administered by the EPA. * * *

    4. Section 147.902 is added to read as follows:
    § 147.902 Aquifer exemptions.

    (a) This section identifies any aquifers or their portions exempted in accordance with §§ 144.7(b) and 146.4 of this chapter. These aquifers are not being proposed for exemption under the Commonwealth of Kentucky's primacy approval. Rather, the exempted aquifers listed below were previously approved while EPA had primary enforcement authority for the Class II UIC program in the Commonwealth of Kentucky and are included here for reference. Additional information pertinent to these exempted aquifers or their portions resides in EPA Region 4.

    (1) The following eight aquifers (underground sources of drinking water) in the Commonwealth of Kentucky have been exempted in accordance with the provisions of §§ 144.7(b) and 146.4 of this chapter for Class II injection activities only: A portion of the Tar Springs sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.7261 and longitude −86.6914. The formation has a true vertical depth from surface of 280 feet.

    (2) A portion of the Tar Springs sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.7294 and longitude −867212. The formation has a true vertical depth from surface of 249 feet.

    (3) A portion of the Tar Springs sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.7055 and longitude −86.7177. The formation has a true vertical depth from surface of 210 feet.

    (4) A portion of the Pennsylvanian Age sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.5402 and longitude −87.2551. The formation has a true vertical depth from surface of 1,050 feet.

    (5) A portion of the Tar Springs sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.7301 and longitude −87.6922. The formation has a true vertical depth from surface of 240 feet.

    (6) A portion of the Caseyville sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.5776 and longitude −87.1321. The formation had a true vertical depth from surface of 350 feet.

    (7) A portion of the Caseyville sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.5778 and longitude −87.1379. The formation has a true vertical depth from surface of 1,080 feet.

    (8) A portion of the Caseyville sandstone formation that has a quarter mile radius areal extent (125.6 acres) that is located at latitude 37.5652 and longitude −87.1222. The formation has a true vertical depth from surface of 1,060 feet.

    (b) [Reserved]

    5. Section 147.903 is amended by revising the section heading to read as follows:.
    § 147.903 Existing Class I and III wells authorized by rule.
    § 147.904 [Removed and Reserved]
    6. Section 147.904 is removed and reserved.
    [FR Doc. 2016-31268 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 147 [EPA-HQ-OW-2015-0372; FRL-9957-47-OW] State of Kentucky Underground Injection Control (UIC) Class II Program; Withdrawal of Primacy Approval AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Withdrawal of direct final rule.

    SUMMARY:

    Because the U.S. Environmental Protection Agency (EPA) received adverse comment, we are withdrawing the direct final rule approving the Commonwealth of Kentucky's Underground Injection Control (UIC) Class II Program for primacy, published on October 28, 2016.

    DATES:

    Effective December 28, 2016, EPA withdraws the direct final rule published at 81 FR 74927, on October 28, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Holly S. Green, Drinking Water Protection Division, Office of Ground Water and Drinking Water (4606M), U.S. Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number: (202) 566-0651; fax number: (202) 564-3754; email address: [email protected]; or Nancy H. Marsh, Safe Drinking Water Branch, U.S. Environmental Protection Agency, Region 4, 61 Forsyth Street SW., Atlanta, Georgia 30303; telephone number (404) 562-9450; fax number: (404) 562 9439; email address: [email protected].

    SUPPLEMENTARY INFORMATION:

    Because EPA received adverse comment, we are withdrawing the direct final rule approving the Commonwealth of Kentucky's Underground Injection Control Class II (UIC).

    Program for primacy, published on October 28, 2016. We stated in that direct final rule that if we received adverse comment by November 28, 2016, the direct final rule would not take effect and we would publish a timely withdrawal in the Federal Register. We subsequently received adverse comment on that direct final rule. We will address those comments in any subsequent final action, which will be based on the parallel proposed rule also published on October 28, 2016 (81 FR 75006). As stated in the direct final rule and the parallel proposed rule, we will not institute a second comment period on this action.

    Dated: December 20, 2016. Gina McCarthy, Administrator.

    Accordingly, the direct final rule published on October 28, 2016, (81 FR 74927) is withdrawn effective December 28, 2016.

    [FR Doc. 2016-31267 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 180 [EPA-HQ-OPP-2015-0776 and EPA-HQ-OPP-2015-0831; FRL-9955-82] Methyl Isobutyrate and Isobutyl Isobutyrate; Exemption From the Requirement of a Tolerance AGENCY:

    Environmental Protection Agency (EPA).

    ACTION:

    Final rule.

    SUMMARY:

    This regulation establishes exemptions from the requirement of a tolerance for residues of methyl isobutyrate (CAS Reg. No. 547-63-7) and for residues of isobutyl isobutyrate (CAS Reg. No. 97-85-8) when used as inert ingredients (solvents) applied to growing crops or raw agricultural commodities after harvest. Jeneil Biosurfactant Company submitted a petition to EPA under the Federal Food, Drug, and Cosmetic Act (FFDCA), requesting establishment of an exemption from the requirement of a tolerance. This regulation eliminates the need to establish a maximum permissible level for residues of methyl isobutyrate and isobutyl isobutyrate when used in accordance with the conditions.

    DATES:

    This regulation is effective December 28, 2016. Objections and requests for hearings must be received on or before February 27, 2017, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION).

    ADDRESSES:

    The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2015-0776 and EPA-HQ-OPP-2015-0831, is available at http://www.regulations.gov or at the Office of Pesticide Programs Regulatory Public Docket (OPP Docket) in the Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW., Washington, DC 20460-0001. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the OPP Docket is (703) 305-5805. Please review the visitor instructions and additional information about the docket available at http://www.epa.gov/dockets.

    FOR FURTHER INFORMATION CONTACT:

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

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

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

    • Crop production (NAICS code 111).

    • Animal production (NAICS code 112).

    • Food manufacturing (NAICS code 311).

    • Pesticide manufacturing (NAICS code 32532).

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

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

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

    Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2015-0776 and EPA-HQ-OPP-2015-0831 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before February 27, 2017. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

    In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2015-0776 and EPA-HQ-OPP-2015-0831, by one of the following methods:

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

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

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

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

    II. Petition for Exemption

    In the Federal Register of March 16, 2016 (81 FR 14030) (FRL-9942-86), EPA issued a document pursuant to FFDCA section 408, 21 U.S.C. 346a, announcing the filing of two pesticide petitions (PP IN-10848 & PP IN-10850) by Jeneil Biosurfactant Company, 400 N. Dekora Woods Blvd., Saukville, WI 53080. The petitions requested that 40 CFR 180.910 be amended by establishing two exemptions from the requirement of a tolerance: One for residues of methyl isobutyrate (CAS Reg. No. 547-63-7) (PP IN-10848) and one for isobutyl isobutyrate (CAS Reg. No. 97-85-8) (PP IN-10850), when used as inert ingredients (solvents) applied to growing crops or raw agricultural commodities after harvest. That document referenced a summary of each petition prepared by Jeneil Biosurfactant Company, the petitioner, which are available in the respective dockets (PP IN-10848 in docket ID number EPA-HQ-OPP-2015-0776 and PP IN-10850 in docket ID number EPA-HQ-OPP-2015-0831), http://www.regulations.gov. Comments were received in response to the notice of filing, requesting the denial of these petitions based only generally on a concern for the use of “toxic chemicals” in or on food. Because the commenters did not provide any information upon which to evaluate these specific inert ingredient tolerance exemptions and because EPA has determined that such exemptions would be safe, EPA is not denying the petition as requested.

    III. Inert Ingredient Definition

    Inert ingredients are all ingredients that are not active ingredients as defined in 40 CFR 153.125 and include, but are not limited to, the following types of ingredients (except when they have a pesticidal efficacy of their own): Solvents such as alcohols and hydrocarbons; surfactants such as polyoxyethylene polymers and fatty acids; carriers such as clay and diatomaceous earth; thickeners such as carrageenan and modified cellulose; wetting, spreading, and dispersing agents; propellants in aerosol dispensers; microencapsulating agents; and emulsifiers. The term “inert” is not intended to imply nontoxicity; the ingredient may or may not be chemically active. Generally, EPA has exempted inert ingredients from the requirement of a tolerance based on the low toxicity of the individual inert ingredients.

    IV. Aggregate Risk Assessment and Determination of Safety

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

    EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be clearly demonstrated that aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.

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

    A. Toxicological Profile

    EPA has evaluated the available toxicity data and considered their validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. Specific information on the studies received and the nature of the adverse effects caused by methyl isobutyrate and isobutyl isobutyrate as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies are discussed in this unit.

    Methyl isobutyrate and isobutyl isobutyrate are rapidly metabolized through hydrolysis to form an alcohol and carboxylic acid in the body. Many of the supporting data for methyl isobutyrate comes directly from the closely related and similarly metabolized compound isobutyl isobutyrate. Where separate information for methyl isobutyrate and isobutyl isobutyrate is available, the studies will be presented along with information for their common metabolite isobutanol.

    An LD50 value of 16,000 milligrams/kilogram body weight (mg/kg bw) was determined in rats for methyl isobutyrate. The LC50 of methyl isobutyrate was 25.5 milligrams per Liter (mg/L) in mice. The acute oral LD50 for isobutyl isobutyrate value in rats and mice was >6,400 mg/kg. The acute inhalation LC50 (6 hour exposure duration) was between 3.88 and 31.94 mg/L isobutyl isobutyrate in rats. The dermal LD50 value for isobutyl isobutyrate in guinea pigs was >8,550 mg/kg.

    No repeat-dose studies of methyl isobutyrate were identified in a search of the toxicological literature. In an 18-week oral gavage study in rats with isobutyl isobutyrate, there were no treatment related effects in hematology, clinical chemistry parameters, urinalysis, histological examination, behavior, appearance, body weight, or food/water consumption. The NOAEL was 1,000 mg/kg/day; the highest dose tested. In a 90-day oral toxicity study in rats with isobutanol, treatment related effects were seen only at 1,000 mg/kg bw/day, and included hypoactivity, which was significant during week one and decreased markedly after week 4, and lower body weight gain (18% below that of control rats) in males during week one. The NOAEL was 316 mg/kg bw/day.

    In a 90-day study toxicity study in rats exposed to isobutanol in drinking water, no effects on body weight, food/water consumption, and clinical signs of toxicity and organ weights (livers, kidneys, adrenal glands, and testes) were observed at doses up to 1,450 mg/kg/day. The NOAEL for isobutanol was 1,450 mg/kg/day.

    In a 90-day isobutanol inhalation study, no differences were found in body weight, food consumption, ophthalmoscopic examination, clinical observation, clinical chemistry, neurobehavioral observations, organ weights, gross pathology, and histopathology. The NOAEL for repeat-dose effects including neurotoxicity was 2,500 ppm.

    In two prenatal developmental toxicity studies via inhalation, female rats and Himalayan rabbits were exposed to vapor of isobutanol. In rats, no mortality or significant differences in clinical signs, body weight development, or gross pathology between controls and treated groups and no effects on development were noted. The maternal and developmental rat NOAELs were 3,030 ppm. In rabbits, no mortality or significant differences in clinical signs, body weight development, or gross pathology between controls and treated groups and no effects on development were noted. The maternal no observed adverse effect level (NOAEL) for rabbits was 758 ppm. Fetuses exhibited no signs of developmental changes in response to isobutanol. Therefore, the developmental NOAEL was 3,030 ppm, the highest dose.

    In a 2-generation reproduction study in rats with isobutanol via inhalation, no exposure-related effects were observed on F0 and F1 parental survival or on F0 and F1 reproductive performance, body weights, food consumption and food efficiency in males or females. The NOAEL for isobutanol for parental systemic, reproductive and neonatal toxicity is 2,500 ppm (7,380 mg/m3 the maximum concentrations exposed).

    There were no adequate studies on the carcinogenic potential of methyl isobutyrate or isobutanol isobutyrate. Methyl isobutyrate did not significantly induce chromosome loss in mitotically growing Saccharomyces cerevisiae. The structurally similar isobutyl isobutyrate did not induce reverse mutations at concentrations as high as 5,000 microgram/milliliter (ug/mL). An evaluation of the structure of methyl isobutyrate for alerts to genotoxicity yields no identifiable structures of concern. Based on negative results in genotoxicity assays and an extensive history of exposure to isobutyl isobutyrate, carcinogenic potential of this compound is likely to be low. Methyl isobutyrate was not genotoxic in one study and it does not contain reactive substructures of concern and isobutyl isobutyrate was also negative in genotoxic assays and in extensive exposure history; therefore the carcinogenic potential of both compounds is low.

    Metabolism of aliphatic esters such as methyl isobutyrate and isobutyl isobutyrate proceeds rapidly through hydrolysis to form an alcohol and carboxylic acid. These are reactions of the carboxylesterases or esterases, which predominate in hepatocytes but are present in most tissues throughout the body, including small intestine, colon, kidney, trachea and lung. Hydrolysis of methyl isobutyrate is extensive and will form methanol and isobutyric acid. Isobutyric acid is metabolized to propionic acid which, in turn, is converted to succinic acid and ultimately to glucose and glycogen. Methanol is oxidized and excreted ultimately as CO2 and water. In male rats injected intravenously with isobutyl isobutyrate, the parent compound decreased rapidly in blood and was undetected after 166 seconds. The half-life was calculated at 11.1 seconds. Isobutanol and isobutyric acid levels increased rapidly, with the acid consistently higher than the alcohol, suggesting that the former is a metabolic product of the alcohol in addition to the parent compound. Isobutyric acid will be conjugated and excreted or will undergo β-oxidation in the fatty acid metabolic pathway.

    B. Toxicological Points of Departure/Levels of Concern

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

    EPA has not identified any toxicological points of departure for assessing methyl isobutyrate and isobutyl isobutyrate. On the basis of the metabolism of as methyl isobutyrate and isobutyl isobutyrate proceeding rapidly through hydrolysis to form an alcohol and carboxylic acid and ultimately to glucose and glycogen, low acute toxicity for animals via the dermal, inhalation, and oral routes of exposure, and low toxicity of the metabolite isobutyl alcohol, no adverse effect is expected from methyl isobutyrate and isobutyl isobutyrate as a result of exposure by any route.

    C. Exposure Assessment

    1. Dietary exposure from food and feed uses. In evaluating dietary exposure to methyl isobutyrate and isobutyl isobutyrate, EPA considered exposure under the proposed exemption from the requirement of a tolerance. EPA assessed dietary exposures from methyl isobutyrate and isobutyl isobutyrate in food as follows:

    Acute and chronic dietary assessments take into account exposure estimates from dietary consumption of food and drinking water. Because no adverse effects attributable to a single or repeat exposures to methyl isobutyrate and isobutyl isobutyrate were seen in the toxicity databases, quantitative dietary risk assessments are not appropriate. Due to expected use of methyl isobutyrate and isobutyl isobutyrate in pesticide formulations applied to growing crops and raw agricultural commodities after harvest, it is reasonable to expect that there will be some exposure to these substances from their use in pesticide products. In addition, FDA has approved the use of methyl isobutyrate and isobutyl isobutyrate as synthetic flavoring substances in food for direct human consumption (21 CFR 172.515), so there is expected to be additional dietary exposure to these substances from non-pesticidal sources.

    2. Dietary exposure from drinking water. For the purpose of the screening level dietary risk assessment to support this request for an exemption from the requirement of a tolerance for methyl isobutyrate and isobutyl isobutyrate, a conservative drinking water concentration value would normally be included in dietary exposure screening level model. However, because no adverse effects attributable to a single or repeat exposures to methyl isobutyrate and isobutyl isobutyrate were seen in the toxicity databases, quantitative dietary risk assessments are not appropriate.

    3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure (e.g., textiles (clothing and diapers), carpets, swimming pools, and hard surface disinfection on walls, floors, tables).

    It is possible that methyl isobutyrate or isobutyl may be used as an inert ingredient in pesticide products that may result in residential exposures, although no residential uses are currently proposed.

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

    Because methyl isobutyrate and isobutyl isobutyrate do not have a toxic mode of action or a mechanism of toxicity, this provision does not apply.

    D. Safety Factor for Infants and Children

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

    Because methyl isobutyrate and isobutyl isobutyrate do not have threshold effects and because of the lack of safety factors needed for this qualitative assessment, this provision does not apply to the assessment of methyl isobutyrate and isobutyl isobutyrate.

    E. Aggregate Risks and Determination of Safety

    Determination of safety section. Based on the lack of any endpoints of concern, EPA concludes that there is a reasonable certainty that no harm will result to the general population or to infants and children from aggregate exposure to methyl isobutyrate and isobutyl isobutyrate residues.

    V. Analytical Enforcement Methodology

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

    VI. Conclusions

    Therefore, exemptions from the requirement of a tolerance are established under 40 CFR 180.910 for methyl isobutyrate (CAS Reg. No. 547-63-7) and isobutyl isobutyrate (CAS Reg. No. 97-85-8) when used as inert ingredients (solvents) in pesticide formulations applied to growing crops or raw agricultural commodities after harvest.

    VII. Statutory and Executive Order Reviews

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

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

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

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

    VIII. Congressional Review Act

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

    List of Subjects in 40 CFR Part 180

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

    Dated: December 15, 2016. Daniel J. Rosenblatt, Acting Director, Registration Division, Office of Pesticide Programs.

    Therefore, 40 CFR chapter I is amended as follows:

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

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

    2. In § 180.910, add alphabetically the inert ingredients “Isobutyl isobutyrate (CAS Reg. No. 97-85-8)”; and “Methyl isobutyrate (CAS Reg. No. 547-63-7)” to the table to read as follows:
    § 180.910 Inert ingredients used pre- and post-harvest; exemptions from the requirement of a tolerance. Inert ingredients Limits Uses *         *         *         *         *         *         * Isobutyl isobutyrate (CAS Reg. No. 97-85-8) None Solvent *         *         *         *         *         *         * Methyl isobutyrate (CAS Reg. No. 547-63-7) None Solvent *         *         *         *         *         *         *
    [FR Doc. 2016-31215 Filed 12-27-16; 8:45 am] BILLING CODE 6560-50-P
    DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 578 [Docket No. NHTSA-2016-0136] RIN 2127-AL82 Civil Penalties AGENCY:

    National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).

    ACTION:

    Final rule; response to petition for reconsideration; response to petition for rulemaking.

    SUMMARY:

    On July 5, 2016, NHTSA published an interim final rule updating the maximum civil penalty amounts for violations of statutes and regulations administered by NHTSA, pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. This decision responds to a petition for partial reconsideration of that interim final rule. After carefully considering the issues raised, the Agency grants some aspects of the petition, and denies other aspects. This decision amends the relevant regulatory text accordingly. This decision also responds to a petition for rulemaking on a similar topic.

    DATES:

    Effective date: This rule is effective January 27, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Ms. Rebecca Yoon, Office of the Chief Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820, 1200 New Jersey Avenue SE., Washington, DC 20590.

    SUPPLEMENTARY INFORMATION:

    I. Background on CAFE Penalties and Interim Final Rule

    The National Highway Traffic Safety Administration (NHTSA) administers Corporate Average Fuel Economy (CAFE) standards under 49 U.S.C. 32901 et seq. Vehicle manufacturers that produce passenger cars and light trucks for sale in the United States are subject to these standards,1 and are subject to civil penalties for failure to meet the standards.2 Manufacturers generally meet the standards by applying technology to their vehicles to improve their fleet-wide fuel economy, but may also apply credits earned from over-compliance with standards in another year or purchased from another manufacturer. If a manufacturer does not have credits to apply, and does not apply sufficient fuel economy-improving technologies to their vehicles to meet their fleet-wide standards, then that manufacturer is liable for civil penalties.3

    1 49 U.S.C. 32911(b).

    2 49 U.S.C. 32912(b).

    3 Civil penalties are remitted to the U.S. Treasury.

    Congress has prescribed the formula for calculating a civil penalty for violation of a CAFE standard. That formula multiplies the penalty rate times the number of tenths-of-a-mile-per-gallon by which a non-compliant fleet falls short of an applicable CAFE standard, times the number of vehicles in that non-compliant fleet.4 For many years, the penalty rate has been $5.50 per tenth-of-a-mile-per-gallon. As an illustration, assume that Manufacturer A produced 1,000,000 light trucks in model year 2010. Assume further that A has a light truck standard of 20 mpg for MY 2010, and an achieved light truck average fuel economy level of 19.7 mpg in that model year. If A has no credits to apply, then A's assessed civil penalty under this historical penalty rate would be:

    4 49 U.S.C. 32912(b).

    $5.50 (penalty rate) × 3 (tenths of an mpg) × 1,000,000 (vehicles in Manufacturer A's light truck fleet) = $16,500,000 due for A's light truck fleet for MY 2010. To date, few manufacturers have actually paid civil penalties, and the amounts of CAFE penalties paid generally have been relatively low. Additionally, since the introduction of credit trading and transfers for MY 2011 and after, many manufacturers have taken advantage of those flexibilities rather than paying civil penalties for non-compliance.

    The Federal Civil Penalties Inflation Adjustment Act Improvements Act (November 2, 2015) (the “Act”) prescribed an inflation adjustment for many civil monetary penalties, including CAFE's civil penalty rate. In that Act, Congress generally required Federal agencies that administer civil monetary penalties to make an initial “catch-up” adjustment for inflation through an interim final rule by July 1, 2016, and then to make subsequent annual adjustments for inflation (see Pub. L. 114-74, Sec. 701). NHTSA developed an interim final rule (IFR) implementing the Agency's responsibilities under that Act, and that IFR published in the Federal Register on July 5, 2016. The NHTSA IFR included adjustments for all civil monetary penalties administered by the Agency, including those prescribed by the CAFE program. In accordance with the Act and OMB guidance, the updated penalty rate increased from $5.50 per tenth of a mile per gallon (mpg) to $14 per tenth of an mpg.5 NHTSA stated in implementation guidance that it issued following the IFR that the Agency intended to apply the $14 rate to any penalties assessed on and after August 4, 2016, beginning with penalties applicable to violations for MY 2015, and also applying to any violations from prior model years that resulted from recalculation of a manufacturer's previous CAFE levels.6

    5 NHTSA's explanation of its process, including reliance on OMB guidance for calculating the initial adjustment required by the Act, is set forth in the interim final rule at 81 FR 43524-26 (Jul. 5, 2016). The interim final rule also discusses the “rounding rule” under the prior version of the Federal Civil Penalties Inflation Adjustment Act, which prevented NHTSA from raising the $5.50 rate after 1997.

    6 Memorandum, “Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvement Act of 2015 for the Corporate Average Fuel Economy (CAFE) Program,” July 18, 2016.

    II. Industry Petition for Reconsideration

    The Auto Alliance and Global Automakers jointly petitioned NHTSA for reconsideration of the interim final rule with regard to the inflation adjustment for CAFE non-compliance penalties (hereafter, the Alliance and Global petition will be referred to as the “Industry Petition”) on August 1, 2016. The Industry Petition asked that NHTSA not apply the penalty increase to non-compliances associated with “model years that have already been completed or for which a company's compliance plan has already been set.” Specifically, the Industry Petition stated that:

    Our most significant concern with the IFR is that it would apply retroactively to the 2014 and 2015 Model Years (which have been completed for all manufacturers but for which the compliance files are not all closed), to the 2016 Model Year (which is complete for many manufacturers) and to the 2017 and 2018 Model Years (for which manufacturers have already set compliance plans based on guidance from NHTSA, including the [historical penalty amounts of $5.50 per tenth of an mpg]). Applying the increased civil penalties in this manner is profoundly unfair to manufacturers, does not improve the effectiveness of this penalty, and does nothing to further the policies underlying the CAFE statute.

