Federal Register Vol. 81, No.91,

Federal Register Volume 81, Issue 91 (May 11, 2016)

Page Range29111-29469
FR Document

81_FR_91
Current View
Page and SubjectPDF
81 FR 29469 - Continuation of the National Emergency With Respect to the Central African RepublicPDF
81 FR 29465 - Facilitation of a Presidential TransitionPDF
81 FR 29463 - Mother's Day, 2016PDF
81 FR 29459 - National Women's Health Week, 2016PDF
81 FR 29308 - Sunshine Act Meeting of the National Museum and Library Services BoardPDF
81 FR 29169 - Restrictions on Qualified Financial Contracts of Systemically Important U.S. Banking Organizations and the U.S. Operations of Systemically Important Foreign Banking Organizations; Revisions to the Definition of Qualifying Master Netting Agreement and Related DefinitionsPDF
81 FR 29142 - Schedules of Controlled Substances: Placement of UR-144, XLR11, and AKB48 into Schedule IPDF
81 FR 29266 - Sunshine Act NoticePDF
81 FR 29309 - In the Matter of Midwest Oil and Gas, Inc., File No. 500-1; Order of Suspension of TradingPDF
81 FR 29314 - Sunshine Act MeetingPDF
81 FR 29293 - 30-Day Notice of Proposed Information Collection: Border Community Capital Initiative and Semi-Annual ReportingPDF
81 FR 29292 - 30-Day Notice of Proposed Information Collection: Home Equity Conversion Mortgage Client Session EvaluationPDF
81 FR 29287 - Office of Chief Information Officer; Agency Information Collection Activities: REAL ID: Minimum Standards for Driver's Licenses and Identification Cards Acceptable by Federal Agencies for Official PurposesPDF
81 FR 29316 - BNSF Railway Company-Abandonment Exemption-in Thurston County, Wash.PDF
81 FR 29317 - Rose Chauffeured Transportation, LTD-Acquisition of Control-My Bus Division of Cherry Consulting of the Carolinas, Inc.PDF
81 FR 29145 - Safety Zone; Fourth of July Fireworks, City of Eureka, Humboldt Bay, Eureka, CAPDF
81 FR 29287 - Practicability Review: Standards for Living Organisms in Ships' Ballast Water Discharged in United States WatersPDF
81 FR 29289 - Information Sharing and Analysis OrganizationPDF
81 FR 29262 - Meeting of the Mobile Sources Technical Review SubcommitteePDF
81 FR 29260 - Proposed Consent Decree, Clean Air Act Citizen SuitPDF
81 FR 29254 - The Benefits, Challenges, and Potential Roles for the Government in Fostering the Advancement of the Internet of ThingsPDF
81 FR 29331 - Veterans' Advisory Committee on Education; Notice of MeetingPDF
81 FR 29262 - Webinar Workshop To Review Initial Draft Materials for the Particulate Matter (PM) Integrated Science Assessment (ISA) for Health and Welfare EffectsPDF
81 FR 29252 - Steel Wire Garment Hangers From the Socialist Republic of Vietnam: Rescission of Countervailing Duty Administrative Review; 2015PDF
81 FR 29247 - Pipeline Safety: Meeting of the Gas Pipeline Safety Advisory Committee and the Liquid Pipeline Safety Advisory CommitteePDF
81 FR 29319 - Public Notice for a Change in Use of Aeronautical Property and Long-Term Lease Approval at Harrisburg International Airport (MDT), Middletown, PAPDF
81 FR 29318 - Notice of Intent To Rule on a Release Request for a Change in Designation of On-Airport Surplus Property From Aeronautical to Non-Aeronautical Use at the Harrisburg International Airport (MDT), Middletown, PAPDF
81 FR 29323 - Submission Deadline for Schedule Information for Chicago O'Hare International Airport, John F. Kennedy International Airport, Los Angeles International Airport, Newark Liberty International Airport, and San Francisco International Airport for the Winter 2016 Scheduling SeasonPDF
81 FR 29273 - Agency Information Collection Activities; Proposed Collection; Comment Request; Abbreviated New Animal Drug ApplicationsPDF
81 FR 29321 - Petition for Exemption; Summary of Petition Received; The Boeing CompanyPDF
81 FR 29319 - Petition for Exemption; Summary of Petition ReceivedPDF
81 FR 29259 - Combined Notice of Filings #2PDF
81 FR 29260 - Combined Notice of Filings #1PDF
81 FR 29320 - Petition for Exemption; Summary of Petition Received; Drone Surveys and ReportsPDF
81 FR 29270 - New Funding FormulaPDF
81 FR 29322 - Petition for Exemption; Summary of Petition Received; BNSF Railway CompanyPDF
81 FR 29321 - Petition for Exemption; Summary of Petition Received; Drone Consultants LLCPDF
81 FR 29322 - Petition for Exemption; Summary of Petition Received; Jackie E. WatsonPDF
81 FR 29329 - Advisory Committee Charter RenewalsPDF
81 FR 29278 - Office of the National Coordinator for Health Information Technology; Announcement of Requirements and Registration for “Move Health Data Forward Challenge”PDF
81 FR 29315 - Notice of Availability of the Final Supplemental Environmental Assessment and Finding of No Significant Impact for the NuStar Dos Laredos Pipeline Presidential Permit Application Review, Webb County, TexasPDF
81 FR 29316 - Culturally Significant Objects Imported for Exhibition Determinations: “Rembrandt's First Masterpiece” ExhibitionPDF
81 FR 29325 - Requests for Information: Community Development Financial Institutions Prize CompetitionPDF
81 FR 29275 - Over-the-Counter Monograph User Fees: Public Meeting; Request for CommentsPDF
81 FR 29315 - Culturally Significant Objects Imported for Exhibition Determinations: “Hubert Robert: 1733-1808” ExhibitionPDF
81 FR 29202 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 29209 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 29300 - Notice of Inventory Completion: University of California, Davis, Davis, CAPDF
81 FR 29297 - Notice of Inventory Completion: History Colorado, formerly Colorado Historical Society, Denver, COPDF
81 FR 29304 - Notice of Intent To Repatriate Cultural Items: Peabody Museum of Natural History, Yale University, New Haven, CTPDF
81 FR 29296 - Notice of Inventory Completion: University of Oregon Museum of Natural and Cultural History, Eugene, ORPDF
81 FR 29304 - Notice of Inventory Completion: The American Museum of Natural History, New York, NY; CorrectionPDF
81 FR 29302 - Notice of Inventory Completion for Native American Human Remains and Associated Funerary Objects in the Possession of the U.S. Department of Defense, Department of the Army, Fort Benning, GA; CorrectionPDF
81 FR 29298 - Notice of Inventory Completion: Michigan State Police, Jackson Post, Jackson, MIPDF
81 FR 29302 - Notice of Inventory Completion: University of Pennsylvania Museum of Archaeology and Anthropology, Philadelphia, PAPDF
81 FR 29265 - Notice of Agreements FiledPDF
81 FR 29271 - Agency Information Collection Activities; Proposed Collection; Comment Request; Threshold of Regulation for Substances Used in Food-Contact ArticlesPDF
81 FR 29129 - Antimicrobial Animal Drug Sales and Distribution ReportingPDF
81 FR 29254 - North Pacific Fishery Management Council; Public MeetingPDF
81 FR 29269 - Agency Information Collection Activities: Submission for OMB Review; Comment RequestPDF
81 FR 29324 - Surrender and Termination of the Port Dolphin Energy LLC License To Own, Construct and Operate the Port Dolphin Deepwater PortPDF
81 FR 29268 - Agency Information Collection Activities: Proposed Collection; Comment RequestPDF
81 FR 29308 - Dominion Virginia Power; North Anna, Unit 3PDF
81 FR 29256 - Basic Energy Sciences Advisory CommitteePDF
81 FR 29255 - Electricity Advisory CommitteePDF
81 FR 29257 - Methane Hydrate Advisory CommitteePDF
81 FR 29257 - Agency Information Collection ExtensionPDF
81 FR 29282 - Agency Information Collection Activities; Proposed Collection; Public Comment RequestPDF
81 FR 29253 - Mid-Atlantic Fishery Management Council (MAFMC); MeetingPDF
81 FR 29166 - Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; Amendments to the Reef Fish, Spiny Lobster, Queen Conch, and Corals and Reef Associated Plants and Invertebrates Fishery Management Plans of Puerto Rico and the U.S. Virgin IslandsPDF
81 FR 29305 - Notice of Receipt of Complaint; Solicitation of Comments Relating to the Public InterestPDF
81 FR 29278 - Findings of Research MisconductPDF
81 FR 29294 - Trinity River Adaptive Management Working Group; Public Meeting, Teleconference and Web-Based MeetingPDF
81 FR 29250 - Generic Clearance for Proposed Information Collection; Comment Request; Collection of State Administrative Records DataPDF
81 FR 29295 - Endangered and Threatened Wildlife and Plants; Workshop To Review the Habitat-Based Recovery Criteria for the Grizzly Bear in the Northern Continental Divide EcosystemPDF
81 FR 29244 - Federal Acquisition Regulation: Combating Trafficking in Persons-Definition of “Recruitment Fees”PDF
81 FR 29330 - Proposed Information Collection (NCA Pre-Need Determination of Eligibility for Burial) Activity Comment RequestPDF
81 FR 29328 - Agency Information Collection (Application for Accrued Amounts Due a Deceased Beneficiary, VA Form 21P-601) Activity Under OMB ReviewPDF
81 FR 29331 - Proposed Information Collection (Pension Claim Questionnaire for Farm Income, VA Form 21P-4165)PDF
81 FR 29332 - Proposed Information Collection (Statement of Disappearance, VA Form 21P-1775) Activity Comment RequestPDF
81 FR 29327 - Proposed Information Collection (Application for Refund of Educational Contributions, VA Form 22-5281) Activity: Comment RequestPDF
81 FR 29329 - Proposed Information Collection (Loan Service Report, VA Form 26-6808) Activity: Comment RequestPDF
81 FR 29332 - Agency Information Collection (Disability Benefits Questionnaires-Group 3) Activity Under OMB ReviewPDF
81 FR 29328 - Proposed Information Collection (Disability Benefits Questionnaire (Group 4)) Activity Under OMB ReviewPDF
81 FR 29290 - Mortgagee Review Board: Administrative ActionsPDF
81 FR 29249 - Agency Information Collection Activities: State Agency (NSLP/SNAP) Direct Certification Rate Data Element Report (FNS-834)PDF
81 FR 29146 - Purchasing of Property and ServicesPDF
81 FR 29314 - Texas Disaster #TX-00469PDF
81 FR 29314 - Texas Disaster Number TX-00468PDF
81 FR 29314 - Washington Disaster #WA-00066 Declaration of Economic InjuryPDF
81 FR 29165 - Endangered and Threatened Wildlife; Technical Corrections for Eight Wildlife Species on the List of Endangered and Threatened WildlifePDF
81 FR 29230 - Army National Military CemeteriesPDF
81 FR 29255 - Agency Information Collection Activities; Comment Request; Program for International Student Assessment (PISA 2018) Recruitment and Field TestPDF
81 FR 29266 - Agency Forms Undergoing Paperwork Reduction Act ReviewPDF
81 FR 29286 - National Institute on Minority Health and Health Disparities; Notice of MeetingPDF
81 FR 29286 - National Institute on Minority Health and Health Disparities; Notice of Closed MeetingPDF
81 FR 29285 - National Institute of Mental Health; Notice of Closed MeetingPDF
81 FR 29284 - National Institute of Mental Health; Notice of Closed MeetingsPDF
81 FR 29283 - National Institute of Mental Health; Notice of Closed MeetingPDF
81 FR 29284 - National Institute of General Medical Sciences; Notice of Closed MeetingPDF
81 FR 29284 - National Institute of General Medical Sciences; Notice of Closed MeetingsPDF
81 FR 29283 - National Institute of Biomedical Imaging and Bioengineering; Notice of Closed MeetingPDF
81 FR 29286 - National Institute of Allergy and Infectious Diseases; Notice of Closed MeetingsPDF
81 FR 29285 - Center for Scientific Review; Notice of Closed MeetingsPDF
81 FR 29266 - Notice of Filing of Complaint and Assignment-CorrectionPDF
81 FR 29307 - Certain Portable Electronic Devices and Components Thereof Institution of InvestigationPDF
81 FR 29146 - Patient Protection and Affordable Care Act; Amendments to Special Enrollment Periods and the Consumer Operated and Oriented Plan ProgramPDF
81 FR 29265 - Information Collection Being Reviewed by the Federal Communications Commission Under Delegated AuthorityPDF
81 FR 29263 - Information Collection Being Submitted for Review and Approval to the Office of Management and BudgetPDF
81 FR 29259 - The City of Holyoke Gas & Electric Department; Notice of Intent To File License Application, Filing of Pre-Application Document, and Approving Use of the Traditional Licensing ProcessPDF
81 FR 29309 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Revise the ICC End-of-Day Price Discovery Policies and ProceduresPDF
81 FR 29311 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To List and Trade Shares of the Pointbreak Diversified Commodity Strategy Fund of the Pointbreak ETF Trust Under BATS Rule 14.11(i), Managed Fund SharesPDF
81 FR 29312 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Revise the ICC Operational Risk Management FrameworkPDF
81 FR 29253 - Proposed Information Collection; Comment Request; NIST Associates Information SystemPDF
81 FR 29243 - Protection of Visibility: Amendments to Requirements for State PlansPDF
81 FR 29306 - Notice of Receipt of Complaint; Solicitation of Comments Relating to the Public InterestPDF
81 FR 29252 - Reorganization of Foreign-Trade Zone 151 (Expansion of Service Area) Under Alternative Site Framework; Findlay, OhioPDF
81 FR 29251 - Approval of Subzone Status; H-J Enterprises, Inc./H-J International, Inc.; High Ridge, MissouriPDF
81 FR 29251 - Proposed Foreign-Trade Zone-Vancouver, Washington; Under Alternative Site FrameworkPDF
81 FR 29264 - Information Collection Being Submitted for Review and Approval to the Office of Management and BudgetPDF
81 FR 29325 - Hazardous Materials: Notice of Applications for Modification of Special PermitPDF
81 FR 29212 - Unsuccessful Work Attempts and Expedited Reinstatement EligibilityPDF
81 FR 29119 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 29193 - Airworthiness Directives; Rosemount Aerospace, Inc. Pitot ProbesPDF
81 FR 29125 - Airworthiness Directives; Viking Air Limited AirplanesPDF
81 FR 29206 - Airworthiness Directives; The Boeing Company AirplanesPDF
81 FR 29198 - Airworthiness Directives; Airbus AirplanesPDF
81 FR 29123 - Airworthiness Directives; M7 Aerospace LLC AirplanesPDF
81 FR 29156 - National Institute on Disability, Independent Living, and Rehabilitation ResearchPDF
81 FR 29250 - Medicine Bow-Routt Resource Advisory CommitteePDF
81 FR 29196 - Airworthiness Directives; The Boeing CompanyPDF
81 FR 29128 - Establishment of Class E Airspace; Beach, NDPDF
81 FR 29111 - Amendments to Filing Requirements Under the Interstate Land Sales Full Disclosure Act (Regulations J and L)PDF
81 FR 29335 - Endangered and Threatened Wildlife and Plants; Designation of Critical Habitat for the Oregon Spotted FrogPDF
81 FR 29397 - Customer Due Diligence Requirements for Financial InstitutionsPDF
81 FR 29215 - Conforming STOP Violence Against Women Formula Grant Program Regulations to Statutory Change; Definitions and Confidentiality Requirements Applicable to All OVW Grant ProgramsPDF