    Industry Petition at 3.

    In the alternative, the Industry Petition requested that if NHTSA decided to apply the penalty increase to MYs 2014-2018, the Agency should recalculate the adjusted penalty rate using 2007 as the “base year” for calculating the inflation adjustment. As another alternative, the Industry Petition sought a finding that immediately increasing the penalty to $14 would cause a “negative economic impact,” thereby requiring a smaller initial penalty increase. See Public Law 114-74, Sec. 701(c) (providing for an exception to the otherwise-applicable penalty increase, if the Agency finds through a rulemaking proceeding that the increase would cause a “negative economic impact,” a term that the statute does not define).7

    7 Because the Agency is granting the Industry Petition's request to apply inflation-adjusted penalties only to MY 2019 and after, the Agency need not address the Industry Petition's alternative requests.

    III. Petition for Rulemaking To Raise Civil Penalty Rate

    The Center for Biological Diversity (CBD) petitioned NHTSA on October 1, 2015, just over a month prior to passage of the Act, to conduct a rulemaking to raise the civil penalty rate for CAFE standard violations under NHTSA's then-existing statutory authority. The CBD petition stated correctly that NHTSA had not adjusted the $5.50 civil penalty rate for inflation since 1997, and requested that the Agency follow the procedure laid out at 49 U.S.C. 32912(c) to undertake a rulemaking to raise the amount to the maximum then allowed by Congress, $10 per tenth-of-an-mpg. A month later, Congress changed the statutory landscape by enacting the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

    IV. NHTSA Response to Petitions

    Having carefully considered the issues raised by the petitioners, NHTSA will grant the Industry Petition in part and deny it in part. Beginning with model year 2019, NHTSA will apply the full penalty prescribed by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015. NHTSA is required by the Act to continue adjusting the civil penalty for inflation each year, so the penalty rate applicable to MY 2019 and after fleets will be $14 per tenth-of-an-mpg, plus any adjustment(s) for inflation that occur between now and a violation's assessment. The Agency concludes that this decision also effectively addresses the issue raised by the CBD Petition. The discussion below presents the Agency's analysis and conclusion.

    A. Model Years 2014-2016

    NHTSA agrees with the Industry Petitioners that applying the $14 civil penalty rate to violations of CAFE standards in model years prior to the enactment of the Act would not result in additional fuel savings, and thus would seem to impose retroactive punishment without accomplishing Congress' specific intent in establishing the civil penalty provision of the Energy Policy and Conservation Act (“EPCA”). Model years typically begin prior to their respective calendar year. By November 2, 2015 (the date of enactment of the civil penalties adjustment Act), nearly all manufacturers subject to the CAFE standards had completed both model years 2014 and 2015, and no further vehicles in those model years were being produced in significant numbers. This argument is even stronger considering that all manufacturers would have completed these model years prior to July 5, 2016, the date of the IFR. If all the vehicles for a model year have already been produced, then there is no way for their manufacturers to raise the fuel economy level of those vehicles in order to avoid higher penalty rates for non-compliance.

    In the specific context of EPCA as amended, the purpose of civil penalties for non-compliance is to encourage manufacturers to comply with the CAFE standards. See 49 CFR 578.2 (section addressing penalties states that a “purpose of this part is to effectuate the remedial impact of civil penalties and to foster compliance with the law”); see generally, 49 U.S.C. 32911-32912; United States v. General Motors, 385 F.Supp. 598, 604 (D.D.C. 1974), vacated on other grounds, 527 F.2d 853 (D.C. Cir. 1975) (“The policy of the Act with regard to civil penalties is clearly to discourage noncompliance”). Assuming that higher civil penalty rates are intended, in the particular context of CAFE, to provide greater incentives for manufacturers to comply with applicable standards, then raising penalty rates for model years already completed and thus unchangeable would be not only retroactive,8 but incapable of serving the purpose of causing greater compliance with CAFE standards. Based on the governing statutory framework and the specific CAFE regulatory scheme, NHTSA believes that Congress would not have intended retroactive application of an inflation adjustment to overcome this core substantive purpose and intent of EPCA. This analysis compels the conclusion that applying an increased penalty rate to MYs 2014 and 2015 would not be appropriate, nor would applying it to MY 2016, which was underway by November 2, 2015 and over halfway complete by July 5, 2016.9

    8 Retroactivity is not favored in the law. The Supreme Court has stated that “congressional enactments . . . will not be construed to have retroactive effect unless their language requires this result.” Landgraf v. USI Film Products, 511 U.S. 244, 280 (1994), citing Bowen v. Georgetown University Hospital, 488 U.S. 204, 208 (1988). NHTSA believes that in the specific context of the CAFE program and the statutes that govern it, Congress could not have intended to impose higher civil penalty rates for time periods when they would not incentivize increased fuel economy.

    9 The decision not to apply the increased penalties retroactively is similar to the approach taken by various other federal agencies in implementing the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. See, e.g., Department of Justice, Interim final rule with request for comments: Civil Monetary Penalties Inflation Adjustment, 81 FR 42491 (June 30, 2016) (applying increased penalties only to violations after November 2, 2015, the date of the Act's enactment); Federal Aviation Administration, Interim Final Rule: Revisions to Civil Penalty Inflation Adjustment Tables, 81 FR 43463 (July 5, 2016) (applying increased penalties only to violations after August 1, 2016).

    B. Model Years 2017 and 2018

    The Industry Petition asserts that manufacturers have set their product and compliance plans for MY 2017 and 2018 based on the CAFE penalty provisions in place prior to July 2016, and that it is too late at this juncture to make significant changes to those plans and avoid non-compliances (for the manufacturers already intending not to comply). The Agency determined above that it is not appropriate to apply an increased penalty rate to CAFE non-compliance in past model years, i.e., MY 2016 and before, which could not be changed in response to a higher penalty rate. The next question presented by the Industry Petition is how to address future model years' vehicles whose fuel economy levels cannot be changed at this juncture.

    For immediate future model years (i.e., 2017 and 2018), the theoretical possibility exists that manufacturers could respond to a higher penalty rate by increasing their fleet fuel economy and thus achieving CAFE compliance or mitigating their non-compliance. However, because of industry design, development, and production cycles, vehicle designs (including drivetrains, which are where many fuel economy improvements are made) are often fixed years in advance, making adjustments to fleet fuel economy difficult without a lead time of multiple years.

    Here, the Industry Petitioners assert that their plans for what technology to put on which MYs 2017 and 2018 vehicles are, at the point the IFR was issued, fixed and inalterable. NHTSA takes manufacturers' product cycles into account when NHTSA sets fuel economy standards. For example, because NHTSA recognizes that manufacturers' product and compliance plans are difficult to alter significantly for years ahead of a given model year,10 the Agency includes product cadence in its assessment of CAFE standards, by limiting application of technology in its analytical model to years in which vehicles are refreshed or redesigned. NHTSA believes that this approach facilitates continued fuel economy improvements over the longer term by accounting for the fact that manufacturers will seek to make improvements when and where they are most cost-effective.

    10 One of the Industry Petitioners, the Alliance, submitted supplemental materials describing the activities and events that make up product cycles, which support this point. See Docket No. NHTSA-2016-0136.

    In an analogous context, EPCA provides that when DOT amends a fuel economy standard to make it more stringent, that new standard must be promulgated “at least 18 months before the beginning of the model year to which the amendment applies.” 49 U.S.C. 32902(a)(2). The 18 months' notice requirement for increases in fuel economy standards represents a congressional acknowledgement of the importance of advance notice to vehicle manufacturers to allow them the lead time necessary to adjust their product plans, designs, and compliance plans to address changes in fuel economy standards. Similarly here, affording manufacturers lead time to adjust their products and compliance plans helps them to account for such an increase in the civil penalty amount. In this unique case, the 18-month lead time for increases in the stringency of fuel economy standards provides a reasonable proxy for appropriate advance notice of the application of substantially increased—here nearly tripled—civil penalties.

    Given that NHTSA issued the IFR in July 2016, 18 months from that date would be January 2018, which would encompass MY 2017 for most manufacturers and models and part of MY 2018. Based on the Industry Petition, comments, and agency expertise, NHTSA believes that, in this instance, applying the adjusted penalties only for MY 2019 and after provides a reasonable amount of lead time for manufacturers to adjust their plans and products to take into account the substantial change in penalty level.

    For future model years for which the vehicles to be produced and their technologies are essentially fixed (i.e., MYs 2017-2018), it is conceivable that some manufacturers might be able to change production volumes of certain lower- or higher-fuel-economy models, which could help them to reduce or avoid CAFE non-compliance penalties. However, in this particular instance, compelling such a result through the immediate application of higher penalty rates to product design decisions that have already been made and cannot be changed would be contrary to a fundamental congressional purpose of the CAFE program. The Energy Independence and Security Act (EISA) amendments of 2007 required that fuel economy standards be attribute-based, demonstrating congressional intent that the CAFE program be responsive to consumer demand. See 49 U.S.C. 32902(b)(3). Applying higher civil penalty rates in a way that would force manufacturers to disregard consumer demand (e.g., by restricting the availability of vehicles that consumers want) would be inconsistent with that fundamental statutory command. Providing some lead time, as here, mitigates that concern.

    In order to reconcile competing statutory objectives in the unique context of multi-year vehicle product cycles, NHTSA will grant the Industry Petition insofar as it seeks to apply the penalty increase only for model years 2019 and after. For CAFE standard non-compliances that occur(ed) for model years 2014-2018, NHTSA intends to assess civil penalties at the rate of $5.50 per tenth of an mpg. Beginning with model year 2019, NHTSA will apply the full penalty prescribed by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015. NHTSA is required by the Act to continue adjusting the civil penalty for inflation each year, so the penalty rate applicable to MY-2019-and-after fleets will be $14 per tenth-of-an-mpg, plus any adjustment(s) for inflation that occur between now and then. See Public Law 114-74, Sec. 701(b)(2).

    NHTSA believes this approach appropriately harmonizes the two congressional directives of adjusting civil penalties to account for inflation and maintaining attribute-based, consumer-demand-focused standards, applied in the context of the presumption against retroactive application of statutes. See, e.g., Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208. This decision increases civil penalties starting with the model year that manufacturers, in this particular instance, are reasonably able to design and produce vehicles in response to the increased penalties. See Industry Petition at 4-6 (seeking application of the adjusted civil penalties only to MY 2019 and after).

    In summary, NHTSA partially grants the Industry Petition for Reconsideration insofar as it seeks implementation of the civil penalties adjustment only to MY 2019 and after, and denies the Industry Petition in all other respects.

    This action also effectively responds to the petition for rulemaking from CBD to increase the civil penalty rate as permitted by EPCA/EISA. The civil penalty rate beginning in MY 2019 will be substantially higher than the CBD petition requested, and NHTSA believes that the increased penalty will accomplish CBD's goal of encouraging manufacturers to apply more fuel-saving technologies to their vehicles in those future model years. To the extent that the CBD Petition requests an earlier penalty rate increase, it is denied for the reasons set forth in this decision.

    V. Regulatory Notices and Analyses A. Executive Order 12866, Executive Order 13563, and DOT Regulatory Policies and Procedures

    NHTSA has considered the impact of this rulemaking action under Executive Order 12866, Executive Order 13563, and the Department of Transportation's regulatory policies and procedures. This rulemaking document was not reviewed under Executive Order 12866 or Executive Order 13563, and has been determined not to be “significant” under the Department of Transportation's regulatory policies and procedures and the policies of the Office of Management and Budget.

    B. Regulatory Flexibility Act

    NHTSA has also considered the impacts of this rule under the Regulatory Flexibility Act. I certify that this rule will not have a significant impact on a substantial number of small entities. The following provides the factual basis for this certification under 5 U.S.C. 605(b). The amendments only affect manufacturers of motor vehicles. Low-volume manufacturers can petition NHTSA for an alternate CAFE standard under 49 CFR part 525, which lessens the impacts of this rulemaking on small businesses by allowing them to avoid liability for potential penalties under 49 CFR 578.6(h)(2). Small organizations and governmental jurisdictions will not be significantly affected as the price of motor vehicles and equipment ought not change as the result of this rule.

    C. Executive Order 13132 (Federalism)

    Executive Order 13132 requires NHTSA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that 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.” Under Executive Order 13132, the agency may not issue a regulation with Federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or the agency consults with State and local governments early in the process of developing the proposed regulation.

    This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. The reason is that this rule applies to motor vehicle manufacturers. Thus, the requirements of Section 6 of the Executive Order do not apply.

    D. Unfunded Mandates Reform Act of 1995 (UMRA)

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, requires agencies to prepare a written assessment of the cost, 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 more than $100 million annually. Because NHTSA does not believe that this rule will necessarily have a $100 million effect, no Unfunded Mandates assessment will be prepared.

    E. Executive Order 12778 (Civil Justice Reform)

    This rule does not have a retroactive or preemptive effect. Judicial review of this rule may be obtained pursuant to 5 U.S.C. 702. That section does not require that a petition for reconsideration be filed prior to seeking judicial review.

    F. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980, we state that there are no requirements for information collection associated with this rulemaking action.

    G. Privacy Act

    Please note that anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act statement in the Federal Register published on April 11, 2000 (65 FR 19477-78) or you may visit https://www.transportation.gov/privacy.

    List of Subjects in 49 CFR Part 578

    Fuel economy, Motor vehicles, Penalties.

    In consideration of the foregoing, 49 CFR part 578 is amended as set forth below.

    PART 578—CIVIL AND CRIMINAL PENALTIES 1. The authority citation for 49 CFR part 578 is revised to read as follows: Authority:

    Pub. L. 101-410, Pub. L. 104-134, Pub. L. 109-59, Pub. L. 114-74, Pub L. 114-94, 49 U.S.C. 32902 and 32912; delegation of authority at 49 CFR 1.81, 1.95.

    2. Section 578.6 is amended by revising paragraph (h) to read as follows:
    § 578.6 Civil penalties for violations of specified provisions of Title 49 of the United States Code.

    (h) Automobile fuel economy. (1) A person that violates 49 U.S.C. 32911(a) is liable to the United States Government for a civil penalty of not more than $40,000 for each violation. A separate violation occurs for each day the violation continues.

    (2) Except as provided in 49 U.S.C. 32912(c), beginning with model year 2019, a manufacturer that violates a standard prescribed for a model year under 49 U.S.C. 32902 is liable to the United States Government for a civil penalty of $14, plus any adjustments for inflation that occurred or may occur (for model years before model year 2019, the civil penalty is $5.50), multiplied by each .1 of a mile a gallon by which the applicable average fuel economy standard under that section exceeds the average fuel economy—

    (i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for automobiles to which the standard applies produced by the manufacturer during the model year;

    (ii) Multiplied by the number of those automobiles; and

    (iii) Reduced by the credits available to the manufacturer under 49 U.S.C. 32903 for the model year.

    Issued on: December 21, 2016. Mark R. Rosekind, Administrator.
    [FR Doc. 2016-31136 Filed 12-27-16; 8:45 am] BILLING CODE 4910-59-P
    DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 648 RIN 0648-XF074 Fisheries of the Northeastern United States; Northeast Multispecies Fishery; Possession and Trip Limit Modifications for the Common Pool Fishery AGENCY:

    National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.

    ACTION:

    Temporary rule; inseason adjustment.

    SUMMARY:

    This action increases the possession and trip limits for Southern New England/Mid-Atlantic yellowtail flounder and reduces the possession and trip limits for Georges Bank cod in place for Northeast multispecies common pool vessels for the remainder of the 2016 fishing year. The Regional Administrator is authorized to adjust possession and trip limits for common pool vessels to facilitate harvesting, or prevent exceeding, the pertinent common pool quotas during the fishing year. Increasing the possession and trip limits on Southern New England/Mid-Atlantic yellowtail flounder is intended to provide additional fishing opportunities and help allow the common pool fishery to catch its allowable quota for the stock, while reducing the possession and trip limits for Georges Bank cod is necessary to prevent overharvest of the common pool quota for that stock.

    DATES:

    The action increasing the possession and trip limits for Southern New England/Mid-Atlantic yellowtail flounder is effective December 22, 2016, through April 30, 2017. The action decreasing the possession and trip limits for Georges Bank cod is effective January 1, 2017, through April 30, 2017.

    FOR FURTHER INFORMATION CONTACT:

    Kyle Molton, Fishery Management Specialist, 978-281-9236.

    SUPPLEMENTARY INFORMATION:

    The regulations at 50 CFR 648.86(o) authorize the Regional Administrator to adjust the possession and trip limits for common pool vessels in order to prevent the overharvest and facilitate utilization of the common pool quotas. As of December 1, 2016, the common pool had caught less than 5 percent of its sub-annual catch limit (ACL) of Southern New England/Mid-Atlantic (SNE/MA) yellowtail flounder. We project that a moderate increase in the possession and trip limit for SNE/MA yellowtail flounder will result in greater fishing opportunities and little risk of exceeding the common pool sub-ACL of that stock in the current fishing year. To allow the common pool fishery to catch more of its quota for this stock, effective December 22, 2016, the possession and trip limit of SNE/MA yellowtail flounder for all common pool vessels of 250 lb (113.4 kg) per day-at-sea (DAS), and 500 lb (226.8 kg) per trip is increased, to 500 lb (226.8 kg) per DAS, and 1,000 lb (453.6 kg) per trip. It is unlawful for any common pool vessel to exceed the new possession and trip limits.

    On November 15, 2016, we reduced possession and trip limits for Georges Bank (GB) cod to prevent an overage of the common pool's quota for the stock. These reduced possession and trip limits were set to expire on December 31, 2016, and return to the initial limits set by Framework Adjustment 55 to the Northeast Multispecies Fishery Management Plan (FMP). We project that if the current possession and trip limits were to expire there will likely be a significant overage of the common pool quota for this stock before the end of the fishing year. As of December 1, 2016, the common pool had caught approximately 76 percent of its sub-ACL of GB cod. To prevent the common pool fishery from exceeding its quota for this stock during the remainder of the fishing year, effective January 1, 2017, the possession and trip limits for GB cod will remain at the current limits (see Table 1) instead of returning to the initial limits set by Framework Adjustment 55 to the Northeast Multispecies FMP. We are also setting a new 25-lb (11.3-kg) per trip GB cod trip limit on common pool vessels fishing with a small vessel category permit. As a result, effective January 1, 2017, it is unlawful for a common pool vessel to exceed the possession and trip limits listed in Table 1.

    Table 1—Current and Updated Common Pool Possession and Trip Limits for GB Cod Permit Current limits (as of November 15, 2016) Updated limits (effective January 1, 2017) A DAS* (outside of the Eastern U.S./Canada Area) 25 lb (11.3 kg) per DAS up to 50 lb (22.7 kg) per trip 25 lb (11.3 kg) per DAS up to 50 lb (22.7 kg) per trip (unchanged). A DAS (Eastern U.S./Canada Area) 25 lb (11.3 kg) per DAS up to 50 lb (22.7 kg) per trip 25 lb (11.3 kg) per DAS up to 50 lb (22.7 kg) per trip (unchanged). A DAS (Special Access Programs) 50 lb (22.7 kg) per trip 50 lb (22.7 kg) per trip (unchanged). Handgear A 25 lb (11.3 kg) per trip 25 lb (11.3 kg) per trip (unchanged). Handgear B 25 lb (11.3 kg) per trip 25 lb (11.3 kg) per trip (unchanged). Regular B DAS Program 25 lb (11.3 kg) per DAS up to 50 lb (22.7 kg) per trip 25 lb (11.3 kg) per DAS up to 50 lb (22.7 kg) per trip (unchanged). Small Vessel Category (≤30 ft) 300 lb (136.1 kg) of cod, haddock, and yellowtail flounder combined 300 lb (136.1 kg) of cod, haddock, and yellowtail flounder combined. Maximum of 25 lb (11.3 kg) of GOM cod and 200 lb (90.7 kg) of GOM haddock within the 300-lb (136.1-kg) combined trip limit Maximum of 25 lb (11.3 kg) of cod and 200 lb (90.7 kg) of GOM haddock within the 300-lb (136.1-kg) combined trip limit. * Day-at-sea (DAS).

    Weekly quota monitoring reports for the common pool fishery can be found on our Web site at: http://www.greateratlantic.fisheries.noaa.gov/ro/fso/MultiMonReports.htm. We will continue to monitor common pool catch through vessel trip reports, dealer-reported landings, vessel monitoring system catch reports and other available information and, if necessary, we will make additional adjustments to common pool management measures.

    Classification

    This action is required by 50 CFR part 648 and is exempt from review under Executive Order 12866.

    The Assistant Administrator for Fisheries, NOAA, finds good cause pursuant to 5 U.S.C. 553(b)(B) and 5 U.S.C. 553(d)(3) to waive prior notice and the opportunity for public comment and the 30-day delayed effectiveness period because it would be impracticable and contrary to the public interest.

    The regulations at § 648.86(o) authorize the Regional Administrator to adjust the Northeast multispecies possession and trip limits for common pool vessels to prevent the overharvest and facilitate utilization of common pool sub-ACLs. The catch data used to justify increasing the SNE/MA yellowtail flounder possession and trip limits and maintaining current possession and trip limits for GB cod only recently became available. The possession and trip limit increase implemented through this action allows for increased harvest of SNE/MA yellowtail flounder, to help ensure that the fishery may achieve the optimum yield (OY) for this stock. As a result, the time necessary to provide for prior notice and comment, and a 30-day delay in effectiveness, would prevent us from increasing the possession and trip limit for SNE/MA yellowtail flounder in a timely manner, which could prevent the fishery from achieving the OY. Further, the same delay would prevent us from implementing measures to prevent overutilization of the GB cod sub-ACL, leading to further negative impacts on the fishery. Either outcome would undermine management objectives of the Northeast Multispecies FMP and cause unnecessary negative economic impacts to the common pool fishery. There is additional good cause to waive the delayed effective period because this action in part relieves restrictions on fishing vessels by increasing a trip limit on SNE/MA yellowtail flounder and also limits regulatory confusion by maintaining status quo restrictions to more effectively prevent overharvest of the GB cod sub-ACL.

    Authority:

    16 U.S.C. 1801 et seq.

    Dated: December 22, 2016. Alan D. Risenhoover, Director, Office of Sustainable Fisheries, National Marine Fisheries Service.
    [FR Doc. 2016-31403 Filed 12-22-16; 4:15 pm] BILLING CODE 3510-22-P
    DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 648 [Docket No. 160906823-6999-01] RIN 0648-XE876 Fisheries of the Northeastern United States; Atlantic Herring Fishery; Adjustments to 2017 Management Area Annual Catch Limits AGENCY:

    National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.

    ACTION:

    Temporary final rule; adjustment of specifications.

    SUMMARY:

    In accordance with the regulations implementing the Atlantic Herring Fishery Management Plan, this action adjusts the 2017 catch limits in the four herring management areas (Areas 1A, 1B, 2, and 3) to account for underages in those areas during 2015. In order to ensure that the carryover of underages do not cause overfishing of the herring resource, management area-specific carryover does not increase the stock-wide annual catch limit. This action is necessary to ensure that NMFS accounts for herring catch consistent with the requirements of the Atlantic Herring Fishery Management Plan.

    DATES:

    Effective December 28, 2016, through December 31, 2017.

    ADDRESSES:

    Copies of supporting documents, including the 2013-2015 Specifications/Framework 2 and the 2016-2017 Specifications to the Atlantic Herring Fishery Management Plan (FMP), are available from the Sustainable Fisheries Division, Greater Atlantic Regional Fisheries Office, 55 Great Republic Drive, Gloucester, MA 01930, telephone (978) 281-9315, or online at: http://www.greateratlantic.fisheries.noaa.gov/sustainable/species/atlherring/index.html.

    FOR FURTHER INFORMATION CONTACT:

    Shannah Jaburek, Fishery Management Specialist, 978-282-8456, fax 978-281-9135.

    SUPPLEMENTARY INFORMATION: Background

    The Atlantic herring harvest in the United States is managed under the FMP developed by the New England Fishery Management Council (Council). The FMP divides the stock-wide herring annual catch limit (ACL) among three management areas, one of which has two sub-areas. It divides Area 1 (located in the Gulf of Maine (GOM)) into an inshore section (Area 1A) and an offshore section (Area 1B). Area 2 is located in the coastal waters between Massachusetts and North Carolina, and Area 3 is on Georges Bank (GB). The FMP considers the herring stock complex to be a single stock, but there are inshore (GOM) and offshore (GB) stock components. The GOM and GB stock components segregate during spawning and mix during feeding and migration. Each management area has its own sub-ACL to allow greater control of the fishing mortality on each stock component.

    NMFS issued a final rule that implemented Amendment 4 to the FMP (76 FR 11373, March 2, 2011) to address ACL and accountability measure (AM) requirements. As a way to account for ACL/sub-ACL overages in the herring fishery, Amendment 4 established an AM that requires NMFS to deduct any ACL/sub-ACL overages from the corresponding ACL/sub-ACL in the year following the catch overage determination. Amendment 4 also specified that NMFS will announce overage deductions in the Federal Register prior to the start of the fishing year, if possible.

    NMFS also published a final rule implementing Framework 2 to the FMP and the 2013-2015 specifications for the herring fishery on October 4, 2013 (78 FR 61828). Among other measures, Framework 2 allowed for the carryover of unharvested allocations (underages) in the year immediately following the catch determination. Up to 10 percent of each sub-ACL may be carried over and added to the following year's sub-ACL, provided total catch did not exceed the stock-wide ACL. The carryover provision allows a sub-ACL increase for a management area, but it does not allow a corresponding increase to the stock-wide ACL.

    NMFS published the 2016-2018 specifications for the herring fishery on November 1, 2016 (81 FR 75731). Table 1 outlines the 2017 herring sub-ACLs, minus deductions for research set-aside catch (RSA), that will be effective on January 1, 2017. RSA equal to 3 percent of each sub-ACL has been awarded to two research projects.

    Table 1—2017 Herring Sub-ACLs [mt] 2017
  • sub-ACLs
  • Research
  • set-aside
  • (3 percent
  • of sub-ACLs)
  • 2017
  • sub-ACLs
  • (minus RSA)
  • Area 1A 30,300 909 29,391 Area 1B 4,500 135 4,365 Area 2 29,100 873 28,227 Area 3 40,900 1,227 39,673 Stock-wide 104,800 3,144 101,656
    Provisions Implemented Through This Final Rule

    NMFS completed the 2015 catch determination in December 2016, and determined that the herring fishery caught less than its allocated catch in 2015 in all four herring management areas (Areas 1A, 1B, 2, and 3). As a result, this action carries over unharvested 2015 catch to the 2017 herring sub-ACL in all four areas. This carryover equals to the amount of each area's underages (or up to ten percent of the allocated 2015 sub-ACL, whichever is less) for Areas 1A, 1B, 2, and 3. Table 2 provides catch details for 2015 and corresponding adjustments for 2017 sub-ACLs.

    Table 2—Herring Sub-ACLs, Catch, and Carryover [mt] Adjusted 2015 sub-ACLs 2015 Catch 2015
  • Underages
  • Carryover * (up to 10 percent) 2017
  • sub-ACLs
  • Adjusted 2017 sub-ACLs
    Area 1A 30,585 28,861 1,724 1,724 29,391 31,115 Area 1B 4,922 2,819 2,103 460 4,365 4,825 Area 2 32,100 15,114 16,986 3,000 28,227 31,227 Area 3 44,910 33,217 11,693 4,200 39,673 43,873 Stock-wide 104,566 80,011 24,555 NA 101,656 **101,656 * Maximum carryover, where applicable, is based on 10 percent of initial 2015 sub-ACLs: Area 1A, 31,200 mt; Area 1B, 4,600 mt; Area 2, 30,000 mt; and Area 3, 42,000 mt. ** The 2017 stock-wide ACL cannot be increased by carryover.

    NMFS calculated the amount of herring landings in 2015 based on dealer reports (Federal and state) of herring purchases, supplemented by vessel trip reports (VTRs) and vessel monitoring system (VMS) reports (Federal and State of Maine) of herring landings. NMFS generally uses dealer reports to estimate herring landings. However, if the amount of herring reported via VTR exceeded the amount of herring reported by the dealer by 10 percent or more, NMFS assumes the dealer report for that trip was in error and uses the VTR report instead. NMFS assigns herring landings to individual herring management areas using VMS reports or using latitude and longitude coordinates from VTR reports when a VMS report is not available. NMFS uses recent fishing activity to assign landings to a management area if dealer reports do not have a corresponding VTR or VMS catch report.

    NMFS estimates herring discards by extrapolating discards from herring trips observed by the Northeast Fisheries Observer Program to all herring trips (observed and unobserved) according to gear and herring management area. Because RSA is removed from management area sub-ACLs at the beginning of the fishery year, NMFS tracks RSA catch but does not count it towards the herring sub-ACLs.

    Classification

    Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Fishery Conservation and Management Act (MSA), the NMFS Assistant Administrator has determined that this final rule is consistent with the FMP, other provisions of the MSA, and other applicable law.

    Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action. Notice and comment are impracticable and contrary to the public interest because a delay would potentially impair achievement of the management plan's objectives of preventing overfishing and achieving optimum yield due by impairing a vessel's ability to harvest available catch allocations. Allowing for prior notice and public comment on this adjustment is also impracticable because regulations require notification of adjustments, if possible, before the herring fishing year begins on January 1, 2017. Further, this is a nondiscretionary action required by provisions of Amendment 4 and Framework 2, which were previously subject to public notice and comment. The adjustments required by these regulations are formulaic. This action simply effectuates these mandatory calculations. The proposed and final rules for Framework 2 and Amendment 4 explained the need and likelihood for adjustments to the sub-ACLs based on final catch amounts. Framework 2, specifically, provided prior notice of the need to distribute carryover catch. These actions provided a full opportunity for the public to comment on the substance and process of this action.

    For the same reasons as noted above, there is good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effective date and make the rule effective upon publication in the Federal Register. To prevent confusion and potential overharvests, it will be in the best interest of the fleet and the herring resource to set the adjusted sub-ACLs as soon as possible. Two areas are currently closed due to seasonal closures and will open on either May 1 (i.e., Management Areas 1B) or June 1 (i.e., Management Area 1A). Management Areas 2 and 3 are already open and subject to a lower catch limit until NMFS implements this action. The adjustments in this notice increase the amount of catch available to fishermen. Putting in place the adjusted sub-ACLs as soon as possible will provide the fleet with an opportunity to develop their business plans in sufficient time to facilitate their full harvest of available catch in the open areas.

    This action is required by 50 CFR part 648 subpart K and is exempt from review under Executive Order 12866.

    This final rule does not contain a collection-of-information requirement for purposes of the Paperwork Reduction Act.

    Because prior notice and opportunity for public comment are not required for this rule by 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., are inapplicable.

    Authority:

    16 U.S.C. 1801 et seq.

    Dated: December 22, 2016. Samuel D. Rauch III, Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service.
    [FR Doc. 2016-31392 Filed 12-27-16; 8:45 am] BILLING CODE 3510-22-P
    81 249 Wednesday, December 28, 2016 Proposed Rules FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 371 RIN 3064-AE54 Recordkeeping Requirements for Qualified Financial Contracts AGENCY:

    Federal Deposit Insurance Corporation (FDIC).

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The FDIC proposes to amend its regulations regarding Recordkeeping Requirements for Qualified Financial Contracts (“Part 371”), which require insured depository institutions (“IDIs”) in a troubled condition to keep records relating to qualified financial contracts (“QFCs”) to which they are party. The proposed rule would expand the scope of QFC records required to be maintained by an IDI that is subject to the FDIC's recordkeeping requirements and that has total consolidated assets equal to or greater than $50 billion or is a member of a corporate group where one or more affiliates is subject to the QFC recordkeeping requirements set forth in the regulations adopted by the Department of the Treasury (a “full scope entity”); for all other IDIs subject to the FDIC's QFC recordkeeping requirements, add and delete a limited number of data requirements and make certain formatting changes with respect to the QFC recordkeeping requirements; require full scope entities to keep QFC records of certain of their subsidiaries; and include certain other changes, including changes that would provide additional time for certain IDIs in a troubled condition to comply with the regulations.

    DATES:

    Comments must be received on or before February 27, 2017.

    ADDRESSES:

    You may submit comments by any of the following methods:

    FDIC Web site: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the agency Web site.

    Email: [email protected] Include RIN 3064-AE54 on the subject line of the message.

    Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 20429.

    Hand Delivery: Comments may be hand delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m.

    Public Inspection: All comments received, including any personal information provided, will be posted generally without change to https://www.fdic.gov/regulations/laws/federal/.

    FOR FURTHER INFORMATION CONTACT:

    Legal Division: Phillip E. Sloan, Counsel, (703) 562-6137; Joanne W. Rose, Counsel, (917) 320-2854. Division of Resolutions and Receiverships: Marc Steckel, Deputy Director, (571) 858-8824; George C. Alexander, Assistant Director, (571) 858-8182.

    SUPPLEMENTARY INFORMATION: I. Policy Objectives II. Background III. The Proposed Rule A. Summary B. Section-By-Section Analysis 1. Scope, Purpose, and Compliance Dates 2. Definitions 3. Maintenance of Records 4. Content of Records 5. Transition for Existing Records Entities 6. Enforcement Actions 7. Appendix A 8. Appendix B IV. Expected Effects A. Limited Scope Entities B. Full Scope Entities C. All Covered Entities V. Alternatives Considered VI. Request for Comments A. Scope of Coverage B. Requirements C. Implementation D. Benefits and Costs VII. Regulatory Process A. Paperwork Reduction Act B. Regulatory Flexibility Act C. The Treasury and General Government Appropriations Act of 1999 D. Plain Language I. Policy Objectives

    The proposed rule would enhance and update recordkeeping requirements as to QFCs of IDIs in troubled condition in order to facilitate the orderly resolution of IDIs with QFC portfolios. The proposed rule would revise the format of records required to be maintained in order to provide more ready access to expanded QFC portfolio data. Additionally, the proposed rule would require that more comprehensive information be maintained to facilitate the FDIC's understanding of complex QFC portfolios in receivership. The proposed changes to both the formatting and the quantity of information would enable the FDIC, as receiver, to make better informed and efficient decisions as to whether to transfer some or all of a failed IDI's QFCs during the one-business-day stay period for the transfer of QFCs. This would help the FDIC achieve a least costly resolution.

    Part 371 was adopted in 2008 pursuant to 12 U.S.C. 1821(e)(8)(H) (the “FDIA Recordkeeping Provision”) to enable the FDIC to have prompt access to detailed information about the QFC portfolios of IDIs for which the FDIC is appointed receiver.1 In the eight years since Part 371 was adopted, the FDIC has obtained QFC information pursuant to Part 371 from many IDIs in troubled condition, ranging in size from large, complex institutions to small community banks. While the information obtained has proved useful to the FDIC as receiver, the necessity for more comprehensive information from institutions with complex QFC portfolios in formats that reflect recent developments in digital technology was evident.

    1 12 CFR part 371.

    In July 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act 2 (“Dodd-Frank Act”), section 210(c)(8)(H) (“Section 210(c)(8)(H)”) of which requires the adoption of regulations that require financial companies to maintain QFC records that are determined to be necessary or appropriate to assist the FDIC as receiver for a covered financial company in being able to exercise its rights and fulfill its obligations under section 210(c)(8), (9), or (10) of the Dodd-Frank Act. These sections of the Dodd-Frank Act are in most respects identical to 12 U.S.C. 1821(e) (8)-(10) of the FDIA and cover, among other subjects, the stay applicable to QFCs and the FDIC's rights to transfer QFCs during the one-business-day stay period.

    2 12 U.S.C. 5301 et seq.

    On October 31, 2016, in implementation of Section 210(c)(8)(H), the Department of the Treasury published regulations (Part 148) that require large U.S. financial holding companies and their U.S. subsidiaries (other than IDIs, certain IDI subsidiaries and insurance companies) to maintain QFC recordkeeping systems.3 The scope of records required to be maintained by companies subject to Part 148 is more comprehensive than that required under Part 371 for IDIs in troubled condition. Part 148 was prepared in consultation with the FDIC. Its recordkeeping requirements reflect the insights obtained by the FDIC in administering Part 371. Part 148, as adopted, reflects comments received on the Part 148 notice of proposed rulemaking, and the input from those comments are, where appropriate, considered in this proposed rule. Part 148 requires companies that are subject to that rule to maintain comprehensive QFC records in formats that will enable the FDIC to expeditiously analyze the information in the event it is appointed as receiver for a covered financial company pursuant to Title II of the Dodd-Frank Act. The comprehensive data fields reflect the data that the FDIC has identified as important for it to make its determinations as to whether to transfer QFCs of a failed institution.

    3 31 CFR part 148.

    The proposed rule would harmonize the recordkeeping requirements under Part 371 for large IDIs and IDIs that are affiliates of financial companies subject to Part 148 with the recordkeeping requirements of Part 148. The harmonization would support the policy objective of enabling the FDIC to make judicious QFC transfer decisions and would enable the FDIC, as receiver of an IDI that is a member of a corporate group subject to Part 371, to rapidly obtain a complete picture of the QFC positions of the entire group by combining the records maintained under the two regulations. Such harmonization would also have the indirect benefit of reducing costs to IDIs that become subject to Part 371 and that are members of a corporate group subject to Part 148 by enabling such IDIs to utilize the information technology infrastructure established by their corporate group for purposes of complying with Part 148.

    II. Background

    The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 4 includes the FDIA Recordkeeping Provision that authorizes the FDIC, in consultation with the appropriate Federal banking agencies, to prescribe regulations requiring more detailed recordkeeping by an IDI with respect to QFCs if such IDI is in a troubled condition. Pursuant to this provision, in 2008 the FDIC adopted Part 371, which requires that IDIs in a troubled condition maintain information relating to QFCs to which they are party in a format set forth in two Appendices to the regulation. As the FDIC noted in the adopting release for Part 371, the FDIC as receiver has very little time—the period between the day on which the FDIC is appointed receiver and 5:00 p.m. Eastern time on the following business day—to determine whether to transfer QFCs to which a failed IDI is party.5 The release stated that “[g]iven the FDIA Act's short time frame for such decision by the FDIC, in the case of a QFC portfolio of any significant size or complexity, it may be difficult to obtain and process the large amount of information necessary for an informed decision by the FDIC as receiver unless the information is readily available to the FDIC in a format that permits the FDIC to quickly and efficiently carry out an appropriate financial and legal analysis.” 6 It was the FDIC's expectation, when it adopted Part 371, that the regulations would provide the FDIC with QFC information in a format that would assist the FDIC in making these determinations.

    4 Public Law 109-8, 119 Stat. 23.

    5 73 FR 78162, 78163 (December 22, 2008).

    6Id.

    In the eight years since it was adopted, Part 371 has proved very useful to the FDIC in connection with QFCs of IDIs for which it was appointed receiver. While these institutions, in general, had limited QFC portfolios, several large IDIs with significant QFC portfolios also became in a troubled condition and were required to comply with the recordkeeping requirements of Part 371. The process of working with these IDIs to achieve compliance with Part 371, in addition to being very useful in resolution planning for these institutions, was instructive for the FDIC and caused the FDIC to identify areas where additional data in a more accessible format would provide the FDIC, as receiver, with important benefits in making determinations as to whether to transfer the institution's QFCs in a manner that would help preserve the value of the receivership and minimize losses to the Deposit Insurance Fund. The FDIC also gained experience with respect to the length of time that sometimes is necessary to complete QFC recordkeeping requirements, and identified areas where the requirements could be made clearer.

    As previously noted, Part 148 requires more extensive record keeping than that required by Part 371 as currently in effect (“Current Part 371”). The additional data include, among other data points, information on underlying QFCs where the QFC in question is a guarantee, additional information as to whether a QFC is guaranteed, information as to positions for which a QFC serves as a hedge, certain information as to the netting sets to which the QFCs pertain, information as to cross-default provisions in QFCs, information as to location of collateral, whether the collateral is segregated by the entity holding the collateral, whether the collateral is subject to re-hypothecation, and information as to the value of QFC positions in the currency applicable to the QFCs. This additional information could greatly assist the FDIC as receiver in making decisions as to the treatment of the receivership's QFCs under the Dodd-Frank Act within the same, short one-business-day stay period that applies where the FDIC is appointed as receiver 7 for an IDI under the Federal Deposit Insurance Act (“FDIA”).8

    7 Most of the restrictions applicable to the treatment of QFCs by an FDIC receiver also apply to the FDIC in its conservatorship capacity. See 12 U.S.C. 1821(e)(8), (9), (10), and (11). While the treatment of QFCs by an FDIC conservator is not identical to the treatment of QFCs in a receivership, see 12 U.S.C. 1821(e)(8)(E) and (10)(B)(i)-(ii), for purposes of this preamble reference to the FDIC in its receivership capacity includes reference to its role as conservator under this statutory authority.

    8 12 U.S.C. 1811 et seq.

    III. The Proposed Rule A. Summary

    The proposed rule would amend and restate Part 371 in its entirety. The proposed rule would require full scope entities to maintain the full complement of data required by Part 148.9 Full scope entities include IDIs with total consolidated assets of $50 billion or more as well as IDIs (“Part 148 affiliates”) that are affiliates of one or more companies required to maintain records pursuant to Part 148. The additional data with respect to credit support and collateral, among other items, would provide the FDIC as receiver with important information as to the risks associated with the QFC portfolio and thus assist the FDIC in addressing more complex QFC portfolios. This is appropriate for larger institutions that are more likely to have significant and more complex QFC portfolios. It also is appropriate for Part 148 affiliates, regardless of size. Consistency of recordkeeping throughout the entire corporate group will provide additional functionality and useful information to the FDIC as receiver of an IDI in that group. Moreover, the additional burden of this scope of recordkeeping on smaller IDIs that are Part 148 affiliates should be mitigated, as the information technology infrastructure required to comply with Part 371 as proposed to be revised would be the same information technology infrastructure that the corporate group would need to construct in order to comply with Part 148.

    9 One data row, relating to the status of non-reporting subsidiaries under the provisions of Part 148, has been omitted from the proposed tables for full scope entities.

    The FDIC decided that the $50 billion total consolidated asset threshold for full scope entities was appropriate for several reasons. Institutions with this higher threshold are more likely to have larger and more complex QFC portfolios. Also, this is the threshold used in 12 CFR part 360 to identify institutions that are required to file resolution plans 10 and, accordingly, was the subject of comments that were considered in the formulation of Part 360 as adopted. The considerations that merit additional resolution planning for these institutions also apply to the QFC recordkeeping requirements of this Part. This threshold also corresponds to the threshold that was established for determining which bank holding companies would be subject to enhanced supervision and prudential standards under Title I of the Dodd-Frank Act 11 and was also adopted by the Financial Stability Oversight Council as an initial threshold for identifying nonbank financial companies that merit further evaluation as to whether they should be designated under section 113 of the Dodd-Frank Act.12 Part 148 also uses a $50 billion threshold.13 All of the previously described uses of the $50 billion threshold reflect a consensus that it is a reasonable cut-off to identify institutions for heightened attention and, in the case of QFC records, for requirements that would provide quick access to more comprehensive data in the event of failure.

    10 12 CFR 360.10.

    11 12 U.S.C. 5365(a).

    12See Financial Stability Oversight Council Guidance for Nonbank Financial Company Determinations, 12 CFR part 1310, app. A., III.a.

    13 $50 billion is also one of the thresholds used in the OCC guidelines establishing standards for recovery planning by certain large IDIs. See 12 CFR part 30. In its preamble to its 2014 guidelines establishing heightened standards for certain large IDIs, the OCC stated that “the $50 billion asset criteria is a well understood threshold that the OCC and other Federal banking regulatory agencies have used to demarcate larger, more complex banking organizations from smaller, less complex banking organizations.” 79 FR 54518, 54521-22 (September 11, 2014) (citing 12 CFR 46.1 (stress testing); 12 CFR 252.30 (enhanced prudential standards for bank holding companies with total consolidated assets of $50 billion or more)).

    The proposed rule makes only limited additions to the data required Current Part 371 for IDIs other than full scope entities (“limited scope entities”) because the data from the tables with the limited additions set forth in the proposed rule will provide sufficient information for the FDIC as receiver to take necessary actions with respect to QFC portfolios of all but the largest IDIs and IDIs that are part of a large group, with extensive QFC portfolios, that are subject to Part 148. It is unlikely that most limited scope entities will have QFC positions of a magnitude and complexity that would justify the added burden of being subject to the full scope of data requirements imposed by Part 148. In assessing what additions to information should be required for limited scope entities, FDIC staff was informed by its experience in administering Part 371.

    Only certain portions of Current Part 371would be substantively changed by the proposed rule. The changes include the following: (i) The recordkeeping requirements for full scope IDIs would be expanded; (ii) full scope IDIs would be required to keep records on the QFC activity of certain of their subsidiaries; (iii) the required format for QFC records for limited scope IDIs would be revised and a limited number of additional data fields would be added for these IDIs; (iv) the length of time that certain IDIs have to comply with the rule would be increased; (v) changes to the process for obtaining extensions and to the permitted duration of extensions for certain types of IDIs; (vi) clarifications relating to records access requirements; and (vii) certain other changes relating to transition and other matters.

    B. Section-By-Section Analysis 1. Scope, Purpose, and Compliance Dates

    Section 371.1 sets forth the scope and purpose of the proposed rule, as well as required compliance dates. The expressed purpose of Part 371—to establish recordkeeping requirements with respect to QFCs for IDIs in a troubled condition—would not change from Current Part 371.

    Under Current Part 371, an IDI is required to comply with Part 371 after receiving written notice from the IDI's appropriate Federal banking agency or the FDIC that it is in troubled condition under Part 371. Section 371.1(a) of the proposed rule would provide that Part 371 applies to an IDI that is a “records entity.” A records entity is an IDI that has received notice from its appropriate Federal banking agency or the FDIC that it is in a troubled condition and has also received written notification from the FDIC that it is subject to the recordkeeping requirements of Part 371. The proposed rule would include a requirement that an IDI receive notification from the FDIC that it is subject to Part 371 in order ensure an orderly administration of Part 371 by the FDIC.

    Section 371.1(c)(1) of the proposed rule would require that, within three business days of receiving notice that it is a records entity, an IDI must provide the FDIC with the contact information of the person who is responsible for the QFC recordkeeping under Part 371 and a directory of the electronic files that will be used by the IDI to maintain the information required to be kept under Part 371. These requirements are substantially similar to those set forth in Current Part 371, although the proposed rule would clarify that the contact person must be the person responsible for the recordkeeping system, rather than simply a knowledgeable person. The electronic file directory consists of the file path or paths of the electronic files located on the IDI's systems.