Issue

81 91 Wednesday, May 11, 2016 Contents Agriculture Agriculture Department See

Food and Nutrition Service

See

Forest Service

Army Army Department PROPOSED RULES Army National Military Cemeteries, 29230-29243 2016-11038 Consumer Financial Protection Bureau of Consumer Financial Protection RULES Filing Requirements Under the Interstate Land Sales Full Disclosure Act; Amendments, 29111-29119 2016-10715 Census Bureau Census Bureau NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: State Administrative Records Data, 29250-29251 2016-11059 Centers Disease Centers for Disease Control and Prevention NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 29266-29268 2016-11036 Centers Medicare Centers for Medicare & Medicaid Services NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 29268-29270 2016-11078 2016-11080 Coast Guard Coast Guard RULES Safety Zones: Fourth of July Fireworks, City of Eureka, Humboldt Bay, Eureka, CA, 29145-29146 2016-11130 NOTICES Guidance: Practicability Review: Standards for Living Organisms in Ships Ballast Water Discharged in United States Waters, 29287 2016-11129 Commerce Commerce Department See

Census Bureau

See

Foreign-Trade Zones Board

See

International Trade Administration

See

National Institute of Standards and Technology

See

National Oceanic and Atmospheric Administration

See

National Telecommunications and Information Administration

Community Development Community Development Financial Institutions Fund NOTICES Requests for Information: Community Development Financial Institutions Prize Competition, 29325-29327 2016-11099 Community Living Administration Community Living Administration NOTICES New Funding Formula, 29270-29271 2016-11108 Defense Department Defense Department See

Army Department

PROPOSED RULES Federal Acquisition Regulation: Combating Trafficking in Persons: Definition of Recruitment Fees, 29244-29247 2016-11056
Drug Drug Enforcement Administration RULES Schedules of Controlled Substances: Placement of UR-144, XLR11, and AKB48 into Schedule I, 29142-29145 2016-11204 Education Department Education Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Program for International Student Assessment Recruitment and Field Test, 29255 2016-11037 Energy Department Energy Department See

Energy Information Administration

See

Federal Energy Regulatory Commission

NOTICES Meetings: Basic Energy Sciences Advisory Committee, 29256-29257 2016-11074 Electricity Advisory Committee, 29255-29256 2016-11072 Methane Hydrate Advisory Committee, 29257 2016-11071
Energy Information Energy Information Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 29257-29259 2016-11070 Environmental Protection Environmental Protection Agency PROPOSED RULES State Plan Requirements; Amendments: Protection of Visibility, 29243-29244 2016-11007 NOTICES Meetings: Mobile Sources Technical Review Subcommittee, 29262 2016-11127 Review of Initial Draft Materials: Particulate Matter Integrated Science Assessment for Health and Welfare Effects, 29262-29263 2016-11122 Proposed Consent Decrees under the Clean Air Act Citizen Suit, 29260-29262 2016-11126 Federal Aviation Federal Aviation Administration RULES Airworthiness Directives: M7 Aerospace LLC Airplanes, 29123-29125 2016-10872 The Boeing Company Airplanes, 29119-29123 2016-10931 Viking Air Limited Airplanes, 29125-29127 2016-10928 Establishment of Class E Airspace: Beach, ND, 29128-29129 2016-10736 PROPOSED RULES Airworthiness Directives: Airbus Airplanes, 29198-29202, 29209-29212 2016-10914 2016-11094 Rosemount Aerospace, Inc. Pitot Probes, 29193-29196 2016-10930 The Boeing Company, 29196-29198, 29202-29209 2016-10740 2016-10915 2016-11095 NOTICES Change in Use of Aeronautical Property: Harrisburg International Airport, Middletown, PA, 29319-29320 2016-11118 Petitions for Exemption; Summaries: Drone Surveys and Reports, 29320 2016-11109 Petitions for Exemptions; Summaries: BNSF Railway Company, 29322 2016-11107 Drone Consultants LLC, 29321 2016-11106 Jackie E. Watson, 29322-29323 2016-11105 L-3 Communications Integrated Systems, LP, 29319 2016-11112 The Boeing Co., 29321-29322 2016-11113 Submission Deadline for Schedule Information for the Winter 2016 Scheduling Season: Chicago O'Hare International Airport, John F. Kennedy International Airport, Los Angeles International Airport, Newark Liberty International Airport, and San Francisco International Airport, 29323-29324 2016-11116 Surplus Airport Properties: Harrisburg International Airport, Middletown, PA, 29318-29319 2016-11117 Federal Communications Federal Communications Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 29263-29265 2016-10996 2016-11015 2016-11016 Federal Energy Federal Energy Regulatory Commission NOTICES Combined Filings, 29259-29260 2016-11110 2016-11111 License Applications: The City of Holyoke Gas and Electric Department, 29259-29260 2016-11013 Federal Maritime Federal Maritime Commission NOTICES Agreements Filed, 29265-29266 2016-11084 Complaints and Assignments: Landers Brothers Auto Group, Inc., et al. v. Nippon Yusen Kabushiki Kaisha, et al.; Correction, 29266 2016-11019 Federal Mine Federal Mine Safety and Health Review Commission NOTICES Meetings; Sunshine Act, 29266 2016-11199 2016-11202 Federal Reserve Federal Reserve System PROPOSED RULES Restrictions on Qualified Financial Contracts of Systemically Important U.S. Banking Organizations, etc.: Definition of Qualifying Master Netting Agreement and Related Definitions, 29169-29193 2016-11209 Financial Crimes Financial Crimes Enforcement Network RULES Customer Due Diligence Requirements for Financial Institutions, 29398-29458 2016-10567 Fish Fish and Wildlife Service RULES Endangered and Threatened Species: Designation of Critical Habitat for the Oregon Spotted Frog, 29336-29396 2016-10712 Endangered and Threatened Wildlife: Eight Wildlife Species; Technical Corrections; Partial Withdrawal, 29165-29166 2016-11039 NOTICES Meetings: Habitat-Based Recovery Criteria for the Grizzly Bear in the Northern Continental Divide Ecosystem; Workshop, 29295-29296 2016-11057 Trinity River Adaptive Management Working Group; Teleconference, 29294-29295 2016-11061 Food and Drug Food and Drug Administration RULES Antimicrobial Animal Drug Sales and Distribution Reporting, 29129-29141 2016-11082 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Abbreviated New Animal Drug Applications, 29273-29275 2016-11114 Threshold of Regulation for Substances Used in Food-Contact Articles, 29271-29273 2016-11083 Meetings: Over-the-Counter Monograph User Fees, 29275-29277 2016-11098 Food and Nutrition Food and Nutrition Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: State Agency (NSLP/SNAP) Direct Certification Rate Data Element Report, 29249-29250 2016-11044 Foreign Trade Foreign-Trade Zones Board NOTICES Foreign-Trade Zone 151; Reorganization: Expansion of Service Area under Alternative Site Framework; Findlay, OH, 29252 2016-11002 Proposed Trade Zone Under Alternative Site Framework: Vancouver, WA, 29251-29252 2016-10997 Subzone Status Approvals: H-J Enterprises, Inc./H-J International, Inc. High Ridge, MO, 29251 2016-11000 Forest Forest Service NOTICES Meetings: Medicine Bow-Routt Resource Advisory Committee, 29250 2016-10783 General Services General Services Administration PROPOSED RULES Federal Acquisition Regulation: Combating Trafficking in Persons: Definition of Recruitment Fees, 29244-29247 2016-11056 Health and Human Health and Human Services Department See