    The proposed rule would set forth a different compliance date schedule than that set forth in Current Part 371. Under Current Part 371, an IDI is required to comply with Part 371 within 60 days of being notified that it is in troubled condition under Part 371, unless it obtains an extension of this deadline. It has been the FDIC's experience that some IDIs with significant QFC portfolios that were subject to Part 371 needed up to 270 days to establish systems that enabled them to maintain QFC records in accordance with Part 371. Because extensions under Current Part 371 are limited to 30 days, several extensions were necessary.

    Under section 371.1(c)(2)(i) of the proposed rule, all IDIs except for an IDI that is an accelerated records entity (as defined in the next paragraph) would have 270 days to comply with Part 371. In addition, § 371.1(d)(1) of the proposed rule would authorize the FDIC to provide extensions of up to 120 days to records entities other than accelerated records entities. This proposed change would reduce or eliminate the need for repeated extensions for IDIs that are not accelerated records entities and thus would reduce the burden on such IDIs.

    Accelerated records entities are IDIs with a composite rating of 4 or 5 or that are determined to be experiencing a significant deterioration of capital or significant funding difficulties or liquidity stress. In view of the increased risk of near-term failure of IDIs that are accelerated records entities, accelerated records entities would remain subject to a 60-day compliance period and extensions for such entities would be limited to 30 days. The 270-day compliance period with extensions of up to 120 days is proposed for other records entities because those entities do not pose the same near-term failure risk as accelerated records entities. The proposed rule, under § 371.1(c)(2)(iii), would specify that if a records entity that was not initially an accelerated records entity becomes an accelerated records entity, the entity would be required to comply with this rule within the shorter of 60 days from the date it became an accelerated records entity or 270 days from the date it became a records entity.

    Section 371.1(d)(3) of the proposed rule would retain the requirement of Current Part 371 that written extension requests be submitted not less than 15 days prior to the deadline for compliance, accompanied by a statement of the reasons why the deadline cannot be met. In order to reflect the FDIC's past practice in considering extension requests under Part 371, the proposed rule would also expressly require that all extension requests include a project plan for achieving compliance (including timeline) and a progress report.

    2. Definitions

    Section 371.2 contains definitions used in Part 371. The proposed rule would add new definitions that reflect the proposed changes to the text and tables of Part 371.

    Newly defined terms include “records entity,” which is added for clarity and conciseness to denote an IDI that is subject to Part 371. As previously discussed, the definition would provide that in order to be a records entity, and thus subject to Part 371, an IDI must receive notice from its appropriate Federal banking agency or the FDIC that it is in a troubled condition and must also receive notice from the FDIC that it is subject to the recordkeeping requirements of Part 371. The definition of records entity would include an IDI already subject to the recordkeeping requirements of Part 371 as of the effective date of the final rule.

    Current Part 371 defines “troubled condition” to mean any IDI that (1) has a composite rating, as determined by its appropriate Federal banking agency in its most recent report of examination, of 3 (only for IDIs with total consolidated assets of $10 billion dollars or greater), 4, or 5 under the Uniform Financial Institution Rating System, or in the case of an insured branch of a foreign bank, an equivalent rating; (2) is subject to a proceeding initiated by the FDIC for termination or suspension of deposit insurance; (3) is subject to a cease-and-desist order or written agreement issued by the appropriate Federal banking agency, as defined in 12 U.S.C. 1813(q), that requires action to improve the financial condition of the IDI or is subject to a proceeding initiated by the appropriate Federal banking agency which contemplates the issuance of an order that requires action to improve the financial condition of the IDI, unless otherwise informed in writing by the appropriate Federal banking agency; (4) is informed in writing by the IDI's appropriate Federal banking agency that it is in troubled condition for purposes of 12 U.S.C. 1831i on the basis of the IDI's most recent report of condition or report of examination, or other information available to the IDI's appropriate Federal banking agency; or (5) is determined by the appropriate Federal banking agency or the FDIC in consultation with the appropriate Federal banking agency to be experiencing a significant deterioration of capital or significant funding difficulties or liquidity stress, notwithstanding the composite rating of the IDI by its appropriate Federal banking agency in its most recent report of examination.

    While the proposed rule would make no change to the definition of troubled condition, the FDIC notes that the third prong of the definition, which addresses IDIs subject to a cease-and-desist order or written agreement issued by the appropriate Federal banking agency that requires action to improve the financial condition of the IDI 14 is intended to be broadly interpreted to include consent orders, or stipulations entered into by, or imposed upon, the IDI pursuant to 12 U.S.C. 1818(b) of the FDIA. Whether any such consent order or stipulation, or any cease-and-desist order or written agreement, requires “action to improve the financial condition” of the IDI will depend on the facts and circumstances surrounding the particular order or agreement, but it is not limited to an order or agreement that specifically mentions adequacy of capital. It may also include, where appropriate, factors relating to asset quality, management, earnings, liquidity, and sensitivity to market risk, as each factor is defined in the FDIC's notice of adoption of policy statement regarding the Uniform Financial Institutions Rating System.15 For instance, in the case of management, an order or agreement that requires improvements in risk management practices and internal policies and controls addressing the operations and risks of significant activities may fall within the scope of orders or agreements that require action to improve the financial condition of the IDI within the meaning of the proposed rule.16 On the other hand, a cease-and-desist order or consent order relating to improvements with respect to Bank Secrecy Act reporting requirements may not fall within the meaning of an order to improve the financial condition of the IDI.

    14 12 CFR 371.2(f)(3) (2016).

    15See 62 FR 752 (Jan. 6, 1997).

    16Id. at 755.

    As discussed previously, the proposed rule would define an “accelerated records entity” as a records entity with a composite rating of 4 or 5 under the Uniform Financial Institution Rating System (or in the case of an insured branch of a foreign bank, an equivalent rating system), or that is determined to be experiencing a significant deterioration of capital or significant funding difficulties or liquidity stress, notwithstanding the composite rating of the institution by its appropriate Federal banking agency in its most recent report of examination.

    The proposed rule would require different recordkeeping requirements for “full scope entities” and “limited scope entities,” and adds definitions of those terms for clarity and conciseness. The rule would define a full scope entity as a records entity that has total consolidated assets equal to or greater than $50 billion or that is a Part 148 affiliate. “Part 148 affiliate” is defined as a records entity that is a member of a corporate group one or more other members of which are required to maintain QFC records pursuant to Part 148. A limited scope entity would be defined as a records entity that is not a full scope entity. As discussed previously, the proposed rule would require full scope entities to keep more detailed QFC records than limited scope entities.

    The proposed rule would require that full scope entities include, among other items, records for their reportable subsidiaries. A reportable subsidiary would be defined to include a subsidiary of an IDI that is not a functionally regulated subsidiary as defined in 12 U.S.C. 1844(c)(5), a security-based swap dealer as defined in 15 U.S.C. 78c(a)(71), or a major security-based swap participant as defined in 15 U.S.C. 78c(a)(67). Since QFC data for reportable subsidiaries is not required to be maintained under Part 148, requiring this information in Part 371 would provide the FDIC as receiver with more complete recordkeeping for the largest entities, which are likely to have more subsidiaries and, as discussed previously, are likely to have larger and more complex QFC portfolios.

    The proposed rule would also add a definition for “business day” that is consistent with the definition of this term used in 12 U.S.C. 1821(e)(10)(D) and a definition for “control” (used in the definition of the term “affiliate”), which is defined consistently with the definition of this term in the FDI Act.17 In addition, the proposed rule would define “total consolidated assets,” used in the definition of troubled condition and in the definition of full scope entity, as total consolidated assets as reported on a records entity's most recent audited consolidated statement of financial condition filed with its appropriate Federal banking agency.

    17 12 U.S.C. 1813(w)(5), which uses the definition set forth in 12 U.S.C. 1841(a)(2).

    Minor drafting changes to the definition of “qualified financial contract” are included in the proposed rule. These changes are for clarity only and are not intended to make substantive changes in the meaning of this term.

    The proposed rule would also add certain terms in order to clarify portions of Part 371, including terms used in the proposed new data tables. These terms include “parent entity,” “corporate group,” “counterparty,” “amendment effective date,” “legal entity identifier” (LEI), and “subsidiary.”

    3. Maintenance of Records

    Section 371.3 of the proposed rule would set forth the requirements for maintaining QFC records. As under Current Part 371, paragraph (a) of the proposed rule would require that QFC records be maintained in electronic form in the format set forth in the Appendices to Part 371, unless the records entity qualifies for the exemption from electronic recordkeeping for institutions with fewer than 20 QFC positions, and that all such records in electronic form be updated on a daily basis. In recognition of the value to the FDIC of consistency of recordkeeping through an entire corporate group, the proposed rule would add a new requirement, in § 371.3(a)(4), that records maintained by a Part 148 affiliate are compiled consistently with records compiled by its affiliates pursuant to Part 148. This would require that an IDI subject to Part 371 use the same data inputs (for example, counterparty identifier) as the inputs used for reporting pursuant to Part 148. The proposed rule would clarify that these updates be based on the previous end-of-day values. The proposed rule would require that the records entity be capable of providing the preceding day's end-of-day values to the FDIC no later than 7:00 a.m. (Eastern Time) each day. The 7:00 a.m. deadline is proposed in light of the limited stay period for transfer of QFCs by the FDIC as receiver, which ends at 5:00 p.m. (Eastern Time) on the business day following the date of the appointment of the receiver.18 This deadline represents a clarification of the requirement contained in Current Part 371 that IDIs subject to Part 371 maintain the capacity to produce records at the close of processing on a daily basis.19 The next-day 7:00 a.m. deadline would be applicable, whether or not the day on which access would be required (the next day) is a business day, to allow the FDIC to have the maximum time to make necessary decisions and take necessary actions with respect to the QFC portfolio, even where the IDI is closed on a Friday. Even though, in the case of a Friday closing, the next day is not a business day, the next day deadline should impose no additional burden on an IDI since the proposed rule would require that the IDI be capable of providing records on the next day in all circumstances. Finally, the proposed rule would extend the 7:00 a.m. deadline if the FDIC does not request access to the records at least eight hours before the 7:00 a.m. deadline.

    18See 12 U.S.C. 1821(e)(10)(A).

    19 See 12 CFR 371.3.

    The proposed rule would also add a new requirement that electronic records be compiled in a manner that permits aggregation and disaggregation of such records by counterparty, and if a records entity is maintaining records in accordance with Appendix B, by records entity and reportable subsidiary. The proposed rule would add a requirement that a records entity maintain daily records for a period of not less than five business days in order to ensure that there are records available to the FDIC that indicate the trends in an institution's QFC holdings even before the actual previous end-of-day's records are available to the FDIC.

    The proposed rule also would change the requirement in Current Part 371 with respect to the point of contact at the records entity to answer questions with respect to the electronic files being maintained at the records entity. Section 371.1(c) of the proposed rule would require that records entities provide the FDIC the name and contact information for the person responsible for recordkeeping, and § 371.3(b) would require that the FDIC be notified within 3 business days of any change to such information.

    The proposed rule would make no change to the requirement in Current Part 371 that a records entity may cease maintaining records one year after it ceases to be a records entity or, if it is acquired by or merges with an IDI entity that is not in troubled condition, following the time it ceases to be a separately insured IDI.

    4. Content of Records

    Section 371.4 of the proposed rule would set forth the requirements for the content of the QFC records that are required to be maintained by records entities. As discussed previously, Section 371.4(b) would require a full scope entity to maintain QFC records in accordance with Appendix B to Part 371, which requires significantly more comprehensive records than are required under Current Part 371. In general, full scope entities are likely to have significant QFC portfolios and the expanded recordkeeping will facilitate the decisions that must be made by the FDIC with respect to these QFC portfolios. Appendix B is substantially similar to the tables included in the Part 148 regulations and, accordingly, if a records entity is an affiliate of an entity that is required to keep records under Part 148, it is likely that it would be able to use the recordkeeping infrastructure developed to comply with Part 148. Consistency of the information as to the IDI and its reportable subsidiaries as well as the other entities in the corporate group will provide the FDIC with a more comprehensive understanding of the QFC exposure of the group.

    Section 371.4 (a) of the proposed rule would require a limited scope entity to maintain less comprehensive QFC records under Appendix A, which is similar in scope to the Appendix to Current Part 371, with the changes discussed under “7. Appendix A”. Section 371.4(a) would give a limited scope entity the option to maintain the more comprehensive QFC records required under paragraph (b). The FDIC anticipates that if a limited scope entity expects to meet the criteria of a full scope entity at some point in the future, it might wish to maintain records under Appendix B in order to avoid changing its records system.

    The QFC records under Appendices A and B are necessary to assist the FDIC in determining, during the short one-business-day stay period applicable to QFCs, whether to transfer QFCs.

    The proposed rule also would require records entities that are subject to § 371.4(b) to include information on QFCs to which their reportable subsidiaries are a party. This information would be provided by the records entity, not the reportable subsidiary. As discussed previously, a reportable subsidiary would be defined to include a subsidiary of an IDI that is not a functionally regulated subsidiary as defined in 12 U.S.C. 1844(c)(5), a security-based swap dealer as defined in 15 U.S.C. 78c(a)(71), or a major security-based swap participant as defined in 15 U.S.C. 78c(a)(67). Like IDIs, reportable subsidiaries are excluded from the recordkeeping requirements of Part 148, while information as to subsidiaries that are not reportable subsidiaries would be available to the FDIC from information provided under Part 148. Without information as to QFCs of reportable subsidiaries, the FDIC, as receiver, might not have information that would allow it to assess the effect of its transfer and retention decisions for QFCs of an IDI on the entire group comprised of the IDI and its subsidiaries. While this information would also be useful from limited scope entities maintaining information in accordance with Appendix A, the FDIC does not believe that the advantage of having this information on reportable subsidiaries would outweigh the burden for these smaller IDIs which, individually or with their subsidiaries, are not expected to normally have significant QFC positions.

    Section 371.4(c) of the proposed rule would provide requirements for a records entity that changes its recordkeeping status. It would require that a limited scope entity that is maintaining QFC records in accordance with the tables in Appendix A that subsequently becomes a full scope entity maintain QFC records in accordance with the tables in Appendix B within 270 days of becoming a full scope entity or, if it is an accelerated records entity, within 60 days. The proposed rule would require such an entity to continue to maintain the records under the tables in Appendix A until it maintains the QFC records specified in the tables to Appendix B. A full scope entity that subsequently becomes a limited scope entity would be permitted to opt to maintain records under the tables in Appendix A. This entity would be required to continue to maintain the records specified in the tables to Appendix B until it maintains the records in accordance with Appendix A. The FDIC is not requiring a time period for compliance in such instance because the records under Appendix B are more comprehensive than the records under Appendix A.

    If a limited scope entity that is not yet maintaining QFC records in accordance with Appendix A or B becomes a full scope entity, the proposed rule would require the records entity to maintain QFC records in accordance with Appendix B within 270 days of the date on which it became a records entity or, if it is an accelerated records entity, within 60 days. The same compliance timeframes would apply to a records entity that is a full scope entity that becomes a limited scope entity before it maintains QFC records in accordance with Appendix B. These compliance periods for records entities that change their recordkeeping status reflect the importance to the FDIC of promptly obtaining QFC records from IDIs in troubled condition.

    Records entities that experience a change in status, like IDIs newly subject to Part 371, would be permitted to apply for extensions of time to comply under § 371.1(d).

    The proposed rule would retain the de minimis exception included in Current Part 371. This provision allows a records entity with fewer than 20 QFC positions at the time it becomes a records entity to maintain these records in any format it chooses, including paper records, so long as the required records are capable of being updated daily, provided that the records entity does not subsequently have 20 or more QFC positions.

    5. Transition for Existing Records Entities

    Section 371.5 of the proposed rule would provide rules for full scope entities that are subject to Current Part 371 immediately prior to the effective date of the amendments to Part 371 to transition to the new recordkeeping requirements included in the proposed rule. Limited scope entities that are subject to Current Part 371 immediately prior to the effective date of the amendments would not be required to transition to the new recordkeeping requirements. If, however, any such limited scope entity ceases to be subject to the recordkeeping requirements because it ceases to be in troubled condition for one year pursuant to § 371.3(d) but subsequently again becomes subject to the recordkeeping requirements, at such subsequent time the limited scope entity would be subject to the new recordkeeping requirements.

    Under the proposed rule, a full scope entity that is maintaining QFC records in accordance with Current Part 371 immediately prior to the effective date of the amendments to Part 371 would be required to comply with all recordkeeping requirements of Part 371 within 270 days after the effective date of the amendments or, in the case of an accelerated records entity, 60 days. Any such records entity would also be required to continue to maintain the records required by Current Part 371 until it maintains the records required by § 371.4(b), as applicable.

    Additionally, the proposed rule contains a provision that addresses the transition of a full scope entity that is required to keep records under the Current Part 371 but is not in compliance with Current Part 371's recordkeeping requirements immediately prior to the effective date of the amendments to Part 371. The proposed rule would require such a records entity to comply with the recordkeeping requirements of Part 371, as amended, within 270 days after the date that it first became a records entity or, in the case of an accelerated records entity, 60 days.

    The effect of these provisions would be to provide more time for the transition to the recordkeeping requirements of Part 371, as amended, for full scope entities that are keeping the records required under Current Part 371 and less time for those that are not. The FDIC believes that it is reasonable to give IDIs that are actually maintaining the information required by Current Part 371 more time to transition to the recordkeeping requirements of the amendments to Part 371 because even in the worst case scenario where the IDI is placed into receivership prior to the transition, the FDIC will have some information on the QFCs of the IDI to use in making the transfer determination. If the transition provisions of the proposed rule were to give a full new 270 day period to an IDI already subject to Part 371, it might be the case that the IDI would be placed into receivership prior to providing any of the records required by Current Part 371 or the proposed rule.

    6. Enforcement Actions

    Section 371.6 of the proposed rule is unchanged from § 371.5 of Current Part 371. It provides that violation of Part 371 would subject a records entity to enforcement action under Section 8 of the FDI Act (12 U.S.C. 1818).

    7. Appendix A

    Appendix A of the proposed rule would apply to a records entity that is a limited scope entity.20 The file structure for Appendix A would require two data tables: (1) Table A-1—Position-level data and (2) Table A-2—Counterparty Netting Set Data. It would also require two master data lookup tables: (1) Corporate Org Master Table and (2) Counterparty Master Table. Although the scope of Appendix A is generally similar to the scope of information required under Current Part 371, the approach to the format of the data required is changed. All of the proposed tables are expected to be data sets that allow for sorting and review using readily available tools which the FDIC expects will make them more useful to the institution as well as to the FDIC in the event it is appointed as receiver. To accommodate this change in format and to make it easier to input and to sort data, the lookup tables have been added.

    20 As discussed previously, a limited scope entity may elect to report on the more comprehensive Appendix B.

    Table A-1. Like Table A-1 of Current Part 371, Table A-1 would require position level information as to each QFC of a records entity. Certain changes have been made with respect to the information required on current Table A-1, however, with two data fields eliminated and a few others added in proposed Table A-1.

    Specifically, Table A-1 of the proposed rule would make a limited number of additions to the rows included in Table A-1 of Current Part 371 in order to provide ready electronic access to information that FDIC staff has found to be important in determining whether to transfer or retain QFCs of a failed IDI. These additions include Row A1.1, which requires an “as of” date. This information is important because a records entity often derives data from multiple systems in multiple locations and the FDIC needs to be able to expeditiously determine whether, due to differences in time zone, legal holidays or other factors, any of the data is not current. Other additions are made to allow for systematic, electronic identification of parties. Row A1.2 would require that a records entity identifier be provided and Row A1.4 would require use of a counterparty identifier. Current Part 371 requires that a records entity provide a list of counterparty identifiers, but the new proposed format will facilitate the prompt and accurate identification of counterparties as well as the determination of whether they are affiliated entities. This is important because in an FDIA resolution, QFCs must be transferred on an all-or-none basis with respect to all QFCs entered into with counterparties of the same affiliated group. This may, but does not always, comport with straightforward netting sets, so the efficient identification of affiliated counterparties is critical to the FDIC's decisions that must be made within the short one-business-day stay period. In addition, proposed Table A-1 would require that the identifier used for records entities as well as counterparties be a Legal Entity Identifier (“LEI”), if the records entity or counterparty has one. LEIs are identifiers maintained for companies by a global organization and are increasingly used by financial institutions. Accordingly, their use in Part 371 would ensure that variations from formal names do not result in the misidentification of a records entity or counterparty and thus help ensure that the FDIC satisfies its obligation to transfer all, or none, of the QFC positions between a failed IDI and a counterparty and its affiliates.

    Proposed new Rows A1.5 and A1.6, which would require that data include the internal booking location identifier and the unique booking unit or desk identifier of a QFC, are intended to improve the ability of the FDIC to identify individuals at a records entity who are familiar with a particular position. This can be of major importance to the FDIC in determining, during the one business day stay period, whether to retain or transfer a QFC. This requirement would replace the requirement in Current Part 371 that the table specify a portfolio location identifier and provide a list of booking locations.

    Some of the new rows in Table A-1 are designed to provide the FDIC with information about other positions or assets of the records entity to which a QFC relates. For example, where an interest rate swap relates to a loan made by an IDI or to a different swap of the IDI, this information would be of critical importance to the FDIC in making its determination of whether to transfer or retain that QFC. The FDIA provides that a guarantee or other credit enhancement of a QFC is itself a QFC.21 Under Current Part 371, a guarantee or other credit enhancement was reported in the same manner as any other QFC, but experience under Current Part 371 made clear that records on guarantees and credit enhancements would be clearer and more complete with clear information with respect to the type of QFC covered by the enhancement and the QFC party whose obligations are being credit enhanced be specified. Accordingly, new rows A1.8 and A1.9 would require that information.

    21 12 U.S.C.(e)(8)(D).

    Rows A1.19-A1.21 would require additional information as to third party credit enhancements in favor of the records entity. This information is important to assessing credit risk and net exposure with respect to QFCs, which will facilitate decisions with respect to transfer of those QFCs. Rows A1.22-A1.24 would require information as to positions of the records entity to which the QFC relates. For example, these rows would indicate if obligations relating to a loan made by the failed IDI are being hedged by the QFC.

    Other proposed changes are intended to facilitate the ability of the FDIC to electronically identify positions and governing agreements. Rows A1.10-A1.12 would require identifying information regarding the QFC master agreement or primary agreement (e.g., the guarantee agreement in the case of a guarantee) and, if different, netting agreement, in lieu of the requirement in Current Part 371 that these agreements be separately listed. Row A1.13 would add a requirement that the trade date of a position be specified in order to help the FDIC differentiate between different positions with the same counterparty.

    Finally, Table A-1 does not include two data fields in Table A of Current Part 371 that in practice have not generally proved to elicit useful information. These are the rows that require that the purpose of the QFC position and that documentation status be identified.

    Table A-2. Like Table A-2 of Current Part 371, Table A-2 would require information as to QFC positions aggregated by counterparty and maintained at each level of netting under the relevant governing agreement. If a master agreement covers multiple types of transactions, but does not require that the different types of transactions be netted against each other the net exposures under each type of transaction would need to be separately reported. Thus, for example, where a single Master Agreement covered both interest rate swaps and forward exchange transactions but did not require netting between the swap positions and the repo positions, the net exposures of the interest rate swaps would be reported separately from the net exposures of the repurchase agreements.

    While there are several non-substantive, clarifying drafting changes and additions to rows included in the existing Table A-2, the substantive additions are limited. Like Table A-1, Table A-2 includes new rows that require records entity identifiers, information as to third party credit enhancements in favor of the records entity and additional information relating to the underlying contracts for QFCs that are themselves credit enhancements.

    Rows A2.16-A2.17 would require information as to the next margin payment date in order to help the receiver or transferee avoid inadvertent defaults and analyze the positions.

    Table A-2 would continue require information as to the net current market value of all positions under a netting agreement, but would also require that the current positive market value and current negative market value of all such positions be separately stated. This break down of information would assist the FDIC in its analysis of the net overall position.

    Corporate Org Master Table. The proposed rule retains the requirement of Current Part 371 for complete information regarding the organizational structure of the records entity, however, proposed Appendix A would require that a records entity maintain that information in the corporate organizational master table in lieu of any other form of organizational chart. Requiring this information in this format will make this information more easily accessible to the FDIC with improved functionality.

    Counterparty Master Table. The FDIA requires that in making a transfer of a QFC the receiver must either (1) transfer all QFCs between a records entity and a counterparty and the counterparty's affiliates to the same transferee IDI, or (2) transfer none of such QFCs.22 Thus, an understanding of the relationship of the counterparties is critical to the FDIC's function as receiver. Current Part 371 required this information in the form of a list of affiliates of counterparties that are also counterparties to QFC transactions with a records entity or its affiliates. The proposed rule would require that a records entity maintain this information in the form of a counterparty organizational master table that would be completed with respect to each counterparty of a records entity. The listing on each such table of the immediate and ultimate parent entity of the counterparty would enable the FDIC to efficiently and reliably identify counterparties that are affiliates of each other without requiring full organizational charts of each counterparty group.

    22 12 U.S.C. 1821(e)(9).

    8. Appendix B

    Appendix B of the proposed rule would apply to a records entity that is a full scope entity as well as to a limited scope entity that elects to use Appendix B rather than Appendix A. As discussed previously, Appendix B corresponds to the information required for records entities under Part 148. It includes all of the data discussed above that is required by Appendix A plus additional information that is important for understanding the larger and more complex QFC portfolios of the largest IDIs. The file structure for Appendix B would require four data tables: (1) Table A-1—Position-level data, (2) Table A-2—Counterparty Netting Set Data, (3) Table A-3—Legal Agreements and (4) Table A-4—Collateral Detail Data. It would also require four master data lookup tables: (1) Corporate Org Master Table, (2) Counterparty Master Table, (3) Booking Location Master Table and (4) Safekeeping Agent Master Table.

    The most significant additional data required by Appendix B, as compared to Appendix A, is provided for in Tables A-3 and A-4 of Appendix B. In general, these Tables require additional information with respect to the master agreements or other contracts governing QFCs as well as additional information regarding collateral supporting QFCs.

    In addition, Tables A-1 and A-2 for these entities require that the market value and notional amount of positions be expressed in local currencies, as well as in U.S. dollars, and that information as to amount of collateral subject to re-hypothecation be provided.

    Table A-3. This table would require specific information as to each governing agreement, such as an ISDA master agreement or other netting agreement or, in the case of a QFC that is a credit enhancement, the agreement governing such credit enhancement. The required information would include the agreement's governing law, whether the agreement includes a cross-default determined by reference to an entity that is not a party to the agreement and, if so, the identity of such other party, and contact information for each counterparty.

    The information as to governing law is needed to evaluate whether there is any likelihood of different treatment of transfer of the QFC, access to collateral or other matters under non-U.S. law. The cross-default information is necessary so that the likelihood of the QFC terminating on account of the insolvency or payment defaults or other matters relating to a third party can be analyzed. The counterparty contact information may be important in connection with the FDIC's obligations under 12 U.S.C. 1821(e)(10) to take steps reasonably calculated to give notice of transfer of a QFC.

    Table A-4. This table would require data as to the different items of collateral that support different netting sets. For each netting set, this table would require information as to the original face amount, local currency, market value, location and jurisdiction of each item of collateral provided. This table would also require an indication of whether the item of collateral is segregated from other assets of the safekeeping agent (which can be a third party or a party to the QFC), and whether re-hypothecation of the item of collateral is permitted. This data would help the FDIC evaluate the adequacy of collateral for each QFC netting set, as well as the potential for the collateral to be subject to ring-fencing by a foreign jurisdiction.

    Table A-1. Proposed Table A-1 in Appendix B is very similar to proposed Table A-1 in Appendix A. In addition to requiring that data be expressed in U.S. dollars, the table as proposed to be included in Appendix B requires that certain data also be expressed in local currency in order to assist the FDIC's analysis of positions. It also requires that the fair value asset classification under GAAP, IFRs or other applicable accounting standards be set forth and that additional information be provided relating to credit enhancements that benefit a QFC counterparty of the records entity.

    Table A-2. Table A-2 in Appendix B is very similar to Table A-2 in Appendix A. The only added rows would require information about collateral that is subject to re-hypothecation, information as to the identity of the safekeeping agent, i.e., the party holding the collateral, which can be either a party to the QFC or a third party, and information as to credit enhancements that benefit a QFC counterparty of the records entity.

    Booking Location Master Table. This master table would require certain additional information regarding each QFC, including internal booking location identifiers, and booking unit or desk contact information. This information would assist the FDIC in locating personnel at the IDI with knowledge of the QFC.

    Safekeeping Agent Master Table. This table would provide information as to points of contact for each collateral safekeeping agent. This information would assist the FDIC in locating personnel at the safekeeping agent who are familiar with the collateral and the safekeeping arrangements.

    IV. Expected Effects

    The FDIC has considered the expected effects of the proposed rule on covered institutions, the financial sector and the U.S. economy. The proposed rule will likely pose some costs for covered institutions, but by expanding the QFC recordkeeping requirements for institutions in troubled condition the proposed rule will enable the FDIC to make better informed decisions on how to manage the QFC portfolio of covered institutions if they enter into receivership. The proposed rule also would harmonize the scope and format of Part 371's QFC recordkeeping requirements for full scope entities with the recordkeeping requirements under Part 148 and thereby permit IDIs that become subject to Part 371 and are members of corporate groups subject to Part 148 to use information technology systems developed by their Part 148 affiliates in order to comply with Part 371. Finally, by enabling the FDIC to more efficiently evaluate and understand QFC portfolios the proposed rule will help the FDIC as receiver minimize unintended defaults through failures to make timely payments or collateral deliveries to QFC counterparties.

    During the financial crisis of 2008 and ensuing recession many banks failed, some of which were party to significant volumes of QFCs. Through its experience of working with banks in troubled condition that were establishing systems to comply with the recordkeeping requirements of Current Part 371, the FDIC concluded that institutions with larger and more complex portfolios of QFCs would be more difficult to resolve in an efficient manner unless more QFC information was readily accessible. Readily available information on collateral, guarantees, credit enhancements, etc. would be necessary to evaluate counterparty risk and maximize value to the receivership. The proposed rule should provide benefits by reducing the likelihood that a future failure of an insured depository institution with a large and complex portfolio of QFCs could result in unnecessary losses to the receivership.

    Full Scope Entities

    The proposed rule would likely result in large implementation costs for full scope entities. Significantly more information on QFCs is required to be maintained by the proposed rule relative to Current Part 371, including additional information as to collateral, guarantees and credit enhancements. The added information would enable the FDIC to more accurately assess and understand the QFC portfolios of institutions this size, which are more likely to be large and complex than the QFC portfolios of limited scope entities. As of September 30th, 2016, based on Consolidated Reports of Condition and Income as of that date, there were 40 FDIC-insured institutions with consolidated assets in excess of $50 billion. There are another 29 FDIC-insured institutions with consolidated assets of less than $50 billion that are members of corporate groups that are subject to Part 148, resulting in a total of 69 potential full-scope entities. In the event that one of these institutions becomes in a troubled condition, as defined in the rule, the FDIC assumes that, on average, it will take approximately 3,000 labor hours to comply with the recordkeeping requirements of the proposed revisions to Part 371 for full scope entities over and above the amount of time that would be expected to be required in order to comply with Current Part 371 for comparable entities. The implementation costs borne by covered institutions primarily include costs that would be incurred in order to accommodate the proposed new data elements. They are anticipated to be incurred when an institution becomes in a troubled condition and begins maintaining the QFC information in accordance with Part 371. Full scope entities that are subject to Current Part 371 when the final rule becomes effective could incur some transition expenses. Ongoing costs of recordkeeping for the proposed rule are assumed to be approximately similar to those under Current Part 371. The labor hours necessary to comply with the proposed rule will vary greatly for each institution depending upon the size and complexity of the QFC portfolio, the efficiency of the institution's QFC information management system(s), and the availability and accessibility of information on QFCs. Therefore, they are difficult to accurately estimate. Additionally, some costs related to complying with the rule might be ameliorated for an institution that is part of a corporate group subject to the Part 148, since its parent company may have already developed the capacity to meet the recordkeeping requirements for Part 148, which cover the same information, in the same format, as the proposed rule.

    Finally, any implementation costs of the proposed rule are contingent upon an entity becoming in a troubled condition and subject to the proposed rule. Based on FDIC supervisory experience, it is estimated that two full scope entities per year, on average, will be subject to the recordkeeping requirements of the proposed rule. It is anticipated that the proposed rule would result in an additional 6,000 labor hours per year for covered institutions.23 To comply with the recordkeeping requirements of the rule it is assumed that IDIs in troubled condition will employ attorneys, compliance officers, credit analysts, computer programmers, computer systems analysts, database administrators, financial managers, and computer information systems managers. The FDIC has estimated that the average hourly wage rate for recordkeepers to comply with the recordkeeping burden is approximately $57 per hour based on average hourly wage information by occupation from the U.S. Department of Labor, Bureau of Labor Statistics.24 Therefore the FDIC estimates that the proposed rule will pose approximately $342,000 in expected additional compliance costs on average, each year, for full scope entities.

    23 This estimate is potentially somewhat greater than would be expected based upon past practice for two reasons. First, not all institutions that become in a troubled condition ultimately complete recordkeeping compliance, as their condition may improve so that they are no longer in a troubled condition before the commencement or completion of recordkeeping. Secondly, the same institution may have cycled in and out of troubled condition more than once in the 16-year look back period and therefore their recordkeeping costs may have been counted more than once. The additional recordkeeping costs could be significantly lower for subsequent instances of institutions becoming in troubled condition because the recordkeeping procedures and systems have already been established.

    24 Wage estimate is in nominal dollars and has not been adjusted for inflation. The average hourly wage estimate is derived from May 2015 Occupational Employment Statistics (OES) from the Bureau of Labor Statistics (BLS) for occupations in depository credit intermediation organizations. Hourly wage rates represent the 75th percentile for Legal Occupations ($75.90), Computer Programmers ($49.86), Computer Systems Analyst ($53.12), Database Administrators ($54.25), Compliance Officers ($38.40), Credit Analysts ($44.99), Financial Managers ($63.22), and Computer and Information Systems Managers ($78.17).

    Limited Scope Entities

    The proposed rule would likely pose some costs for limited scope entities, but those costs would be relatively small. Only slightly more QFC information is required to be maintained by limited scope entities to comply with the proposed rule relative to Current Part 371. The FDIC is proposing to remove three data elements from the Current Part 371 recordkeeping requirements while adding less than twenty additional data elements. The FDIC understands that most of the added data elements cover information that is either information that an IDI would need to ascertain in order to comply with Current Part 371 or that would otherwise be readily available to the IDI.

    As of September 30th, 2016 there were 6,009 FDIC-insured institutions with total consolidated assets less than $50 billion. Of those institutions only 1,238 (21 percent) reported some amount of QFCs.25 To estimate the number of institutions affected by the proposed rule the FDIC analyzed the frequency with which FDIC-insured institutions with consolidated assets of less than $50 billion became in a troubled condition. Based on supervisory experience, it is estimated that limited scope entities become in a troubled condition 310 times per year on average. The annual average estimate of institutions in troubled condition with consolidated assets of less than $50 billion is adjusted to 65 to reflect the number of institutions in troubled condition that are likely to be a party to some volume of QFCs, and therefore subject to the proposed rule.26

    25 Consolidated Reports of Condition and Income, September 30, 2016.

    26 1,238 FDIC-insured institutions out of 6,009 reported some volume of QFCs on their Consolidated Reports of Condition and Income. Therefore it is estimated that only 21 percent of the historical average annual rate of institutions in a troubled condition had some volume of QFCs (310*0.21 = 65).

    In the event that a limited scope entity becomes in a troubled condition, the FDIC assumes that it will take approximately 5 labor hours, on average, to comply with the added recordkeeping requirements of the proposed revisions to Part 371. The implementation costs borne by covered institutions primarily include costs that would be incurred in order to accommodate the proposed new data elements. They are anticipated to be incurred when an institution becomes in a troubled condition and begins maintaining the QFC information in accordance with Part 371. Ongoing costs of recordkeeping for the proposed rule are assumed to be approximately similar to those under Current Part 371. Therefore, the FDIC estimates that the added compliance costs associated with the proposed rule are 325 hours annually 27 for limited scope entities that are likely to become in a troubled condition.28 However, assuming that the proportion of limited scope entities that become in a troubled condition in future years remains constant, 29 of the 65 estimated average annual limited scope entities that are likely to become in a troubled condition have less than $550 million in assets. They are therefore likely to have insignificant volumes of QFCs and an associated burden estimate of 1 hour or less. The labor hours necessary to comply with the proposed rule will vary greatly for each institution depending upon the size and complexity of its QFC portfolio, the efficiency of the institution's QFC information management system(s) and the availability and accessibility of information on QFCs. Therefore, the added compliance costs associated with the proposed rule are difficult to accurately estimate.

    27 The estimated average annual compliance burden hours for limited scope entities is the calculated as 65*5 hours, which equals 325 hours.

    28 As discussed previously with respect to full scope entities, this estimate is potentially somewhat greater than would be expected based upon past practice for two reasons. First, not all institutions that become in a troubled condition ultimately complete recordkeeping compliance, as their condition may improve so that they are no longer in a troubled condition before the commencement or completion of recordkeeping. Secondly, some institutions may be double-counted, because the same institution may have cycled in and out of troubled condition more than once in the 16-year look back period. The additional recordkeeping costs could be significantly lower the second time around.

    To comply with the recordkeeping requirements of the rule it is assumed that entities in troubled condition will employ attorneys, compliance officers, credit analysts, computer programmers, computer systems analysts, database administrators, financial managers, and computer information systems managers. The FDIC has estimated that the average hourly wage rate for recordkeepers to comply with the initial recordkeeping burden is approximately $57 per hour based on average hourly wage information by occupation from the U.S. Department of Labor, Bureau of Labor Statistics.29 Therefore the FDIC estimates that the proposed rule would pose approximately $19,000 in expected compliance costs each year on average, for limited scope entities. However, the costs realized by limited scope entities as a result of the proposed rule are likely to be lower in the first few years given that the proposed rule allows covered entities already maintaining information in accordance with the current Part 371 rule to continue to do so.

    29 Wage estimate is in nominal dollars and has not been adjusted for inflation. The average hourly wage estimate is derived from May 2015 Occupational Employment Statistics (OES) from the Bureau of Labor Statistics (BLS) for depository credit intermediation occupations. Hourly wage rates represent the 75th percentile for Legal Occupations ($75.90), Computer Programmers ($49.86), Computer Systems Analyst ($53.12), Database Administrators ($54.25), Compliance Officers ($38.40), Credit Analysts ($44.99), Financial Managers ($63.22), and Computer and Information Systems Managers ($78.17).

    All Covered Entities

    The total estimated compliance costs for all covered entities, both full scope and limited scope, is approximately $361,000 each year. The realized compliance costs for covered entities are dependent upon future utilization rates of QFCs, and the propensity of institutions to become troubled. Therefore it is difficult to accurately estimate.

    The proposed rule provides some relief from compliance costs relative to Current Part 371 by extending the time period allotted for an institution in troubled condition to start maintaining the required QFC information from 60 days to 270 days, with the exception of accelerated records entities. It has been the FDIC's experience that large institutions with complex QFC portfolios had difficulty meeting the current 60-day compliance deadline. Failure to meet the initial deadline necessitated multiple rounds of extension requests that were cumbersome and time-consuming for institutions in troubled condition and their primary regulator. By extending the compliance period to 270 days for all institutions, both “full scope” and “limited scope” entities, the proposed rule will reduce the overall compliance costs. Along with the extended compliance period the proposed rule also requires institutions to include a project plan with their extension request. However, the proposed inclusion of the project plan provision reflects current FDIC practice, and therefore, poses no additional burden.

    The proposed rule would harmonize QFC recordkeeping requirements for full scope entities in troubled condition with the Part 148 requirements for other members of their corporate groups. This harmonization benefits these IDIs by enabling them to reduce costs by using information technology created for compliance with Part 148 by other members of their corporate group. Moreover, consistency of reporting across the corporate group would benefit the FDIC as receiver by enabling it to better analyze how an IDI's QFC positions relate to QFC positions of other members of the corporate group.

    The proposed rule should also provide indirect benefits to QFC counterparties of institutions in troubled condition by helping the FDIC as receiver avoid unintended payment or delivery disruptions. The additional information required by the proposed rule includes detailed information about collateral, guarantees and credit enhancements which will significantly enhance the ability of the FDIC to judiciously exercise its rights and responsibilities related to QFC portfolios for institutions in troubled condition within the statutory one-business day stay period.

    V. Alternatives Considered

    The FDIC considered a number of alternatives in developing the proposed rule. The major alternatives include: (i) Expanding the recordkeeping scope to include IDIs subject to any cease-and-desist order by, or written agreement with, the appropriate federal banking agency; (ii) expanding the recordkeeping scope for records entities to include all subsidiaries; (iii) recordkeeping thresholds of above and below $10 billion or $50 billion in total consolidated assets; (iv) requiring all records entities to maintain QFC records under the tables in Appendix B; (iv) requiring the same compliance period for all records entities; (v) not requiring existing full scope records entities to transition to the new recordkeeping requirements; and (vi) requiring existing limited scope entities to transition to the new recordkeeping requirements.

    The FDIC considered expanding the definition of “troubled condition” to include all cease-and-desist orders or written agreements issued by the appropriate Federal banking agency in addition to those requiring action to improve the financial condition of an IDI. In reviewing the types of orders and agreements, including stipulations and consent orders, that may be issued or entered into, the FDIC determined that the requirement with respect to an action to improve the financial condition of the IDI is appropriate because it is more likely that such orders relate to an institution for which failure is less remote than is likely the case in connection with other types of orders and agreements. As a result, the FDIC decided not to expand this prong of the definition of “troubled condition.” Nonetheless, this preamble clarifies (in section III.B.2) that an “action to improve the financial condition,” for purposes of this Part, may include, but is not limited to, an action to improve capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk.

    The FDIC also considered requiring IDIs that report on Appendix B to report QFC information for all subsidiaries rather than only “reportable subsidiaries.” However, expanding the scope of recordkeeping to all subsidiaries would be burdensome and would also be redundant for corporate groups that are subject to Part 148 because QFC information for subsidiaries that are not reportable subsidiaries (other than IDIs and insurance companies) is required under Part 148.

    In determining the scope of recordkeeping for records entities, the FDIC considered total consolidated asset thresholds above and below $50 billion. As discussed under “III.A The Proposed Rule, Summary”, the FDIC determined the $50 billion threshold was appropriate because institutions at or above this threshold are more likely to have complex QFC portfolios and it is an asset level used in the several regulations cited in the above section that has been deemed appropriate for enhanced regulation and supervision. The FDIC determined that a threshold below $50 billion would impact smaller IDIs and unduly burden community banks.

    The proposed rule requires certain records entities, as described previously, to maintain QFC records according to the tables in Appendix A or B depending on the size of the records entity.

    The FDIC considered requiring the same compliance period for all records entities subject to this Part. Based on its experience, the FDIC has found that the longer period (270 days) is appropriate for larger entities. Larger entities that are required to report on Appendix B due to a composite CAMEL rating of 3 generally need a longer period to comply and, because an entity with a composite CAMEL rating of 3 is less likely to fail imminently, the additional time for recordkeeping should not pose significant additional risks that the FDIC as receiver will lack the information it needs with respect to the QFC portfolio. Entities with a composite CAMEL rating of 4 or 5 pose greater risk of near-term failure. For the same reason, the proposed rule would not increase the length of extensions available for 4 and 5 rated entities (30 days), regardless of their size. Although it may not be feasible for large entities with complex QFC portfolios to complete the recordkeeping requirements within 60 days, the short deadline with the requirement that extension requests be accompanied by progress reports and action plans will help assure that the recordkeeping requirements are being met in the most expeditious manner and that appropriate resources are being devoted to the effort by the IDI in troubled condition.

    Finally, the FDIC considered other transition requirements. The alternative of not requiring transition to the new recordkeeping requirements by full scope entities was rejected because of the importance of having available for these entities, that are more likely to have complex QFC portfolios, all of the additional information included in the proposed rule, should such an entity become subject to receivership. The FDIC also considered requiring existing limited scope entities to transition to the new recordkeeping requirements, but determined that given the limited nature of almost all existing limited scope entity QFC portfolios the added burden would exceed the benefit of requiring this transition.

    VI. Request for Comments

    The FDIC invites comments on all aspects of the proposed rule and requests feedback on the following specific questions.

    A. Scope of Coverage

    The proposed rule requires records entities, which are IDIs in troubled condition that receive notice from the FDIC that it is subject to this rule, to maintain QFC records in compliance with the provisions of this Part.

    • Should the definition of “troubled condition” be modified to increase or decrease the scope of IDIs that potentially may be subject to this rule? If so, how?

    B. Requirements

    Records entities would be required to maintain QFC records subject to the provisions of this Part. The FDIC requests comments on all aspects of the proposed requirement. In particular:

    • Should the same compliance periods apply to all records entities, including accelerated records entities and existing records entities?

    • Are the compliance periods in the proposed rule appropriate? If not, how much time should be provided?

    • A full scope entity is a records entity that has total consolidated assets equal to or greater than $50 billion or that is a member of a corporate group where at least one affiliate is required to maintain QFC records pursuant to 31 CFR part 148. Is the full scope entity threshold of $50 billion in total consolidated assets appropriate? If not, what threshold would be more appropriate and why?

    • Are the differences in recordkeeping requirements between full scope and limited scope entities appropriate? Are the additional requirements of Appendix B appropriate?

    • Should a limited scope entity be required to report under the tables in Appendix A, Appendix B, or be given the option of either Appendix A or B?

    • Should a records entity be provided a compliance timeframe when transitioning from being required to maintain records under the tables in Appendix B to deciding on maintaining records under the tables in Appendix A?

    • Should a limited scope entity have the option to maintain records under Appendix B in anticipation of meeting the criteria of a full scope entity at some point in the future?

    • Are there any data fields in the proposed tables of Appendix A or Appendix B that should be modified? Which fields and why?

    • Are there any additional data fields that should be included in the tables of Appendix A or Appendix B? What fields and why?

    • Is the proposed 7:00 a.m. deadline for an IDI to be capable of providing records to the FDIC unduly burdensome?