Centers for Disease Control and Prevention

See

Centers for Medicare & Medicaid Services

See

Community Living Administration

See

Food and Drug Administration

See

National Institutes of Health

RULES National Institute on Disability, Independent Living, and Rehabilitation Research, 29156-29165 2016-10853 Patient Protection and Affordable Care Act: Amendments to Special Enrollment Periods and the Consumer Operated and Oriented Plan Program, 29146-29156 2016-11017 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 29282-29283 2016-11069 Findings of Research Misconduct, 29278 2016-11062 Requirements and Registration: Move Health Data Forward Challenge, 29278-29282 2016-11102
Homeland Homeland Security Department See

Coast Guard

NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: REAL ID -- Minimum Standards for Driver's Licenses and Identification Cards Acceptable by Federal Agencies for Official Purposes, 29287-29289 2016-11133 Information Sharing and Analysis Organization, 29289-29290 2016-11128
Housing Housing and Urban Development Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Border Community Capital Initiative and Semi-Annual Reporting, 29293-29294 2016-11135 Home Equity Conversion Mortgage Client Session Evaluation, 29292-29293 2016-11134 Mortgagee Review Board Administrative Actions, 29290-29292 2016-11045 Institute of Museum and Library Services Institute of Museum and Library Services NOTICES Meetings; Sunshine Act, 29308 2016-11234 Interior Interior Department See

Fish and Wildlife Service

See

National Park Service

International Trade Adm International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Steel Wire Garment Hangers from the Socialist Republic of Vietnam, 29252-29253 2016-11120 International Trade Com International Trade Commission NOTICES Complaints: Certain Composite Aerogel Insulation Materials and Methods for Manufacturing the Same, 29306-29307 2016-11006 Certain Mobile and Portable Electronic Devices Incorporating Haptics (Including Smartphones and Laptops) and Components Thereof, 29305-29306 2016-11063 Investigations; Determinations, Modifications, and Rulings, etc.: Certain Portable Electronic Devices and Components Thereof, 29307-29308 2016-11018 Justice Department Justice Department See

Drug Enforcement Administration

PROPOSED RULES STOP Violence Against Women Formula Grant Program: Definitions and Confidentiality Requirements Applicable to All OVW Grant Programs, 29215-29230 2016-10564
Maritime Maritime Administration NOTICES Deepwater Port Licenses: Port Dolphin Energy, LLC; Port Dolphin Deepwater Port; Surrender and Termination License to Own, Construct and Operate, 29324 2016-11079 NASA National Aeronautics and Space Administration PROPOSED RULES Federal Acquisition Regulation: Combating Trafficking in Persons: Definition of Recruitment Fees, 29244-29247 2016-11056 National Foundation National Foundation on the Arts and the Humanities See

Institute of Museum and Library Services

National Institute National Institute of Standards and Technology NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: NIST Associates Information System, 29253 2016-11009 National Institute National Institutes of Health NOTICES Meetings: Center for Scientific Review, 29285 2016-11021 National Institute of Allergy and Infectious Diseases, 29286 2016-11022 National Institute of Biomedical Imaging and Bioengineering, 29283 2016-11023 National Institute of General Medical Sciences, 29284 2016-11024 2016-11025 National Institute of Mental Health, 29283-29285 2016-11026 2016-11027 2016-11028 National Institute on Minority Health and Health Disparities, 29286-29287 2016-11029 2016-11030 National Oceanic National Oceanic and Atmospheric Administration RULES Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic: Amendments to the Reef Fish, Spiny Lobster, Queen Conch, and Corals and Reef Associated Plants and Invertebrates Fishery Management Plans of Puerto Rico and the U.S. Virgin Islands, 29166-29168 2016-11064 NOTICES Meetings: Mid-Atlantic Fishery Management Council, 29253-29254 2016-11068 North Pacific Fishery Management Councill, 29254 2016-11081 National Park National Park Service NOTICES Intent to Repatriate Cultural Items: Peabody Museum of Natural History, Yale University, New Haven, CT, 29304 2016-11090 Inventory Completions: History Colorado, formerly Colorado Historical Society, Denver, CO, 29297-29298 2016-11091 Michigan State Police, Jackson Post, Jackson, MI, 29298-29299 2016-11086 Native American Human Remains and Associated Funerary Objects in the Possession of the U.S. Department of Defense, Department of the Army, Fort Benning, GA; Corrections, 29302 2016-11087 Oregon Museum of Natural and Cultural History, Eugene, OR, 29296-29297 2016-11089 The American Museum of Natural History, New York, NY; Correction, 29304-29305 2016-11088 University of California, Davis, Davis, CA, 29300-29301 2016-11092 2016-11093 University of Pennsylvania Museum of Archaeology and Anthropology, Philadelphia, PA, 29302-29304 2016-11085 National Telecommunications National Telecommunications and Information Administration NOTICES Benefits, Challenges, and Potential Roles for the Government in Fostering the Advancement of the Internet of Things, 29254 2016-11124 Nuclear Regulatory Nuclear Regulatory Commission NOTICES Combined License Applications: Dominion Virginia Power, North Anna, Unit 3, 29308-29309 2016-11076 Pipeline Pipeline and Hazardous Materials Safety Administration PROPOSED RULES Pipeline Safety: Meeting of the Gas Pipeline Safety Advisory Committee and the Liquid Pipeline Safety Advisory Committee, 29247-29248 2016-11119 NOTICES Hazardous Materials: Applications for Modification of Special Permit, 29325 2016-10977 Postal Service Postal Service RULES Purchasing of Property and Services, 29146 2016-11043 Presidential Documents Presidential Documents PROCLAMATIONS Special Observances: Mother's Day (Proc. 9444), 29463-29464 2016-11299 National Women's Health Week (Proc. 9443), 29459-29462 2016-11298 EXECUTIVE ORDERS Presidential Transition; Facilitation Efforts (EO 13727), 29465-29467 2016-11300 ADMINISTRATIVE ORDERS Central African Republic; Continuation of National Emergency (Notice of May 9, 2016), 29469 2016-11302 Securities Securities and Exchange Commission NOTICES Meetings; Sunshine Act, 29314 2016-11157 Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc., 29311-29312 2016-11011 ICE Clear Credit LLC, 29312-29313 2016-11010 Trading Suspension Orders: Midwest Oil and Gas, Inc., 29309 2016-11183 Small Business Small Business Administration NOTICES Disaster Declarations: Texas, 29314 2016-11042 Texas; Amendment 1, 29314-29315 2016-11041 Washington; Declaration of Economic Injury, 29314 2016-11040 Social Social Security Administration PROPOSED RULES Unsuccessful Work Attempts and Expedited Reinstatement Eligibility, 29212-29215 2016-10932 State Department State Department NOTICES Culturally Significant Objects Imported for Exhibition: Hubert Robert: 1733-1808, 29315 2016-11097 Rembrandt's First Masterpiece, 29316 2016-11100 Environmental Assessments; Availability, etc.: NuStar Dos Laredos Pipeline Presidential Permit Application Review, Webb County, TX, 29315-29316 2016-11101 Surface Transportation Surface Transportation Board NOTICES Abandonment Exemptions: BNSF Railway Co., Thurston County, WA, 29316-29317 2016-11132 Acquisition of Control: Rose Chauffeured Transportation, LTD, My Bus Division of Cherry Consulting of the Carolinas, Inc., 29317-29318 2016-11131 Transportation Department Transportation Department See

Federal Aviation Administration

See

Maritime Administration

See

Pipeline and Hazardous Materials Safety Administration

Treasury Treasury Department See

Community Development Financial Institutions Fund

See

Financial Crimes Enforcement Network

Veteran Affairs Veterans Affairs Department NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Accrued Amounts Due a Deceased Beneficiary, 29328-29329 2016-11054 Application for Refund of Educational Contributions, 29327-29328 2016-11051 Disability Benefits Questionnaire (Group 4), 29328 2016-11048 Disability Benefits Questionnaires—Group 3, 29332 2016-11049 Loan Service Report, 29329 2016-11050 NCA Pre-Need Determination of Eligibility for Burial, 29330-29331 2016-11055 Pension Claim Questionnaire for Farm Income, 29331-29332 2016-11053 Statement of Disappearance, 29332-29333 2016-11052 Charter Renewals: Advisory Committees, 29329-29330 2016-11103 Meetings: Veterans' Advisory Committee on Education, 29331 2016-11123 Separate Parts In This Issue Part II Interior Department, Fish and Wildlife Service, 29336-29396 2016-10712 Part III Treasury Department, Financial Crimes Enforcement Network, 29398-29458 2016-10567 Part IV Presidential Documents, 29459-29467, 29469 2016-11299 2016-11298 2016-11300 2016-11302 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 LISTSERV electronic mailing list, go to http://listserv.access.thefederalregister.org and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions.

81 91 Wednesday, May 11, 2016 Rules and Regulations BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Parts 1010 and 1012 RIN 3170-AA53 Amendments to Filing Requirements Under the Interstate Land Sales Full Disclosure Act (Regulations J and L) AGENCY:

Bureau of Consumer Financial Protection.

ACTION:

Final rule.

SUMMARY:

The Bureau of Consumer Financial Protection (Bureau) is amending Regulations J and L to permit the electronic submission of filings under the Interstate Land Sales Full Disclosure Act. The Bureau is also making non-substantive corrections to regulatory and statutory citations and other technical changes.

DATES:

This final rule is effective June 10, 2016.

FOR FURTHER INFORMATION CONTACT:

Rachel Ross, Project Analyst; or Amanda Quester, Senior Counsel, Office of Regulations, at 202-435-7700.

SUPPLEMENTARY INFORMATION: I. Summary of the Final Rule

This final rule makes a number of procedural and technical amendments to Regulations J and L, which implement the Interstate Land Sales Full Disclosure Act (ILSA). The final rule allows developers to choose whether to submit ILSA filings—including Statements of Record and related amendments, annual reports, and requests to suspend an effective date—on paper or via electronic means designated on the ILSA program page of the Bureau's Web site. Statements of Record submitted to the Bureau electronically in compliance with the final rule need not comply with the requirements in § 1010.102(a), (g), and (h) relating to paper type, tabs, folding, and ordering.

The final rule removes a number of procedural filing requirements under Regulation J, including that developers submit three copies of the final Property Report and two copies of the current geological survey topographic map or maps; that developers use legal size paper for submitting certain filings; that developers submit originals of topographic maps; and that developers bind paper filings. Under the final rule, developers need only submit one copy of documents to the Bureau, may use letter size paper for paper filings, and may submit photocopies of topographic maps in lieu of originals. The final rule also permits developers to choose whether to enclose warnings in a box in the Statement of Record.

The final rule also removes or corrects certain unnecessary and erroneous statutory and regulatory citations, without changing the substance of Regulations J and L. The final rule also updates contact information for the Bureau's Interstate Land Sales Registration Program office, reflecting changes to the Bureau's internal organization, and makes other technical changes.

II. Background

ILSA protects lot purchasers by requiring certain land developers to register their plans and to provide prescribed disclosures to prospective lot purchasers. Developers of subdivisions with 100 or more nonexempt lots must register their plans with the Bureau. These developers must also provide purchasers with a disclosure statement known as a Property Report before a contract of sale is signed.

Prior to July 21, 2011, ILSA was implemented by the U.S. Department of Housing and Urban Development's (HUD's) Interstate Land Sales Registration Program, 24 CFR parts 1710, 1715, and 1720. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended a number of consumer financial protection laws, including ILSA. In addition to various substantive amendments, the Dodd-Frank Act transferred rulemaking authority for ILSA to the Bureau, effective July 21, 2011.1 The Bureau issued an interim final rule restating the ILSA regulations in December 2011 (Restatement). The Restatement substantially duplicated HUD's Interstate Land Sales Registration Program regulations, 24 CFR parts 1710, 1715, and 1720, making only non-substantive, technical, formatting, and stylistic changes, as the Bureau's Regulation J (Land Registration), 12 CFR part 1010; Regulation K (Purchasers' Revocation Rights, Sales Practices and Standards), 12 CFR part 1011; and Regulation L (Special Rules of Practice), 12 CFR part 1012. In April 2016, the Bureau adopted the Restatement as final without making any changes to the ILSA provisions of the interim final rule.

1 Public Law 111-203, sections 1061 and 1098A, 124 Stat. 1376, 2038, 2105 (2010).

III. Legal Authority A. Rulemaking Authority

The Bureau is issuing this final rule pursuant to its authority under the Dodd-Frank Act and ILSA. Section 1061 of the Dodd-Frank Act transferred to the Bureau all of the HUD Secretary's consumer protection functions relating to ILSA.2 ILSA, as amended, authorizes the Bureau's Director to make, issue, amend, and rescind such rules and regulations as are necessary or appropriate to the exercise of the Director's functions and powers under ILSA.3 Section 1022(b)(1) of the Dodd-Frank Act also authorizes the Director to prescribe rules “as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws,” including ILSA.4

2Id. at section 1061(b)(7)(A). Effective on the designated transfer date, July 21, 2011, the Bureau was also granted “all powers and duties” that were vested in the HUD Secretary relating to ILSA on the day before the designated transfer date. Id. at section 1061(b)(7)(B). The term “consumer financial protection function” is defined to include “all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.” 12 U.S.C. 5581(a)(1)(A).