    • Is the new information that would be required of limited scope entities information that such entities would maintain in order to comply with Current Part 371 or information that is otherwise readily available to such entities? For example, would an IDI with a QFC that benefits from a guarantee ordinarily keep records concerning the guarantor? Would an IDI that is required to provide margin under its QFC ordinarily keep track of current margin delivery requirements either by keeping its own records or having access to data made available by its counterparty? Do the proposed changes to the recordkeeping requirements for limited scope entities impose a significant new burden on these entities as compared to the requirements currently in effect? If so, which aspects of the proposed requirements are significantly burdensome? Please be as specific as possible in your comments and quantify costs where possible.

    C. Implementation

    The FDIC recognizes implementing information technology systems that will be required for compliance with this Part will take time and has proposed 270 days for records entities other than accelerated records entities and 60 days for accelerated records entities.

    • Are there any aspects of the requirements that would take more time to implement? Which aspects and why? How much more time would be required?

    • Should accelerated records entities be given more or less time to comply with the recordkeeping requirements than is provided in the proposed rule? How much time and why?

    • Regarding § 371.5 (Transition for Existing Records Entities), should records entities that are not maintaining records under Part 371 at the time the proposed amendments to Part 371 become effective be given the same amount of time to comply with the recordkeeping requirements of this Part, as amended, as records entities that are maintaining such records on the effective date?

    • Should existing full scope entities that are maintaining records in accordance with Part 371 when the proposed amendments become effective be required to transition to the new recordkeeping requirements?

    • Should existing limited scope entities be required to transition to the new recordkeeping requirements?

    D. Benefits and Costs

    The proposed rule would impose costs on certain records entities, but it would also provide some benefits.

    • To what extent would the proposed rule impact the QFC recordkeeping operations and IT systems normally maintained by IDIs?

    • What would be the costs or savings associated with these changes?

    • By aligning the data requirements of Part 371 with those of Part 148, would it reduce the burden on corporate groups that are subject to the QFC recordkeeping requirements of both Part 148 and that contain an IDI subject to Part 371? Please quantify costs or burden to the extent possible.

    • How burdensome would it be for a records entity that is maintaining records according to the appendix and tables in the existing Part 371 to transition to the requirements of Appendix B? What costs would be associated with that burden?

    VII. Regulatory Process A. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The FDIC has determined that this proposed rule would revise an existing collection of information. The FDIC will request approval from the OMB for this proposed information collection. OMB will assign an OMB control number.

    Certain provisions of the proposed rule contain “collection of information” requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with the requirements of the PRA, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently-valid Office of Management and Budget (OMB) control number. The OMB control number is 3064-0163 and will be revised. The information collection requirements contained in this proposed rulemaking will be submitted by the FDIC to OMB for review and approval under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and § 1320.11 of the OMB's implementing regulations (5 CFR 1320.11).

    As discussed above, the FDIC proposes to amend its regulations regarding Part 371 which requires IDIs in a troubled condition to keep records relating to QFCs to which they are party. The FDIC estimates that the total compliance burden for covered entities, including full scope and limited scope entities, is as follows:

    Title Type of burden Estimated
  • number of
  • respondents
  • Estimated
  • number of
  • responses
  • Estimated
  • time per
  • response
  • (hours)
  • Frequency
  • of response
  • Total annual
  • estimated
  • burden
  • (hours)
  • Full Scope Entities: Recordkeeping related to QFCs to which they are a party when they are in troubled condition Recordkeeping 2 1 3,000 On Occasion 6,000 Limited Scope Entities: Recordkeeping related to QFCs to which they are a party when they are in troubled condition Recordkeeping 65 1 5 On Occasion 325 Total Burden 6,325

    Comments are invited on:

    (a) Whether the collections of information are necessary for the proper performance of the agencies' functions, including whether the information has practical utility;

    (b) The accuracy of the estimates of the burden of the information collections, including the validity of the methodology and assumptions used;

    (c) Ways to enhance the quality, utility, and clarity of the information to be collected; and

    (d) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

    All comments will become a matter of public record. Comments on aspects of this notice that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the addresses listed in the ADDRESSES section of this document. A copy of the comments may also be submitted to the OMB desk officer for the agencies: By mail to U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503; by facsimile to (202) 395-5806; or by email to: [email protected], Attention, Federal Banking Agency Desk Officer.

    B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., requires an agency to provide an initial regulatory flexibility analysis with a proposed rule, unless the agency certifies that the rule would not have a significant economic impact on a substantial number of small entities (defined by the Small Business Administration for purposes of the RFA to include banking entities with total assets of $550 million or less).

    For the same reasons as stated in the NPR of the existing Part 371 (73 FR 43635, 43640 (July 28, 2008)), the proposed rule would not have a significant economic impact on a substantial number of small entities. Most small entities do not participate in capital markets involving QFCs since QFCs are “generally sophisticated financial instruments that are usually used by larger financial institutions to hedge assets, provide funding, or increase income.” Id. According to data from the September 30th, 2016 Consolidated Reports of Condition and Income the FDIC insures 4,748 small depository institutions and 543 (11 percent) report some volume of QFCs. To estimate the number of small institutions affected by the proposed rule the FDIC analyzed the frequency with which FDIC-insured institutions with consolidated assets less than $550 million became in a troubled condition. Based on FDIC supervisory experience, it is estimated that small institutions became in a troubled condition 267 times per year on average. The annual average estimate of institutions in troubled condition with consolidated assets less than $550 million is adjusted to 29 to reflect the number of institutions in troubled condition that are likely to be a party to some volume of QFCs, and therefore subject to the proposed rule.30

    30 543 small FDIC-insured institutions out of 4,748 reported some volume of QFCs on their Consolidated Reports of Condition and Income. Therefore it is estimated that only 11 percent of the historical average annual rate of small institutions in a troubled condition had some volume of QFCs (267*0.11 = 29).

    In the event that one of these small institutions becomes in a troubled condition, the FDIC assumes that it will take approximately one labor hour, on average, to comply with the added recordkeeping requirements of the proposed revisions to Part 371. Small depository institutions generally do not have large and complex portfolios of QFCs and, therefore, the anticipated burden hours associated with the proposed rule is going to be low. Accordingly, the FDIC estimates that the added compliance costs associated with the proposed rule are 29 hours annually for all small institutions with some volume of QFCs that become in a troubled condition. The labor hours necessary to comply with the proposed rule will vary greatly for each institution depending upon the size and complexity of the QFC portfolio, the efficiency of the institution's QFC information management system(s) and the availability and accessibility of information on QFCs.

    To comply with the recordkeeping requirements of the rule it is assumed that entities in troubled condition will employ attorneys, compliance officers, credit analysts, computer programmers, computer systems analysts, database administrators, financial managers, and computer information systems managers. The FDIC has estimated that the average hourly wage rate for recordkeepers to comply with the initial recordkeeping burden is approximately $57 per hour based on average hourly wage information by occupation from the U.S. Department of Labor, Bureau of Labor Statistics.31 Therefore the FDIC estimates that the proposed rule would pose $1,653 in expected compliance costs each year on average, for small depository institutions. However, the costs realized by limited scope entities as a result of the proposed rule are likely to be lower in the first few years given that the proposed rule allows covered entities already maintaining information in accordance with the current Part 371 rule to continue to do so. For these reasons, the FDIC hereby certifies that the proposed rule would not have a significant economic impact on a substantial number of small entities.

    31 Wage estimate is in nominal dollars and has not been adjusted for inflation. The average hourly wage estimate is derived from May 2015 Occupational Employment Statistics (OES) from the Bureau of Labor Statistics (BLS) for depository credit intermediation occupations. Hourly wage rates represent the 75th percentile for Legal Occupations ($75.90), Computer Programmers ($49.86), Computer Systems Analyst ($53.12), Database Administrators ($54.25), Compliance Officers ($38.40), Credit Analysts ($44.99), Financial Managers ($63.22), and Computer and Information Systems Managers ($78.17).

    C. The Treasury and General Government Appropriations Act, 1999

    The FDIC has determined that the proposed rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681).

    D. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, sec. 722, 113 Stat. 1338, 1471 (1999)) requires the FDIC to use plain language in all proposed and final rules published after January 1, 2000. The FDIC invites your comments on how to make this proposed rule easier to understand. For example:

    • Has the FDIC organized the material to suit your needs? If not, how could this material be better organized?

    • Are the requirements in the proposed regulation clearly stated? If not, how could the regulation be stated more clearly?

    • Does the proposed regulation contain language or jargon that is unclear? If so, which language requires clarification?

    • Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes to the format would make the regulation easier to understand?

    • What else could the FDIC do to make the regulation easier to understand?

    Text of the Proposed Rule Federal Deposit Insurance Corporation 12 CFR Chapter III List of Subjects in 12 CFR Part 371

    Administrative practice and procedure, Bank deposit insurance, Banking, Banks, Reporting and recordkeeping requirements, Securities, State non-member banks.

    Authority and Issuance

    For the reasons set forth in the preamble, the Federal Insurance Deposit Corporation proposes to revise 12 CFR part 371 to read as follows:

    PART 371—RECORDKEEPING REQUIREMENTS FOR QUALIFIED FINANCIAL CONTRACTS Sec. 371.1 Scope, purpose, and compliance dates. 371.2 Definitions. 371.3 Maintenance of records. 371.4 Content of records. 371.5 Enforcement actions. Appendix A to Part 371—File structure for qualified financial contract records for Limited Scope Entities. Appendix B to Part 371—File structure for qualified financial contract records for Full Scope Entities. Authority:

    12 U.S.C. 1819(a)(Tenth); 1820(g); 1821(e)(8)(D) and (H); 1831g; 1831i; and 1831s.

    § 371.1 Scope, purpose, and compliance dates.

    (a) Scope. This part applies to each insured depository institution that qualifies as a “records entity” under the definition set forth in § 371.2(q).

    (b) Purpose. This part establishes recordkeeping requirements with respect to qualified financial contracts for insured depository institutions that are in a troubled condition.

    (c) Compliance Dates. (1) Within 3 business days of becoming a records entity, the records entity shall provide to the FDIC, in writing, the name and contact information for the person at the records entity who is responsible for recordkeeping under this part and, unless not required to maintain files in electronic form pursuant to § 371.4(d), a directory of the electronic files that will be used to maintain the information required to be kept by this part.

    (2) Except as provided in § 371.5:

    (i) A records entity, other than an accelerated records entity, shall comply with all applicable recordkeeping requirements of this part within 270 days after it becomes a records entity.

    (ii) An accelerated records entity shall comply with all applicable recordkeeping requirements of this part within 60 days after it becomes a records entity.

    (iii) Notwithstanding paragraphs (c)(2)(i) and (ii) of this section, a records entity that becomes an accelerated records entity after it became a records entity shall comply with all applicable recordkeeping requirements of this part within 60 days after it becomes an accelerated records entity or its original 270 day compliance period, whichever time period is shorter.

    (d) Extensions of time to comply. The FDIC may, in its discretion, grant one or more extensions of time for compliance with the recordkeeping requirements of this part.

    (1) Except as provided in paragraph (d)(2) of this section, no single extension for a records entity shall be for a period of more than 120 days.

    (2) For a records entity that is an accelerated records entity at the time of a request for an extension, no single extension shall be for a period of more than 30 days.

    (3) A records entity may request an extension of time by submitting a written request to the FDIC at least 15 days prior to the deadline for its compliance with the recordkeeping requirements of this part. The written request for an extension must contain a statement of the reasons why the records entity cannot comply by the deadline for compliance, a project plan (including timeline) for achieving compliance, and a progress report describing the steps taken to achieve compliance.

    § 371.2 Definitions.

    For purposes of this part:

    (a) Accelerated records entity means a records entity that:

    (1) Has a composite rating, as determined by its appropriate Federal banking agency in its most recent report of examination, of 4 or 5 under the Uniform Financial Institution Rating System, or in the case of an insured branch of a foreign bank, an equivalent rating; or

    (2) Is determined by the appropriate Federal banking agency or by the FDIC in consultation with the appropriate Federal banking agency to be experiencing a significant deterioration of capital or significant funding difficulties or liquidity stress, notwithstanding the composite rating of the institution by its appropriate Federal banking agency in its most recent report of examination.

    (b) Affiliate means any entity that controls, is controlled by, or is under common control with another entity.

    (c) Amendment Effective Date means [insert effective date of amendment].

    (d) Appropriate Federal banking agency means the agency or agencies designated under 12 U.S.C. 1813(q).

    (e) Business day means any day other than any Saturday, Sunday or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.

    (f) Control. An entity controls another entity if:

    (1) The entity directly or indirectly or acting through one or more persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the other entity;

    (2) The entity controls in any manner the election of a majority of the directors or trustees of the other entity; or

    (3) The Board of Governors of the Federal Reserve System has determined, after notice and opportunity for hearing in accordance with 12 CFR 225.31, that the entity directly or indirectly exercises a controlling influence over the management or policies of the other entity.

    (g) Corporate group means an entity and all affiliates of that entity.

    (h) Counterparty means any natural person or entity (or separate non-U.S. branch of any entity) that is a party to a QFC with a records entity or, if the records entity is required or chooses to maintain the records specified in § 371.4(b), a reportable subsidiary of such records entity.

    (i) Full scope entity means a records entity that has total consolidated assets equal to or greater than $50 billion or that is a Part 148 affiliate.

    (j) Insured depository institution means any bank or savings association, as defined in 12 U.S.C. 1813, the deposits of which are insured by the FDIC.

    (k) Legal entity identifier or LEI for an entity means the global legal entity identifier maintained for such entity by a utility accredited by the Global LEI Foundation or by a utility endorsed by the Regulatory Oversight Committee. As used in this definition:

    (1) Regulatory Oversight Committee means the Regulatory Oversight Committee (of the Global LEI System), whose charter was set forth by the Finance Ministers and Central Bank Governors of the Group of Twenty and the Financial Stability Board, or any successor thereof; and

    (2) Global LEI Foundation means the not-for-profit organization organized under Swiss law by the Financial Stability Board in 2014, or any successor thereof.

    (l) Limited scope entity means a records entity that is not a full scope entity.

    (m) Parent entity with respect to an entity means an entity that controls that entity.

    (n) Part 148 affiliate means a records entity that is a member of a corporate group one or more other members of which are required to maintain QFC records pursuant to 31 CFR part 148.

    (o) Position means an individual transaction under a qualified financial contract and includes the rights and obligations of a person or entity as a party to an individual transaction under a qualified financial contract.

    (p) Qualified financial contract or QFC means any qualified financial contract as defined in 12 U.S.C. 1821(e)(8)(D), and any agreement or transaction that the FDIC determines by regulation, resolution, or order to be a QFC, including without limitation, any securities contract, commodity contract, forward contract, repurchase agreement, and swap agreement.

    (q) Records entity means any insured depository institution that has received written notice from the institution's appropriate Federal banking agency or the FDIC that it is in a troubled condition and written notice from the FDIC that it is subject to the recordkeeping requirements of this part.

    (r) Reportable subsidiary means any subsidiary of a records entity that is not:

    (1) A functionally regulated subsidiary as defined in 12 U.S.C. 1844(c)(5);

    (2) A security-based swap dealer as defined in 15 U.S.C. 78c(a)(71); or

    (3) A major security-based swap participant as defined in 15 U.S.C. 78c(a)(67).

    (s) Subsidiary has the meaning set forth in 12 U.S.C. 1813(w)(4).

    (t) Total consolidated assets means the total consolidated assets of a records entity and its consolidated subsidiaries as reported in the records entity's most recent year-end audited consolidated statement of financial condition filed with the appropriate Federal banking agency.

    (u) Troubled condition means an insured depository institution that:

    (1) Has a composite rating, as determined by its appropriate Federal banking agency in its most recent report of examination, of 3 (only for insured depository institutions with total consolidated assets of $10 billion or greater), 4 or 5 under the Uniform Financial Institution Rating System, or in the case of an insured branch of a foreign bank, an equivalent rating;

    (2) Is subject to a proceeding initiated by the FDIC for termination or suspension of deposit insurance;

    (3) Is subject to a cease-and-desist order or written agreement issued by the appropriate Federal banking agency, as defined in 12 U.S.C. 1813(q), that requires action to improve the financial condition of the insured depository institution or is subject to a proceeding initiated by the appropriate Federal banking agency which contemplates the issuance of an order that requires action to improve the financial condition of the insured depository institution, unless otherwise informed in writing by the appropriate Federal banking agency;

    (4) Is informed in writing by the insured depository institution's appropriate Federal banking agency that it is in troubled condition for purposes of 12 U.S.C. 1831i on the basis of the institution's most recent report of condition or report of examination, or other information available to the institution's appropriate Federal banking agency; or

    (5) Is determined by the appropriate Federal banking agency or the FDIC in consultation with the appropriate Federal banking agency to be experiencing a significant deterioration of capital or significant funding difficulties or liquidity stress, notwithstanding the composite rating of the institution by its appropriate Federal banking agency in its most recent report of examination.

    § 371.3 Maintenance of records.

    (a) Form and availability.

    (1) Unless it is not required to maintain records in electronic form as provided in § 371.4(d), a records entity shall maintain the records described in § 371.4 in electronic form and shall be capable of producing such records electronically in the format set forth in the appendices of this part.

    (2) All such records shall be updated on a daily basis and shall be based upon values and information no less current than previous end-of-day values and information.

    (3) Except as provided in § 371.4(d), a records entity shall compile the records described in § 371.4(a) or § 371.4(b) (as applicable) in a manner that permits aggregation and disaggregation of such records by counterparty. If the records are maintained pursuant to § 371.4(b), they must be compiled by the records entity on a consolidated basis for itself and its reportable subsidiaries in a manner that also permits aggregation and disaggregation of such records by the records entity and its reportable subsidiary.

    (4) Records maintained pursuant to § 371.4(b) by a records entity that is a Part 148 affiliate shall be compiled consistently, in all respects, with records compiled by its affiliate(s) pursuant to 31 CFR part 148.

    (5) A records entity shall maintain each set of daily records for a period of not less than five business days.

    (b) Change in Point of Contact. A records entity shall provide to the FDIC, in writing, any change to the name and contact information for the person at the records entity who is responsible for recordkeeping under this part within 3 business days of any change to such information.

    (c) Access to Records. A records entity shall be capable of providing the records specified in § 371.4 (based on the immediately preceding day's end-of-day values and information) to the FDIC no later than 7:00 a.m. (Eastern Time) each day. A records entity is required to make such records available to the FDIC following a written request by the FDIC for such records. Any such written request shall specify the date such records are to be made available (and the period of time covered by the request) and shall provide the records entity at least 8 hours to respond to the request. If the request is made less than 8 hours before such 7:00 a.m. deadline, the deadline shall be automatically extended to the time that is 8 hours following the time of the request.

    (d) Maintenance of records after a records entity is no longer in a troubled condition. A records entity shall continue to maintain the capacity to produce the records required under this part on a daily basis for a period of one year after the date that the appropriate Federal banking agency or the FDIC notifies the institution, in writing, that it is no longer in a troubled condition as defined in § 371.2 (u).

    (e) Maintenance of records after an acquisition of a records entity. If a records entity ceases to exist as an insured depository institution as a result of a merger or a similar transaction with an insured depository institution that is not in a troubled condition immediately following the transaction, the obligation to maintain records under this part on a daily basis will terminate when the records entity ceases to exist as a separately insured depository institution.

    § 371.4 Content of records.

    (a) Limited scope entities. Except as provided in § 371.5, a limited scope entity must maintain (at the election of such records entity) either the records described in paragraph (b) of this section or the following records:

    (1) The position-level data listed in Table A-1 in Appendix A of this part with respect to each QFC to which it is a party, without duplication.

    (2) The counterparty-level data listed in Table A-2 in Appendix A of this part with respect to each QFC to which it is a party, without duplication.

    (3) The corporate organization master table in Appendix A of this part for the records entity and its affiliates.

    (4) The counterparty master table in Appendix A of this part with respect to each QFC to which it is a party, without duplication.

    (5) All documents that govern QFC transactions between the records entity and each counterparty, including, without limitation, master agreements and annexes, schedules, netting agreements, supplements, or other modifications with respect to the agreements, confirmations for each QFC position that has been confirmed and all trade acknowledgments for each QFC position that has not been confirmed, all credit support documents including, but not limited to, credit support annexes, guarantees, keep-well agreements, or net worth maintenance agreements that are relevant to one or more QFCs, and all assignment or novation documents, if applicable, including documents that confirm that all required consents, approvals, or other conditions precedent for such assignment or novation have been obtained or satisfied.

    (6) A list of vendors directly supporting the QFC-related activities of the records entity and the vendors' contact information.

    (b) Full scope entities. A full scope entity must maintain the following records:

    (1) The position-level data listed in Table A-1 in Appendix B of this part with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (2) The counterparty-level data listed in Table A-2 in Appendix B of this part with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (3) The legal agreements information listed in Table A-3 in Appendix B of this part with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (4) The collateral detail data listed in Table A-4 in Appendix B of this part with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (5) The corporate organization master table in Appendix B of this part for the records entity and its affiliates.

    (6) The counterparty master table in Appendix B of this part with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (7) The booking location master table in Appendix B of this part for each booking location used with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (8) The safekeeping agent master table in Appendix B of this part for each safekeeping agent used with respect to each QFC to which it or any of its reportable subsidiaries is a party, without duplication.

    (9) All documents that govern QFC transactions between the records entity (or any of its reportable subsidiaries) and each counterparty, including, without limitation, master agreements and annexes, schedules, netting agreements, supplements, or other modifications with respect to the agreements, confirmations for each QFC position that has been confirmed and all trade acknowledgments for each QFC position that has not been confirmed, all credit support documents including, but not limited to, credit support annexes, guarantees, keep-well agreements, or net worth maintenance agreements that are relevant to one or more QFCs, and all assignment or novation documents, if applicable, including documents that confirm that all required consents, approvals, or other conditions precedent for such assignment or novation have been obtained or satisfied.

    (10) A list of vendors directly supporting the QFC-related activities of the records entity and its reportable subsidiaries and the vendors' contact information.

    (c) Change in recordkeeping status. (1) A records entity that was a limited scope entity maintaining the records specified in paragraphs (a)(1) through (a)(6) of this section and that subsequently becomes a full scope entity must maintain the records specified in paragraph (b) of this section within 270 days of becoming a full scope entity (or 60 days of becoming a full scope entity if it is an accelerated records entity). Until the records entity maintains the records required by paragraph (b) of this section it must continue to maintain the records required by paragraphs (a)(1) through (a)(6) of this section.

    (2) A records entity that was a full scope entity maintaining the records specified in paragraph (b) of this section and that subsequently becomes a limited scope entity may continue to maintain the records specified in paragraph (b) of this section or, at its option, may maintain the records specified in paragraphs (a)(1) through (a)(6) of this section, provided however, that such records entity shall continue to maintain the records specified in paragraph (b) of this section until it maintains the records specified in paragraphs (a)(1) through (a)(6) of this section.

    (3) A records entity that changes from a limited scope entity to a full scope entity and at the time it becomes a full scope entity is not yet maintaining the records specified in paragraph (a) of this section or paragraph (b) of this section must satisfy the recordkeeping requirements of paragraph (b) of this section within 270 days of first becoming a records entity (or 60 days of first becoming a records entity if it is an accelerated records entity).

    (4) A records entity that changes from a full scope entity to a limited scope entity and at the time it becomes a limited scope entity is not yet maintaining the records specified in paragraph (b) of this section must satisfy the recordkeeping requirements of paragraph (a) of this section within 270 days of first becoming a record entity (or 60 days of first becoming a record entity if it is an accelerated records entity).