3 15 U.S.C. 1718; see also 15 U.S.C. 1704 (providing that a subdivision may be registered by filing a statement of record, meeting the requirements of ILSA and such rules and regulations as may be prescribed by the Director in furtherance of the provisions of ILSA).

4 12 U.S.C. 5512(b)(1); 12 U.S.C. 5481(14) (defining “Federal consumer financial law” to include the “enumerated consumer laws”); 12 U.S.C. 5481(12) (defining “enumerated consumer laws” to include ILSA).

B. Procedural Requirements

Under the Administrative Procedure Act (APA), notice and opportunity for public comment are not required for a “rule[] of agency organization, procedure, or practice” or if the Bureau finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b). The amendments regarding electronic submission of ILSA filings and other changes to the filing process (such as number of copies required and permitting photocopies of topographic maps) relate solely to agency procedure and practice and, thus, are not subject to the APA's notice and comment requirements. The other changes made in this rulemaking delete outdated cross-references, correct typographical errors, or are similar technical amendments that merely clarify the operation of the regulation. The Bureau believes that there is minimal, if any basis, for substantive disagreement with the technical amendments. As to all of these changes, the Bureau finds that notice and comment are unnecessary.

For these reasons, the Bureau has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are not required. Therefore, the amendments are adopted in final form. Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 601(2), 603(a), 604(a).

IV. Section-by-Section Analysis A. Regulation J 1010.1 Definitions 1(a) Statutory Terms

The Bureau is making a technical amendment to § 1010.1(a) to correct a citation to the United States Code.

1010.4 Exemptions—General 4(c)

The Bureau is making a technical amendment to § 1010.4(c) to remove a citation to a regulation that does not exist, § 1011.15(f). Prior to the Restatement, 24 CFR 1710.4(c) cited 24 CFR 1715.15(f), which implemented the requirements of 15 U.S.C. 1703(a)(2)(D). HUD eliminated § 1715.15(f) in 1996 but retained the cross-reference.5 As part of the Restatement, the Bureau substituted § 1011.15(f) for § 1715.15(f), even though § 1011.15(f) does not exist. This technical amendment to remove the citation to § 1011.15(f) does not modify any requirements or obligations under Regulation J.

5 61 FR 13596, 13598 (Mar. 27, 1996).

4(e)

The Bureau is making a technical amendment that changes the name of the Bureau office designated in § 1010.4(e), to reflect changes in the internal organization of the Bureau since the Bureau issued the Restatement in 2011.

1010.5 Statutory Exemptions

The Bureau is making a technical amendment to § 1010.5 to correct two citations to the United States Code.

1010.20 Requirements for Registering a Subdivision—Statement of Record—Filing and Form 20(a) Filing

Section 1010.20(a) provides filing requirements for registering a subdivision. The Bureau is amending this section to update the address to which developers should send Statements of Record because the Bureau will no longer be using a third-party contractor to receive incoming Statements of Record.

In addition to amending the U.S. mail address, the final rule permits submission of Statements of Record via electronic means that are designated on the ILSA program page of the Bureau's Web site, www.consumerfinance.gov. The Bureau's Web site specifies uploading, file naming, and other requirements for electronic submissions. Electronic filing of Statements of Record will reduce the burden on filers and facilitate the Bureau's processing of submissions, by reducing costs spent on mailing and eliminating the time in transit for physical mailings and the time required for the Bureau to scan paper submissions. Filers may choose different submission options for each filing, only exercising the electronic option when it is beneficial. Further, the Bureau will achieve cost savings by receiving and processing filings in house rather than through a third-party contractor.

20(b) Form

The Bureau is amending § 1010.20(b) to clarify that electronic filings made pursuant to § 1010.20(a) are not subject to the requirements in § 1010.102(a), (g), and (h) relating to paper type, tabs, folding, and ordering for filings. The Bureau is making this change because it would be difficult or impossible for electronic filings to comply with these paper-specific requirements.

1010.21 Effective Dates 21(b) Suspension of Effective Date by Developer

The Bureau is amending § 1010.21(b) to allow for submission of requests for the suspension of the effective date of a Statement of Record through the electronic means described in § 1010.20(a). The Bureau believes that permitting electronic submission of such requests will reduce the burden on filers and facilitate the Bureau's processing of submissions.

1010.23 Amendment—Filing and Form 23(a) Filing

The Bureau is amending § 1010.23(a) to allow for submission of amendments to Statements of Record through the electronic means described in § 1010.20(a). The Bureau believes that permitting electronic submission of such amendments will reduce the burden on filers and facilitate the Bureau's processing of submissions.

1010.35 Payment of Fees 35(a) Method of Payment

The Bureau is amending § 1010.35(a) to reflect changes in the internal organization of the Bureau and to provide contact information for the relevant Bureau office. The final rule also notes that information regarding the current mailing address or electronic payment procedures can be obtained from the ILSA program page of the Bureau's Web site at www.consumerfinance.gov.

1010.102 General Instructions for Completing the Statement of Record 102(a) Paper and Type

Section 1010.102(a) currently requires the use of legal size paper for the Additional Information and Documentation portion of the Statement of Record. The Bureau is amending § 1010.102(a) to allow developers that file on paper to use either legal size or letter size paper for the Additional Information and Documentation portion of the Statement of Record. The Bureau believes that allowing this flexibility could reduce costs for both developers and the Bureau.

102(e) Headings, Subheadings, Captions, Introductory Paragraphs, Warnings

The Bureau is making a technical amendment to § 1010.102(e) to correct a reference to the location of the sample page that shows how headings and subheadings should be used in the Property Report. The Bureau is also removing the requirement in § 1010.102(e) that warnings be enclosed in a box and is instead making the use of the box optional for developers, in order to facilitate compliance.

102(h) Ordering

Section 1010.102(h) requires the Statement of Record to be bound with the Property Report on top (including any documents required to be attached when delivered to the purchaser), followed by the Additional Information and Documentation. The Bureau is amending § 1010.102(h) to remove the requirement that the Statement of Record be bound with the Property Report, while still requiring that the filing be presented in the specified order.6 The Bureau believes allowing developers to decide whether to bind filings facilitates compliance.

6 As noted above in the section-by-section discussion of § 1010.20(a) and (b), electronic filings made pursuant to § 1010.20(a) are not subject to the requirements in § 1010.102(a), (g), and (h) relating to paper type, tabs, folding, and ordering for filings but must comply with instructions for electronic filing designated on the ILSA program page of the Bureau's Web site.

102(m) Final Version of Property Report

Section 1010.102(m) provides general instructions relating to the final version of the Property Report and indicates that the version of the Property Report delivered to prospective lot purchasers must meet many of the same standards as those set forth in the regulations for the Statement of Record. Section 1010.102(m) requires developers to submit to the Bureau three copies of the final Property Report or, if a Property Report in a foreign language is used, three copies of the Property Report together with copies of the translated documents. The Bureau is amending § 1010.102(m) to require submission of only one copy of these documents to the Bureau. The Bureau believes that reducing the number of copies required to be filed could reduce costs for developers and for the Bureau.