    (d) Records entities with fewer than 20 QFC positions. Notwithstanding any other requirement of this part, if a records entity and, if it is a full scope entity, its reportable subsidiaries, have fewer than 20 open QFC positions in total (without duplication) on the date the institution becomes a records entity, the records required by this section are not required to be recorded and maintained in electronic form as would otherwise be required by this section, so long as all required records are capable of being updated on a daily basis. If at any time after it becomes a records entity, the institution and, if it is a full scope entity, its reportable subsidiaries, if applicable, have 20 or more open QFC positions in total (without duplication), it must record and maintain records in electronic form as required by this section within 270 days (or, if it is an accelerated records entity at that time, within 60 days). The records entity must provide to the FDIC, within 3 business days of reaching the 20-QFC threshold, a directory of the electronic files that will be used to maintain the information required to be kept by this section.

    § 371.5 Transition for existing records entities.

    (a) Limited Scope Entities. Notwithstanding any other provision of this part, an insured depository institution that became a records entity prior to the Amendment Effective Date and constitutes a limited scope entity on the Amendment Effective Date shall continue to comply with this part as in effect immediately prior to the Amendment Effective Date or, if it elects to comply with this part as in effect on and after such date, as so in effect, for so long as the entity remains a limited scope entity that has not ceased to be required to maintain the capacity to produce records pursuant to § 371.3(d).

    (b) Transition for full scope entities maintaining records on effective date. If an insured depository institution that constitutes a full scope entity on the Amendment Effective Date became a records entity prior to the Amendment Effective Date and is maintaining the records required by this part immediately prior to the Amendment Effective Date, such records entity shall comply with all recordkeeping requirements of this part within 270 days after the Amendment Effective Date (or no later than 60 days after the Amendment Effective Date if it is an accelerated records entity). Until the records entity maintains the records required by § 371.4(a) or § 371.4(b), as applicable, it must continue to maintain the records required by this part immediately prior to the Amendment Effective Date.

    (c) Transition for full scope entities not maintaining records on effective date. If an insured depository institution that constitutes a full scope entity on the Amendment Effective Date became a records entity prior to the Amendment Effective Date but is not maintaining the records required by this part immediately prior to the Amendment Effective Date, such records entity shall comply with all recordkeeping requirements of this part within 270 days after the date that it first became a records entity (or no later than 60 days after it first became a records entity if it is an accelerated records entity).

    § 371.6 Enforcement Actions.

    Violating the terms or requirements set forth in this part constitutes a violation of a regulation and subjects the records entity to enforcement actions under Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818).

    Appendix A to Part 371—File Structure for Qualified Financial Contract (QFC) Records for Limited Scope Entities Table A-1—Position-Level Data Field Example Instructions and data
  • application
  • Definition Validation
    A1.1 As of date 2015-01-05 Provide data extraction date YYYY-MM-DD A1.2 Records entity identifier 999999999 Provide LEI for records entity if available. Information needed to review position-level data by records entity Varchar(50) Validated against CO.2. A1.3 Position identifier 20058953 Provide a position identifier. Use the unique transaction identifier if available. Information needed to readily track and distinguish positions Varchar(100) A1.4 Counterparty identifier 888888888 Provide a counterparty identifier. Use LEI if counterparty has one. Information needed to identify counterparty by reference to Counterparty Master Table Varchar(50) Validated against CP.2 A1.5 Internal booking location identifier New York, New York Provide office where the position is booked. Information needed to determine system on which the trade is booked and settled Varchar(50) A1.6 Unique booking unit or desk identifier xxxxxx Provide an identifier for unit or desk at which the position is booked. Information needed to help determine purpose of position Varchar(50) A1.7 Type of QFC Credit, equity, foreign exchange, interest rate (including cross-currency), other commodity, securities repurchase agreement, securities lending, loan repurchase agreement, guarantee or other third party credit enhancement of a QFC Provide type of QFC. Use unique product identifier if available. Information needed to determine the nature of the QFC Varchar(100) A1.8 Type of QFC covered by guarantee or other third party credit enhancement Credit, equity, foreign exchange, interest rate (including cross-currency), other commodity, securities repurchase agreement, securities lending, or loan repurchase agreement If QFC type is guarantee or other third party credit enhancement, provide type of QFC that is covered by such guarantee or other third party credit enhancement. Use unique product identifier if available. If multiple asset classes are covered by the guarantee or credit enhancement, enter the asset classes separated by comma. If all the QFCs of the underlying QFC obligor identifier are covered by the guarantee or other third party credit enhancement, enter “All.” Varchar(200) Only required if QFC type (A1.7) is a guarantee or other third party credit enhancement. A1.9 Underlying QFC obligor identifier 888888888 If QFC type is guarantee or other third party credit enhancement, provide an identifier for the QFC obligor whose obligation is covered by the guarantee or other third party credit enhancement. Use LEI if underlying QFC obligor has one. Complete the counterparty master table with respect to a QFC obligor that is a non-affiliate Varchar(50) Only required if QFC asset type (A1.7) is a guarantee or other third party credit enhancement. Validated against CO.2 if affiliate or CP.2 if non-affiliate. A1.10 Agreement identifier xxxxxxxxx Provide an identifier for primary governing documentation, e.g. the master agreement or guarantee agreement, as applicable Varchar(50) A1.11 Netting agreement identifier xxxxxxxxx Provide an identifier for netting agreement. If this agreement is the same as provided in A1.10, use same identifier. Information needed to identify unique netting sets Varchar(50) A1.12 Netting agreement counterparty identifier xxxxxxxxx Provide a netting agreement counterparty identifier. Use same identifier as provided in A1.4 if counterparty and netting agreement counterparty are the same. Use LEI if netting agreement counterparty has one. Information needed to identify unique netting sets Varchar(50) Validated against CP.2. A1.13 Trade date 2014-12-20 Provide trade or other commitment date for the QFC. Information needed to determine when the entity's rights and obligations regarding the position originated YYYY-MM-DD A1.14 Termination date 2014-03-31 Provide date the QFC terminates or is expected to terminate, expire, mature, or when final performance is required. Information needed to determine when the entity's rights and obligations regarding the position are expected to end YYYY-MM-DD A1.15 Next call, put, or cancellation date 2015-01-25 Provide next call, put, or cancellation date YYYY-MM-DD A1.16 Next payment date 2015-01-25 Provide next payment date YYYY-MM-DD A1.17 Current market value of the position in U.S. dollars 995000 In the case of a guarantee or other third party credit enhancements, provide the current mark-to-market expected value of the exposure. Information needed to determine the current size of the obligation/benefit associated with the QFC Num (25,5) A1.18 Notional or principal amount of the position In U.S. dollars 1000000 Provide the notional or principal amount, as applicable, in U.S. dollars. In the case of a guarantee or other third party credit enhancements, provide the maximum possible exposure. Information needed to help evaluate the position Num (25,5) A1.19 Covered by third-party credit enhancement agreement (for the benefit of the records entity)? Y/N Indicate whether QFC is covered by a guarantee or other third-party credit enhancement. Information needed to determine credit enhancement Char(1) Should be “Y” or “N“ A1.20 Third-party credit enhancement provider identifier (for the benefit of the records entity) 999999999 If QFC is covered by a guarantee or other third-party credit enhancement, provide an identifier for provider. Use LEI if available. Complete the counterparty master table with respect to a provider that is a non-affiliate Varchar(50) Required if A1.20 is “Y”. Validated against CP.2 A1.21 Third-party credit enhancement agreement identifier (for the benefit of the records entity) If QFC is covered by a guarantee or other third-party credit enhancement, provide an identifier for the agreement Varchar(50) Required if A1.20 is “Y”. A1.22 Related position of records entity 3333333 Use this field to link any related positions of the records entity . All positions that are related to one another should have same designation in this field Varchar(100) A1.23 Reference number for any related loan 9999999 Provide a unique reference number for any loan held by the records entity or a member of its corporate group related to the position (with multiple entries delimited by commas) Varchar(500) A1.24 Identifier of the lender of the related loan 999999999 For any loan recorded in A1.23, provide identifier for records entity or member of its corporate group that holds any related loan. Use LEI if entity has one Varchar(500)
    Table A-2—Counterparty Netting Set Data Field Example Instructions and data
  • application
  • Def Validation
    A2.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD A2.2 Records entity identifier 999999999 Provide the LEI for the records entity if available Varchar(50) Validated against CO.2. A2.3 Netting agreement counterparty identifier 888888888 Provide an identifier for the netting agreement counterparty. Use LEI if counterparty has one Varchar(50) Validated against CP.2. A2.4 Netting agreement identifier xxxxxxxxx Provide an identifier for the netting agreement Varchar(50) A2.5 Underlying QFC obligor identifier 888888888 Provide identifier for underlying QFC obligor if netting agreement is associated with a guarantee or other third party credit enhancement. Use LEI if available Varchar(50) Validated against CO.2 or CP.2. A2.6 Covered by third-party credit enhancement agreement (for the benefit of the records entity)? Y/N Indicate whether the positions subject to the netting set agreement are covered by a third-party credit enhancement agreement Char(1) Should be “Y” or “N“. A2.7 Third-party credit enhancement provider identifier (for the benefit of the records entity) 999999999 Use LEI if available. Information needed to identity third-party credit enhancement provider Varchar(50) Required if A2.6 is “Y”. Should be a valid entry in the Counterparty Master Table. Validated against CP.2. A2.8 Third-party credit enhancement agreement identifier (for the benefit of the records entity) 4444444 Varchar(50) Required if A2.6 is “Y”. Validated against A3.3. A2.9 Aggregate current market value in U.S. dollars of all positions under this netting agreement −1000000 Information needed to help evaluate the positions subject to the netting agreement Num (25,5) Market value of all positions in A1 for the given netting agreement identifier should be equal to this value. A2.9 = A2.10 + A2.11. A2.10 Current market value in U.S. dollars of all positive positions, as aggregated under this netting agreement 3000000 Information needed to help evaluate the positions subject to the netting agreement Num (25,5) Market value of all positive positions in A1 for the given netting agreement identifier should be equal to this value. A2.9 = A2.10 + A2.11. A2.11 Current market value in U.S. dollars of all negative positions, as aggregated under this netting agreement −4000000 Information needed to help evaluate the positions subject to the netting agreement Num (25,5) Market value of all negative positions in A1 for the given Netting Agreement Identifier should be equal to this value. A2.9 = A2.10 + A2.11. A2.12 Current market value in U.S. dollars of all collateral posted by records entity, as aggregated under this netting agreement 950000 Information needed to determine the extent to which collateral has been provided by records entity Num (25,5) A2.13 Current market value in U.S. dollars of all collateral posted by counterparty, as aggregated under this netting agreement 50000 Information needed to determine the extent to which collateral has been provided by counterparty Num (25,5) A2.14 Records entity collateral—net 950,000 Provide records entity's collateral excess or deficiency with respect to all of its positions, as determined under each applicable agreement, including thresholds and haircuts where applicable Num (25,5) Should be less than or equal to A2.15. A2.15 Counterparty collateral—net 950,000 Provide counterparty's collateral excess or deficiency with respect to all of its positions, as determined under each applicable agreement, including thresholds and haircuts where applicable Num (25,5) Should be less than or equal to A2.16. A2.16 Next margin payment date 2015-11-05 Provide next margin payment date for position YYYY-MM-DD A2.17 Next margin payment amount in U.S. dollars 150,000 Use positive value if records entity is due a payment and use negative value if records entity has to make the payment Num (25,5)
    Corporate Organization Master Table * Field Example Instructions and data
  • application
  • Def Validation
    CO.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD CO.2 Entity identifier 888888888 Provide unique identifier. Use LEI if available. Information needed to identify entity Varchar(50) Should be unique across all record entities. CO.3 Has LEI been used for entity identifier? Y/N Specify whether the entity identifier provided is an LEI Char(1) Should be “Y” or “N“. CO.4 Legal name of entity John Doe & Co Provide legal name of entity Varchar(200) CO.5 Immediate parent entity identifier 77777777 Use LEI if available. Information needed to complete org structure Varchar(50) CO.6 Has LEI been used for immediate parent entity identifier? Y/N Specify whether the immediate parent entity identifier provided is an LEI Char(1) Should be “Y” or “N“. CO.7 Legal name of immediate parent entity John Doe & Co Information needed to complete org structure Varchar(200) CO.8 Percentage ownership of immediate parent entity in the entity 100.00 Information needed to complete org structure Num (5,2) CO.9 Entity type Subsidiary, foreign branch, foreign division Information needed to complete org structure Varchar(50) CO.10 Domicile New York, New York Enter as city, state or city, foreign country Varchar(50) CO.11 Jurisdiction under which incorporated or organized New York Enter as state or foreign jurisdiction Varchar(50) * Foreign branches and divisions shall be separately identified to the extent they are identified in an entity's reports to its PFRAs.
    Counterparty Master Table Field Example Instructions and data
  • application
  • Def Validation
    CP.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD CP.2 Counterparty identifier 888888888 Use LEI if counterparty has one. The counterparty identifier shall be the global legal entity identifier if one has been issued to the entity. If a counterparty transacts with the records entity through one or more separate foreign branches or divisions and any such branch or division does not have its own unique global legal entity identifier, the records entity must include additional identifiers, as appropriate to enable the FDIC to aggregate or disaggregate the data for each counterparty and for each entity with the same ultimate parent entity as the counterparty Varchar(50) CP.3 Has LEI been used for counterparty identifier? Y/N Indicate whether the counterparty identifier is an LEI Char(1) Should be “Y” or “N“. CP.4 Legal name of counterparty John Doe & Co Information needed to identify and, if necessary, communicate with counterparty Varchar(200) CP.5 Domicile New York, New York Enter as city, state or city, foreign country Varchar(50) CP.6 Jurisdiction under which incorporated or organized New York Enter as state or foreign jurisdiction Varchar(50) CP.7 Immediate parent entity identifier 77777777 Provide an identifier for the parent entity that directly controls the counterparty. Use LEI if immediate parent entity has one Varchar(50) CP.8 Has LEI been used for immediate parent entity identifier? Y/N Indicate whether the immediate parent entity identifier is an LEI Char(1) Should be “Y” or “N“. CP.9 Legal name of immediate parent entity John Doe & Co Information needed to identify and, if necessary, communicate with counterparty Varchar(200) CP.10 Ultimate parent entity identifier 666666666 Provide an identifier for the parent entity that is a member of the corporate group of the counterparty that is not controlled by another entity. Information needed to identify counterparty. Use LEI if ultimate parent entity has one Varchar(50) CP.11 Has LEI been used for ultimate parent entity identifier? Y/N Indicate whether the ultimate parent entity identifier is an LEI Char(1) Should be “Y” or “N“. CP.12 Legal name of ultimate parent entity John Doe & Co Information needed to identify and, if necessary, communicate with counterparty Varchar(100)
    Details of Formats Format Content in brief Additional explanation Examples YYYY-MM-DD Date YYYY = four digit date, MM = 2 digit month, DD = 2 digit date. 2015-11-12. Num (25,5) Up to 25 numerical characters including 5 decimals Up to 20 numerical characters before the decimal point and up to 5 numerical characters after the decimal point. The dot character is used to separate decimals 1352.67.
  • 12345678901234567890.12345.
  • 0.
  • −20000.25.
  • −0.257.
  • Char(3) 3 alphanumeric characters The length is fixed at 3 alphanumeric characters USD.
  • X1X.
  • 999.
  • Varchar(25) Up to 25 alphanumeric characters The length is not fixed but limited at up to 25 alphanumeric characters asgaGEH3268EFdsagtTRCF543.
    Appendix B to Part 371—File Structure for Qualified Financial Contract Records for Full Scope Entities32

    32 Pursuant to § 374(b), the records entity is required to provide the information required by Appendix B for itself and each of its reportable subsidiaries in manner that can be disaggregated by legal entities (i.e., the records entity and each reportable subsidiary).