The final rule also indicates that if a developer submits a Statement of Record to the Bureau via electronic means pursuant to § 1010.20(a), the version of the Property Report delivered to prospective lot purchasers must meet the same standards that apply to a Statement of Record submitted on paper to the Bureau.

1010.103 Developer Obligated Improvements (a)

The Bureau is making a technical amendment to § 1010.103(a) to remove one erroneous citation and replace another erroneous citation. Prior to the Restatement, 24 CFR 1710.103(a) cited 24 CFR 1715.15(f), which implemented the requirements of 15 U.S.C. 1703(a)(2)(D). As part of the Restatement, the Bureau replaced § 1715.15(f) with § 1011.15(f) in this paragraph, even though HUD had eliminated § 1715.15(f) in 1996 and § 1011.15(f) does not exist.7 These technical amendments do not modify any requirements or obligations under Regulation J.

7 61 FR 13596, 13598 (Mar. 27, 1996).

1010.209 Title and Land Use (f) Supplemental Title Information (3)

(iv) The Bureau is making a technical amendment to § 1010.209(f)(3)(iv) to remove an erroneous citation to § 1011.15(f). Prior to the Restatement, 24 CFR 1710.209(f)(3)(iv) cited 24 CFR 1715.15(f), which implemented the requirements of 15 U.S.C. 1703(a)(2)(D). As part of the Restatement, the Bureau replaced § 1715.15(f) with § 1011.15(f) in this paragraph, even though HUD had eliminated § 1711.15(f) in 1996 and § 1011.15(f) does not exist. The technical amendment to remove the citation to § 1011.15(f) does not modify any requirements or obligations under Regulation J.

1010.215 Subdivision Characteristics and Climate (a)

Section 1010.215(a) requires submission of two copies of a current geological survey topographic map or maps from the U.S. Geological Survey and prohibits use of photocopies made by the developer. The final rule amends this section to require submission of only one copy and to eliminate the prohibition on photocopying. The Bureau believes that reducing the number of copies required to be filed could reduce costs for developers and for the Bureau, and anticipates that these changes will facilitate compliance and electronic filing.

1010.310 Annual Report of Activity (b)

The Bureau is amending § 1010.310(b) to allow for submission of annual reports through the electronic means described in § 1010.20(a). Permitting electronic submission will reduce the burden on filers and facilitate the Bureau's processing of submissions.

1010.500 General (a)

The Bureau is making a technical amendment to § 1010.500(a) to remove duplicated words.

1010.503 Notice of Certification (a)

The Bureau is making a technical amendment to § 1010.503(a), which currently erroneously refers to § 1010.501(a) or (b) as the provisions pursuant to which a State may qualify for certification. Prior to the Restatement, 24 CFR 1710.503(a) referred to 24 CFR 1710.501(a) or (b), which implemented the requirements of 15 U.S.C. 1708(a). As part of the Restatement, the Bureau replaced § 1710.501 with § 1010.501 in this paragraph, even though HUD had removed § 1710.501 from codification in 1996 8 and § 1010.501 does not exist. Because § 1010.501 does not exist, the final rule substitutes a reference to subpart C of part 1010, which is the subpart pursuant to which a State may qualify for certification. This technical amendment does not alter or change the substance of the requirements of § 1010.503(a).

8 61 FR 13596, 13597 (Mar. 27, 1996).

1010.504 Cooperation Among Certified States and Between Certified States and the Director (a)

The Bureau is making a technical amendment to § 1010.504(a), which currently erroneously refers to § 1010.502 as the provision pursuant to which an Application for Certification of State Land Sales Program is filed. Because § 1010.502 does not exist, the final rule substitutes a reference to subpart C of part 1010, which is the subpart pursuant to which an Application for Certification of State Land Sales Program is filed. This technical amendment does not alter or change the substance of the requirements of § 1010.504(a).

(c)

The Bureau is making a technical amendment to § 1010.504(c) to remove a duplicated word.

1010.505 Withdrawal of State Certification

The Bureau is making a technical amendment to the title of § 1010.505 to remove a duplicated word.

1010.506 State/Federal Filing Requirements (a)(1)

The Bureau is making a technical amendment to § 1010.506(a)(1), which currently erroneously refers to § 1010.501 as the provision under which the Director certifies States. Because § 1010.501 does not exist, the final rule substitutes a reference to subpart C of part 1010, which is the subpart under which the Director certifies States. This technical amendment does not alter or change the substance of the requirements of § 1010.506(a)(1).

(a)(2)

The Bureau is making a technical amendment to § 1010.506(a)(2) to remove a duplicated word.

(f)

The Bureau is making a technical amendment to § 1010.506(f) to remove a duplicated word.

1010.507 Effect of Suspension or Withdrawal of Certification Granted Under § 1010.501(a): Full Disclosure Requirement

The Bureau is making technical amendments to the title of § 1010.507 and to § 1010.507(a), which currently erroneously refer to § 1010.501(a) as a provision under which the Director certifies States. Prior to the Restatement, 24 CFR 1710.507 cited 24 CFR 1710.501(a), which implemented the requirements of 15 U.S.C. 1708(a)(1). As part of the Restatement, the Bureau replaced § 1710.501(a) with § 1010.501(a) in this paragraph, even though HUD had removed § 1710.501 from codification in 1996 and § 1010.501(a) does not exist. The Bureau is now replacing the erroneous citations to § 1010.501(a) with citations to 15 U.S.C. 1708(a)(1). These technical amendments do not alter or change the substance of the requirements of § 1010.507.

1010.508 Effect of Suspension of Certification Granted Under § 1010.501(b): Sufficient Protection Requirement

The Bureau is making technical amendments to the title of § 1010.508 and to § 1010.508(a), which currently erroneously refer to § 1010.501(b) as a provision under which the Director certifies States. Prior to the Restatement, 24 CFR 1710.508 cited 24 CFR 1710.501(b), which implemented the requirements of 15 U.S.C. 1708(a)(2). As part of the Restatement, the Bureau replaced § 1710.501(b) with § 1010.501(b) in this section, even though HUD had removed § 1710.501 from codification in 1996 and § 1010.501(b) does not exist. The Bureau is now replacing the erroneous citations to § 1010.501(b) with citations to 15 U.S.C. 1708(a)(2). These technical amendments do not alter or change the substance of the requirements of § 1010.508.

1010.552 Previously Accepted State Filings (a)

The Bureau is making a technical amendment to § 1010.552 to replace an erroneous citation to § 1011.15(f) with a citation to 15 U.S.C. 1703(a)(2)(D). Prior to the Restatement, 24 CFR 1710.552(a) cited 24 CFR 1715.15(f), which implemented the requirements of 15 U.S.C. 1703(a)(2)(D). As part of the Restatement, the Bureau replaced § 1715.15(f) with § 1011.15(f) in this section, even though HUD had eliminated § 1715.15(f) in 1996 and § 1011.15(f) does not exist. This technical amendment does not modify any requirements or obligations under Regulation J.