    Table A-1—Position-Level Data Field Example Instructions and data
  • application
  • Definition Validation
    A1.1 As of date 2015-01-05 Provide data extraction date YYYY-MM-DD A1.2 Records entity identifier 999999999 Provide LEI for records entity. Information needed to review position-level data by records entity Varchar(50) Validated against CO.2. A1.3 Position identifier 20058953 Provide a position identifier. Should be used consistently across all records entities. Use the unique transaction identifier if available. Information needed to readily track and distinguish positions Varchar(100) A1.4 Counterparty identifier 888888888 Provide a counterparty identifier. Use LEI if counterparty has one. Should be used consistently by all records entities. Information needed to identify counterparty by reference to Counterparty Master Table Varchar(50) Validated against CP.2. A1.5 Internal booking location identifier New York, New York Provide office where the position is booked. Information needed to determine system on which the trade is booked and settled Varchar(50) Combination A1.2 + A1.5 + A1.6 should have a corresponding unique combination BL.2 + BL.3 + BL.4 entry in Booking Location Master Table. A1.6 Unique booking unit or desk identifier xxxxxx Provide an identifier for unit or desk at which the position is booked. Information needed to help determine purpose of position Varchar(50) Combination A1.2 + A1.5 + A1.6 should have a corresponding unique combination BL.2 + BL.3 + BL.4 entry in Booking Location Master Table. A1.7 Type of QFC Credit, equity, foreign exchange, interest rate (including cross-currency), other commodity, securities repurchase agreement, securities lending, loan repurchase agreement, guarantee or other third party credit enhancement of a QFC Provide type of QFC. Use unique product identifier if available. Information needed to determine the nature of the QFC Varchar(100) A1.7.1 Type of QFC covered by guarantee or other third party credit enhancement Credit, equity, foreign exchange, interest rate (including cross-currency), other commodity, securities repurchase agreement, securities lending, or loan repurchase agreement If QFC type is guarantee or other third party credit enhancement, provide type of QFC of the QFC that is covered by such guarantee or other third party credit enhancement. Use unique product identifier if available. If multiple asset classes are covered by the guarantee or credit enhancement, enter the asset classes separated by comma. If all the QFCs of the underlying QFC obligor identifier are covered by the guarantee or other third party credit enhancement, enter “All” Varchar(500) Only required if QFC type (A1.7) is a guarantee or other third party credit enhancement. A1.7.2 Underlying QFC obligor identifier 888888888 If QFC type is guarantee or other third party credit enhancement, provide an identifier for the QFC obligor whose obligation is covered by the guarantee or other third party credit enhancement. Use LEI if underlying QFC obligor has one. Complete the counterparty master table with respect to a QFC obligor that is a non-affiliate Varchar(50) Only required if QFC asset type (A1.7) is a guarantee or other third party credit enhancement. Validated against CO.2 if affiliate or CP.2 if non-affiliate. A1.8 Agreement identifier xxxxxxxxx Provide an identifier for the primary governing documentation, e.g., the master agreement or guarantee agreement, as applicable Varchar(50) Validated against A3.3. A1.9 Netting agreement identifier xxxxxxxxx Provide an identifier for netting agreement. If this agreement is the same as provided in A1.10, use same identifier. Information needed to identify unique netting sets Varchar(50) Validated against A3.3. A1.10 Netting agreement counterparty identifier xxxxxxxxx Provide a netting agreement counterparty identifier. Use same identifier as provided in A1.4 if counterparty and netting agreement counterparty are the same. Use LEI if netting agreement counterparty has one. Information needed to identify unique netting sets Varchar(50) Validated against CP.2. A1.11 Trade date 2014-12-20 Provide trade or other commitment date for the QFC. Information needed to determine when the entity's rights and obligations regarding the position originated YYYY-MM-DD A1.12 Termination date 2014-03-31 Provide date the QFC terminates or is expected to terminate, expire, mature, or when final performance is required. Information needed to determine when the entity's rights and obligations regarding the position are expected to end YYYY-MM-DD A1.13 Next call, put, or cancellation date 2015-01-25 Provide next call, put, or cancellation date YYYY-MM-DD A1.14 Next payment date 2015-01-25 Provide next payment date YYYY-MM-DD A1.15 Local Currency Of Position USD Provide currency in which QFC is denominated. Use ISO currency code Char(3) A1.16 Current market value of the position in local currency 995000 Provide current market value of the position in local currency. In the case of a guarantee or other third party credit enhancements, provide the current mark-to-market expected value of the exposure. Information needed to determine the current size of the obligation or benefit associated with the QFC Num (25,5) A1.17 Current market value of the position in U.S. dollars 995000 In the case of a guarantee or other third party credit enhancements, provide the current mark-to-market expected value of the exposure. Information needed to determine the current size of the obligation/benefit associated with the QFC Num (25,5) A1.18 Asset Classification 1 Provide fair value asset classification under GAAP, IFRS, or other accounting principles or standards used by records entity. Provide “1” for Level 1, “2” for Level 2, or “3” for Level 3. Information needed to assess fair value of the position Char(1) A1.19 Notional or principal amount of the position in local currency 1000000 Provide the notional or principal amount, as applicable, in local currency. In the case of a guarantee or other third party credit enhancement, provide the maximum possible exposure. Information needed to help evaluate the position Num (25,5) A1.20 Notional or principal amount of the position In U.S. dollars 1000000 Provide the notional or principal amount, as applicable, in U.S. dollars. In the case of a guarantee or other third party credit enhancements, provide the maximum possible exposure. Information needed to help evaluate the position Num (25,5) A1.21 Covered by third-party credit enhancement agreement (for the benefit of the records entity)? Y/N Indicate whether QFC is covered by a guarantee or other third-party credit enhancement. Information needed to determine credit enhancement Char(1) Should be “Y” or “N“. A1.21.1 Third-party credit enhancement provider identifier (for the benefit of the records entity) 999999999 If QFC is covered by a guarantee or other third-party credit enhancement, provide an identifier for provider. Use LEI if available. Complete the counterparty master table with respect to a provider that is a non-affiliate Varchar(50) Required if A1.21 is “Y”. Validated against CP.2. A1.21.2 Third-party credit enhancement agreement identifier (for the benefit of the records entity) 4444444 If QFC is covered by a guarantee or other third-party credit enhancement, provide an identifier for the agreement Varchar(50) Required if A1.21 is “Y.” Validated against A3.3. A1.21.3 Covered by third-party credit enhancement agreement (for the benefit of the counterparty)? Y/N Indicate whether QFC is covered by a guarantee or other third-party credit enhancement. Information needed to determine credit enhancement Char(1) Should be “Y” or “N“. A1.21.4 Third-party credit enhancement provider identifier (for the benefit of the counterparty) 999999999 If QFC is covered by a guarantee or other third-party credit enhancement, provide an identifier for provider. Use LEI if available. Complete the counterparty master table with respect to a provider that is a non-affiliate Varchar(50) Required if A1.21.3 is “Y”. Validated against CO.2 or CP.2. A1.21.5 Third-party credit enhancement agreement identifier (for the benefit of the counterparty) 4444444 If QFC is covered by a guarantee or other third-party credit enhancement, provide an identifier for agreement Varchar(50) Required if A1.21.3 is “Y”. Validated against A3.3. A1.22 Related position of records entity 3333333 Use this field to link any related positions of the records entity. All positions that are related to one another should have same designation in this field Varchar(100) A1.23 Reference number for any related loan 9999999 Provide a unique reference number for any loan held by the records entity or a member of its corporate group related to the position (with multiple entries delimited by commas) Varchar(500) A1.24 Identifier of the lender of the related loan 999999999 For any loan recorded in A1.23, provide identifier for records entity or member of its corporate group that holds any related loan. Use LEI if entity has one Varchar(500)
    Table A-2—Counterparty Netting Set Data Field Example Instructions and data
  • application
  • Def Validation
    A2.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD A2.2 Records entity identifier 999999999 Provide the LEI for the records entity Varchar(50) Validated against CO.2. A2.3 Netting agreement counterparty identifier 888888888 Provide an identifier for the netting agreement counterparty. Use LEI if counterparty has one Varchar(50) Validated against CP.2. A2.4 Netting agreement identifier xxxxxxxxx Provide an identifier for the netting agreement Varchar(50) Validated against A3.3. A2.4.1 Underlying QFC obligor identifier 888888888 Provide identifier for underlying QFC obligor if netting agreement is associated with a guarantee or other third party credit enhancement. Use LEI if available Varchar(50) Validated against CO.2 or CP.2. A2.5 Covered by third-party credit enhancement agreement (for the benefit of the records entity)? Y/N Indicate whether the positions subject to the netting set agreement are covered by a third-party credit enhancement agreement Char(1) Should be “Y” or “N“. A2.5.1 Third-party credit enhancement provider identifier (for the benefit of the records entity) 999999999 Use LEI if available. Information needed to identity third-party credit enhancement provider Varchar(50) Required if A2.5 is “Y”.
  • Validated against CP.2.
  • A2.5.2 Third-party credit enhancement agreement identifier (for the benefit of the records entity) 4444444 Varchar(50) Required if A2.5 is “Y”.
  • Validated against A3.3.
  • A2.5.3 Covered by third-party credit enhancement agreement (for the benefit of the counterparty)? Y/N Information needed to determine credit enhancement Char(1) Should be “Y” or “N“. A2.5.4 Third-party credit enhancement provider identifier (for the benefit of the counterparty) 999999999 Use LEI if available. Information needed to identity third-party credit enhancement provider Varchar(50) Required if A2.5.3 is “Y”. Should be a valid entry in the Counterparty Master Table. Validated against CP.2. A2.5.5 Third-party credit enhancement agreement identifier (for the benefit of the counterparty) 4444444 Information used to determine guarantee or other third-party credit enhancement Varchar(50) Required if A2.5.3 is “Y”. Validated against A3.3. A2.6 Aggregate current market value in U.S. dollars of all positions under this netting agreement −1000000 Information needed to help evaluate the positions subject to the netting agreement Num (25,5) Market value of all positions in A1 for the given netting agreement identifier should be equal to this value. A2.6 = A2.7 + A2.8. A2.7 Current market value in U.S. dollars of all positive positions, as aggregated under this netting agreement 3000000 Information needed to help evaluate the positions subject to the netting agreement Num (25,5) Market value of all positive positions in A1 for the given netting agreement identifier should be equal to this value. A2.6 = A2.7 + A2.8. A2.8 Current market value in U.S. dollars of all negative positions, as aggregated under this netting agreement −4000000 Information needed to help evaluate the positions subject to the netting agreement Num (25,5) Market value of all negative positions in A1 for the given Netting Agreement Identifier should be equal to this value. A2.6 = A2.7 + A2.8. A2.9 Current market value in U.S. dollars of all collateral posted by records entity, as aggregated under this netting agreement 950000 Information needed to determine the extent to which collateral has been provided by records entity Num (25,5) Market value of all collateral posted by records entity for the given netting agreement Identifier should be equal to sum of all A4.9 for the same netting agreement identifier in A4. A2.10 Current market value in U.S. dollars of all collateral posted by counterparty, as aggregated under this netting agreement 50000 Information needed to determine the extent to which collateral has been provided by counterparty Num (25,5) Market value of all collateral posted by counterparty for the given netting agreement identifier should be equal to sum of all A4.9 for the same netting agreement identifier in A4. A2.11 Current market value in U.S. dollars of all collateral posted by records entity that is subject to re-hypothecation, as aggregated under this netting agreement 950,000 Information needed to determine the extent to which collateral has been provided by records entity Num (25,5) A2.12 Current market value in U.S. dollars of all collateral posted by counterparty that is subject to re-hypothecation, as aggregated under this netting agreement 950,000 Information needed to determine the extent to which collateral has been provided by records entity Num (25,5) A2.13 Records entity collateral—net 950,000 Provide records entity's collateral excess or deficiency with respect to all of its positions, as determined under each applicable agreement, including thresholds and haircuts where applicable Num (25,5) Should be less than or equal to A2.9. A2.14 Counterparty collateral—net 950,000 Provide counterparty's collateral excess or deficiency with respect to all of its positions, as determined under each applicable agreement, including thresholds and haircuts where applicable Num (25,5) Should be less than or equal to A2.10. A2.15 Next margin payment date 2015-11-05 Provide next margin payment date for position YYYY-MM-DD A2.16 Next margin payment amount in U.S. dollars 150,000 Use positive value if records entity is due a payment and use negative value if records entity has to make the payment Num (25,5) A2.17 Safekeeping agent identifier for records entity 888888888 Provide an identifier for the records entity's safekeeping agent, if any. Use LEI if safekeeping agent has one Varchar(50) Validated against SA.2. A2.18 Safekeeping agent identifier for counterparty 888888888 Provide an identifier for the counterparty's safekeeping agent, if any. Use LEI if safekeeping agent has one Varchar(50) Validated against SA.2.
    Table A-3—Legal Agreements Field Example Instructions and data
  • application
  • Def Validation
    A3.1 As of Date 2015-01-05 Data extraction date YYYY-MM-DD A3.2 Records entity identifier 999999999 Provide LEI for records entity Varchar(50) Validated against CO.2. A3.3 Agreement identifier xxxxxx Provide identifier for each master agreement, governing document, netting agreement or third-party credit enhancement agreement Varchar(50) A3.4 Name of agreement or governing document ISDA Master 1992 or Guarantee Agreement or Master Netting Agreement Provide name of agreement or governing document Varchar(50) A3.5 Agreement date 2010-01-25 Provide the date of the agreement YYYY-MM-DD A3.6 Agreement counterparty identifier 888888888 Use LEI if counterparty has one. Information needed to identify counterparty Varchar(50) Validated against field CP.2. A3.6.1 Underlying QFC obligor identifier 888888888 Provide underlying QFC obligor identifier if document identifier is associated with a guarantee or other third party credit enhancement. Use LEI if underlying QFC obligor has one Varchar(50) Validated against CO.2 or CP.2. A3.7 Agreement governing law New York Provide law governing contract disputes Varchar(50) A3.8 Cross-default provision? Y/N Specify whether agreement includes default or other termination event provisions that reference an entity not a party to the agreement (“cross-default Entity”). Information needed to determine exposure to affiliates or other entities Char(1) Should be “Y” or “N“. A3.9 Identity of cross-default entities 777777777 Provide identity of any cross-default entities referenced in A3.8. Use LEI if entity has one. Information needed to determine exposure to other entities Varchar(500) Required if A3.8 is “Y“. ID should be a valid entry in Corporate Org Master Table or Counterparty Master Table, if applicable. Multiple entries comma separated. A3.10 Covered by third-party credit enhancement agreement (for the benefit of the records entity)? Y/N Information needed to determine credit enhancement Char(1) Should be “Y” or “N“. A3.11 Third-party credit enhancement provider identifier (for the benefit of the records entity) 999999999 Use LEI if available. Information needed to identity Third-Party Credit Enhancement Provider Varchar(50) Required if A3.10 is “Y”. Should be a valid entry in the Counterparty Master Table. Validated against CP.2. A3.12 Associated third-party credit enhancement agreement document identifier (for the benefit of the records entity) 33333333 Information needed to determine credit enhancement Varchar(50) Required if A3.10 is “Y”. Validated against field A3.3. A3.12.1 Covered by third-party credit enhancement agreement (for the benefit of the counterparty)? Y/N Information needed to determine credit enhancement Char(1) Should be “Y” or “N“. A3.12.2 Third-party credit enhancement provider identifier (for the benefit of the counterparty) 999999999 Use LEI if available. Information needed to identity Third-Party Credit Enhancement Provider Varchar(50) Required if A3.12 is “Y”. Should be a valid entry in the Counterparty Master. Validated against CP.2. A3.12.3 Associated third-party credit enhancement agreement document identifier (for the benefit of the counterparty) 33333333 Information needed to determine credit enhancement Varchar(50) Required if A3.12.2 is “Y”. Validated against field A3.3. A3.13 Counterparty contact information: name John Doe & Co Provide contact name for counterparty as provided under notice section of agreement Varchar(200) A3.14 Counterparty contact information: address 123 Main St, City, State Zip code Provide contact address for counterparty as provided under notice section of agreement Varchar(100) A3.15 Counterparty contact information: phone 1-999-999-9999 Provide contact phone number for counterparty as provided under notice section of agreement Varchar(50) A3.16 Counterparty's contact information: email address [email protected] Provide contact email address for counterparty as provided under notice section of agreement Varchar(100)
    Table A-4—Collateral Detail Data Field Example Instructions and data
  • application
  • Def Validation
    A4.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD A4.2 Records entity identifier 999999999 Provide LEI for records entity Varchar(50) Validated against CO.2. A4.3 Collateral posted/collateral received flag P/N Enter “P” if collateral has been posted by the records entity. Enter “R” for collateral received by Records Entity Char(1) A4.4 Counterparty identifier 888888888 Provide identifier for counterparty. Use LEI if counterparty has one Varchar(50) Validated against CP.2. A4.5 Netting agreement identifier xxxxxxxxx Provide identifier for applicable netting agreement Varchar(50) Validated against field A3.3. A4.6 Unique collateral item identifier CUSIP/ISIN Provide identifier to reference individual collateral posted Varchar(50) A4.7 Original face amount of collateral item in local currency 1500000 Information needed to evaluate collateral sufficiency and marketability Num (25,5) A4.8 Local currency of collateral item USD Use ISO currency code Char(3) A4.9 Market value amount of collateral item in U.S. dollars 850000 Information needed to evaluate collateral sufficiency and marketability and to permit aggregation across currencies Num (25,5) Market value of all collateral posted by Records Entity or Counterparty A2.9 or A2.10 for the given netting agreement identifier should be equal to sum of all A4.9 for the same netting agreement identifier in A4. A4.10 Description of collateral item U.S. Treasury Strip, maturity 2020/6/30 Information needed to evaluate collateral sufficiency and marketability Varchar(200) A4.11 Asset classification 1 Provide fair value asset classification for the collateral item under GAAP, IFRS, or other accounting principles or standards used by records entity. Provide “1” for Level 1, “2” for Level 2, or “3” for Level 3 Char(1) Should be “1” or “2” or “3”. A4.12 Collateral or portfolio segregation status Y/N Specify whether the specific item of collateral or the related collateral portfolio is segregated from assets of the safekeeping agent Char(1) Should be “Y” or “N”. A4.13 Collateral location ABC broker-dealer (in safekeeping account of counterparty) Provide location of collateral posted Varchar(200) A4.14 Collateral jurisdiction New York, New York Provide jurisdiction of location of collateral posted Varchar(50) A4.15 Is collateral re-hypothecation allowed? Y/N Information needed to evaluate exposure of the records entity to the counterparty or vice-versa for re-hypothecated collateral Char(1) Should be “Y” or “N”.
    Corporate Organization Master Table * Field Example Instructions and data
  • application
  • Def Validation
    CO.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD CO.2 Entity identifier 888888888 Provide unique identifier. Use LEI if available. Information needed to identify entity Varchar(50) Should be unique across all records entities. CO.3 Has LEI been used for entity identifier? Y/N Specify whether the entity identifier provided is an LEI Char(1) Should be “Y” or “N”. CO.4 Legal name of entity John Doe & Co Provide legal name of entity Varchar(200) CO.5 Immediate parent entity identifier 77777777 Use LEI if available. Information needed to complete org structure Varchar(50) CO.6 Has LEI been used for immediate parent entity identifier? Y/N Specify whether the immediate parent entity identifier provided is an LEI Char(1) Should be “Y” or “N”. CO.7 Legal name of immediate parent entity John Doe & Co Information needed to complete org structure Varchar(200) CO.8 Percentage ownership of immediate parent entity in the entity 100.00 Information needed to complete org structure Num (5,2) CO.9 Entity type Subsidiary, foreign branch, foreign division Information needed to complete org structure Varchar(50) CO.10 Domicile New York, New York Enter as city, state or city, foreign country Varchar(50) CO.11 Jurisdiction under which incorporated or organized New York Enter as state or foreign jurisdiction Varchar(50) * Foreign branches and divisions shall be separately identified to the extent they are identified in an entity's reports to its PFRAs.
    Counterparty Master Table Field Example Instructions and data
  • application
  • Def Validation
    CP.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD CP.2 Counterparty identifier 888888888 Use LEI if counterparty has one. Should be used consistently across all records entities within a corporate group. The counterparty identifier shall be the global legal entity identifier if one has been issued to the entity. If a counterparty transacts with the records entity through one or more separate foreign branches or divisions and any such branch or division does not have its own unique global legal entity identifier, the records entity must include additional identifiers, as appropriate to enable the FDIC to aggregate or disaggregate the data for each counterparty and for each entity with the same ultimate parent entity as the counterparty Varchar(50) CP.3 Has LEI been used for counterparty identifier? Y/N Indicate whether the counterparty identifier is an LEI Char(1) Should be “Y” or “N”. CP.4 Legal name of counterparty John Doe & Co Information needed to identify and, if necessary, communicate with counterparty Varchar(200) CP.5 Domicile New York, New York Enter as city, state or city, foreign country Varchar(50) CP.6 Jurisdiction under which incorporated or organized New York Enter as state or foreign jurisdiction Varchar(50) CP.7 Immediate parent entity identifier 77777777 Provide an identifier for the parent entity that directly controls the counterparty. Use LEI if immediate parent entity has one Varchar(50) CP.8 Has LEI been used for immediate parent entity identifier? Y/N Indicate whether the immediate parent entity identifier is an LEI Char(1) Should be “Y” or “N”. CP.9 Legal name of immediate parent entity John Doe & Co Information needed to identify and, if necessary, communicate with counterparty Varchar(200) CP.10 Ultimate parent entity identifier 666666666 Provide an identifier for the parent entity that is a member of the corporate group of the counterparty that is not controlled by another entity. Information needed to identify counterparty. Use LEI if ultimate parent entity has one Varchar(50) CP.11 Has LEI been used for ultimate parent entity identifier? Y/N Indicate whether the ultimate parent entity identifier is an LEI Char(1) Should be “Y” or “N”. CP.12 Legal name of ultimate parent entity John Doe & Co Information needed to identify and, if necessary, communicate with Counterparty Varchar(100)
    Booking Location Master Table Field Example Instructions and data
  • application
  • Def Validation
    BL.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD BL.2 Records entity identifier 999999999 Provide LEI Varchar(50) Should be a valid entry in the Corporate Org Master Table. BL.3 Internal booking location identifier New York, New York Provide office where the position is booked. Information needed to determine the headquarters or branch where the position is booked, including the system on which the trade is booked, as well as the system on which the trade is settled Varchar(50) BL.4 Unique booking unit or desk identifier xxxxxx Provide unit or desk at which the position is booked. Information needed to help determine purpose of position Varchar(50) BL.5 Unique booking unit or desk description North American trading desk Additional information to help determine purpose of position Varchar(50) BL.6 Booking unit or desk contact—phone 1-999-999-9999 Information needed to communicate with the booking unit or desk Varchar(50) BL.7 Booking unit or desk contact—email [email protected] Information needed to communicate with the booking unit or desk Varchar(100)
    Safekeeping Agent Master Table Field Example Instructions and data
  • application
  • Def Validation
    SA.1 As of date 2015-01-05 Data extraction date YYYY-MM-DD SA.2 Safekeeping agent identifier 888888888 Provide an identifier for the safekeeping agent. Use LEI if safekeeping agent has one Varchar(50) SA.3 Legal name of safekeeping agent John Doe & Co Information needed to identify and, if necessary, communicate with the safekeeping agent Varchar(200) SA.4 Point of contact—name John Doe Information needed to identify and, if necessary, communicate with the safekeeping agent Varchar(200) SA.5 Point of contact—address 123 Main St, City, State Zip Code Information needed to identify and, if necessary, communicate with the safekeeping agent Varchar(100) SA.6 Point of contact—phone 1-999-999-9999 Information needed to identify and, if necessary, communicate with the safekeeping agent Varchar(50) SA.7 Point of contact—email [email protected] Information needed to identify and, if necessary, communicate with the safekeeping agent Varchar(100)
    Details of Formats Format Content in brief Additional explanation Examples YYYY-MM-DD Date YYYY = four digit date, MM = 2 digit month, DD = 2 digit date 2015-11-12. Num (25,5) Up to 25 numerical characters including 5 decimals Up to 20 numerical characters before the decimal point and up to 5 numerical characters after the decimal point. The dot character is used to separate decimals 1352.67.
  • 12345678901234567890.12345.
  • 0.
  • −20000.25.
  • −0.257.
  • Char(3) 3 alphanumeric characters The length is fixed at 3 alphanumeric characters USD.
  • X1X.
  • 999.
  • Varchar(25) Up to 25 alphanumeric characters The length is not fixed but limited at up to 25 alphanumeric characters asgaGEH3268EFdsagtTRCF543.
    Dated at Washington, DC, this 13th day of December 2016.

    By order of the Board of Directors.

    Federal Deposit Insurance Corporation. Valerie J. Best, Assistant Executive Secretary.
    [FR Doc. 2016-30734 Filed 12-27-16; 8:45 am] BILLING CODE 6714-01-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-9531; Directorate Identifier 2015-CE-011-AD] RIN 2120-AA64 Airworthiness Directives; M7 Aerospace LLC 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 M7 Aerospace LLC Models SA226-T, SA226-AT, SA226-T(B), SA226-TC, SA227-AC (C-26A), SA227-AT, SA227-BC (C-26A), SA227-CC, SA227-DC (C-26B), and SA227-TT airplanes. This proposed AD was prompted by detachment of the power lever linkage to the TPE331 engine propeller pitch control. This proposed AD would require installing a secondary retention device and repetitively inspecting the propeller pitch control for proper torque, with corrections as necessary. We are proposing this AD to correct the unsafe condition on these products.

    DATES:

    We must receive comments on this proposed AD by February 13, 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 proposed AD contact information M7 Aerospace LLC, 10823 NE Entrance Road, San Antonio, Texas 78216; phone: (210) 824-9421; fax: (210) 804-7766; Internet: http://www.elbitsystems-us.com; email: [email protected]; or Honeywell International Inc., 111 S. 34th Street, Phoenix, Arizona 85034-2802; phone: (855) 808-6500; email: [email protected]; Internet: https://aerospace.honeywell.com/en/services/maintenance-and-monitoring.

    You may view this referenced service information at the FAA, Small Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. For information on the availability of this material at the FAA, call 816-329-4148.

    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-2016-9531; 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 ONE OF THE FOLLOWING:

    • Justin Carter, ASW-142, Aerospace Engineer, Fort Worth Airplane Certification Office (ACO), FAA, 2601 Meacham Blvd., Fort Worth, Texas 76137-4298; telephone: (817) 222-5146; fax: (817) 222-5960; email: [email protected]; or

    • Kristin Bradley, ASW-143, Aerospace Engineer, Fort Worth ACO, FAA, 2601 Meacham Blvd., Fort Worth, Texas 76137-4298; telephone: (817) 222-5485; fax: (817) 222-5960; 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-2016-9531; Directorate Identifier 2015-CE-011-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 received reports of the airplane power lever linkage detaching from the TPE331 engine propeller pitch control (PPC) shaft on M7 Aircraft SA226 and SA227 airplanes. In flight operations, detachment may result in fuel flow to the engine remaining constant regardless of the power lever movement by the pilot. The orientation of the engine on certain M7 Aerospace airplanes increases the vulnerability of detachment. The PPC lever is an airplane part and its detachment from the TPE311 has been the subject of previous ADs on other airplane type designs. This condition, if not corrected, could result in uncommanded change to the engine power settings with consequent loss of control.

    Related Service Information Under 1 CFR Part 51

    We reviewed M7 Aerospace LLC SA226 Series Service Bulletin 226-76-012, dated March 17, 2015; M7 Aerospace LLC SA227 Series Service Bulletin 227-76-007, dated March 17, 2015; and M7 Aerospace LLC SA227 Series Commuter Category Service Bulletin CC7-76-004, dated March 17, 2015; that in combination for the applicable models describes the actions that must be done to comply with this NPRM.

    We also reviewed M7 Aerospace SA226 Series Maintenance Manual Temporary Revision 71-02, dated March 15, 2016; M7 Aerospace SA227 Series Maintenance Manual Temporary Revision 71-03, dated March 15, 2016; and M7 Aerospace SA227 Series Commuter Category Maintenance Manual Temporary Revision 71-02, dated March 15, 2016; that in combination for the applicable models describes procedures for installing the secondary retention device on the PPC assembly and doing a visual inspection of the PPC lever.

    We also reviewed Honeywell International Inc. Service Bulletin TPE331-72-2190, dated December 21, 2011, that describes procedures for replacing or reworking the propeller pitch control assembly, incorporating a threaded hole in the splined end of the shouldered shaft, and reassembling the propeller pitch control assembly.

    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 of this NPRM.

    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 replacement or rework of the PPC assembly to have a threaded hole in the splined end of the shouldered shaft, installation of a secondary retention feature for the airplane control linkage interface, and a repetitive inspection of the PPC lever torque with corrective action as necessary.

    Costs of Compliance

    We estimate that this proposed AD affects 360 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
    Replacement or rework of the PPC assembly 19 work-hours × $85 per hour = 1,615 $1,000 $2,615 $941,400 Install secondary retention device 1 work-hour × $85 per hour = $85 10 95 34,200 Visual inspection of propeller pitch control lever .5 work-hour × $85 per hour = $42.50 Not applicable 42.50 15,300

    We estimate the following costs to do any necessary adjustments 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 adjustments:

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Correct attachment of the propeller pitch control lever .5 work-hour × $85 per hour = $42.50 Not applicable $42.50
    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): M7 Aerospace LLC: Docket No. FAA-2016-9531; Directorate Identifier 2015-CE-011-AD. (a) Comments Due Date

    We must receive comments by February 13, 2017.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to M7 Aerospace LLC SA226-T, SA226-AT, SA226-T(B), SA226-TC, SA227-AC (C-26A), SA227-AT, SA227-BC (C-26A), SA227-CC, SA227-DC (C-26B), and SA227-TT airplanes; all serial numbers, certificated in any category.

    (d) Subject

    Joint Aircraft System Component (JASC)/Air Transport Association (ATA) of America Code 61, Propellers/Propulsors.

    (e) Unsafe Condition

    This AD was prompted by detachment of the power lever linkage to the TPE331 engine propeller pitch control (PPC). We are issuing this AD to prevent detachment of the power lever linkage to the TPE331 engine propeller pitch control, which could result in uncommanded change to the engine power settings with consequent loss of control.

    (f) Compliance

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

    (g) Applicable M7 Aerospace LLC Service Bulletins

    Use the applicable service bulletins as listed in paragraph (g)(1), (2), or (3) of this AD as reference to complete the actions in pargraph (h)(1) or (2) of this AD:

    (1) M7 Aerospace LLC SA226 Series Service Bulletin 226-76-012, dated March 17, 2015;

    (2) M7 Aerospace LLC SA227 Series Service Bulletin 227-76-007, dated March 17, 2015; or

    (3) M7Aerospace LLC SA227 Series Commuter Category Service Bulletin CC7-76-004, dated March 17, 2015.

    (h) PPC Lever Installation

    (1) Within 100 hours time-in-service (TIS) after the effective date of this AD and repetitively thereafter at intervals not to exceed 100 hours TIS, vi