Appendix A to Part 1010

This Appendix provides Standard and Model Forms and Clauses. The Bureau is making a technical amendment to section III, Sample Lot Information Statement and Sample Receipt—§ 1010.15(b)(11), to provide contact information for the relevant Bureau office. The Bureau is also making a technical amendment to section VIII, Property Report for Statement of Record—§ 1010.100(b), to harmonize a heading label with the requirements of § 1010.107.

B. Regulation L 1012.35 Prefiling Assistance

The Bureau is making a technical amendment to § 1012.35 to reflect changes in the internal organization of the Bureau and to provide contact information for the relevant Bureau office.

1012.40 Processing of Filings (a)

The Bureau is making a technical amendment to § 1012.40(a) to reflect changes in the internal organization of the Bureau.

1012.236 Notice of Proceedings To Withdraw a State's Certification (b)

Section 1012.236(b) refers to a determination by the Director pursuant to § 1010.505 that a State's laws, regulations, and the administration thereof, taken as a whole, no longer meet the requirements of § 1010.501. The Bureau is making a technical amendment to § 1012.236(b) to conform the language of § 1012.236(b) to that of § 1010.505. The final rule substitutes subpart C of part 1010 for § 1010.501, which does not exist. This technical amendment does not alter or change the substance of the requirements of § 1012.236(b).

V. Effective Date

The Administrative Procedure Act generally requires that rules be published not less than 30 days before their effective dates.9 This final rule is effective 30 days after May 11, 2016.

9 5 U.S.C. 553(d).

VI. Dodd-Frank Act Section 1022(b) Analysis A. Overview

In developing this final rule, the Bureau has considered potential benefits, costs, and impacts and has consulted, or offered to consult with, HUD and HUD's Office of the Inspector General, including regarding consistency with any prudential, market, or systemic objectives administered by such agencies.10

10 Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act calls for the Bureau to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act; and the impact on consumers in rural areas. Section 1022(b)(2)(B) of the Dodd-Frank Act directs the Bureau to consult with appropriate prudential regulators or other Federal agencies regarding consistency with prudential, market, or systemic objectives that those agencies administer. The manner and extent to which these provisions apply to a rulemaking of this kind that does not establish standards of conduct is unclear. Nevertheless, to inform this rulemaking more fully, the Bureau performed the described analyses and has consulted, or offered to consult, as indicated.

The Bureau is amending Regulation J to allow ILSA filings by electronic means designated on the Bureau's Web site or via physical mail. The final rule exempts electronic filings from certain requirements in § 1010.102 relating to paper type, folding, and ordering. The Bureau is also amending Regulation J to require filings submitted by mail to be sent to the Bureau directly, rather than to a third-party service provider. The existing contract with the service provider will not be renewed. The Bureau is also making certain technical changes to Regulations J and L.

This analysis focuses on the benefits, costs, and impacts of the key provision of the final rule, the new electronic filing option.11 The Bureau is evaluating the benefits, costs, and impacts of the final rule against the current regulation.

11 The final rule also addresses a number of typographic and other non-substantive issues in Regulations J and L by: (1) Correcting or removing incorrect regulatory and statutory cross-references, (2) updating contact information for the Bureau, and (3) removing inconsistent language regarding certain formatting requirements. These changes increase the accuracy and consistency of the regulations' language, but are expected to have negligible impacts on consumers or covered persons. As noted below in the discussion of the potential costs and benefits, the final rule also offers developers additional options with respect to the form of certain filings when submitted via paper.

B. Potential Benefits and Costs to Consumers and Covered Persons

The current rule directs filers 12 to submit ILSA filings by physically mailing paper copies to the Bureau in care of a service provider. In addition, the Bureau has in practice permitted submissions by physically-mailed digital media.

12 For purposes of this analysis, “filer” refers to a developer or owner within the meaning of ILSA. Developers or owners within the meaning of ILSA are typically not covered persons within the meaning of the Dodd-Frank Act. Accordingly, the Bureau believes that the final rule will have minimal if any impact on covered persons. Nevertheless, to inform this rulemaking more fully, the Bureau has performed the described analysis with respect to the impact on filers.

If filers wish to continue physically mailing their paper submissions after this rulemaking, they may do so using the address provided in the final rule for the Bureau. Filers that continue to submit paper filings would generally incur no costs as a result of the rule. Based on the expected volume of paper submissions, the Bureau believes that the processing time for paper filings is unlikely to change from the current processing time. Additionally, the Bureau has taken several steps to reduce the burden on paper filers, by, for example, permitting copies of topographic maps to be submitted instead of the original; eliminating the requirement that developers submit multiple copies of the Property Report to the Bureau; and relaxing paper size, binding, and other formatting requirements for Bureau submissions.

Two primary categories of filers may take advantage of electronic filing: Filers that switch from paper filing to electronic filing and covered persons that currently submit filings by physically-mailed digital media. Filers that switch from paper submissions to the new electronic means of submission may incur benefits and costs, but presumably will only adopt the new means when it is advantageous to them. Filers that currently submit filings by physically-mailed digital media will now file via either the electronic means designated by the Bureau or physically-mailed paper submissions. Filers may choose different submission options for each filing, only exercising the electronic option when it is beneficial.

Electronic filing may reduce preparation time for some filers and offer faster processing of their submissions. Electronic filing will eliminate the time in transit for physical mailings, the time required for the Bureau to scan paper submissions, and the processing time added by necessary security precautions taken for mailed digital media submissions. In addition, the new means may benefit filers by reducing costs spent on printing paper submissions and mailing both paper and physically-mailed digital media submissions, as well as the costs spent on the digital media devices.

For filers who currently physically mail digital media to the Bureau, the costs of switching to direct electronic submission should be negligible because those submissions are already formatted and saved electronically. The Bureau does not possess any data that would enable it to quantify these costs or savings, but informal outreach indicates that many filers would prefer the electronic option over physical mailings.

This procedural rulemaking is expected to have negligible impact on consumers.

C. Impact on Depository Institutions With No More Than $10 Billion in Assets

This final rule will affect land developers and law firms and others making filings on behalf of land developers. Depository institutions with no more than $10 billion in assets will not be impacted by this final rule.

D. Impact on Access to Credit

The Bureau does not expect this final rule to affect consumers' access to credit. The scope of the rulemaking is limited to filings related to land development, which are not directly related to credit access.

E. Impact on Rural Areas

The Bureau does not believe that this final rule will have a unique impact on consumers in rural areas. Any potential effects on consumers, expected to be negligible in all cases, would be indirect effects passed through by developers, and the impact on developers is not expected to vary by geographic area.

VII. Paperwork Reduction Act

This final rule amends Regulations J and L, 12 CFR parts 1010 and 1012, to allow developers to submit ILSA filings electronically and make other technical adjustments. The Bureau's OMB control number for collections under ILSA is 3170-0012. This rule does not add any new collections and does not remove any of the existing collections, although it does reduce the number of copies required to be submitted to the Bureau for certain paper filings. Therefore, the impact of this new rule on the Paperwork Reduction Act burden associated with ILSA depends largely on the extent to which developers switch from paper submissions to electronic submissions. Currently, only 10 percent of ILSA information collections received by the Bureau are done in electronic form. If all submissions become electronic, the estimated savings in ongoing Paperwork Reduction Act burden could be up to 972 hours and 15,000 pages of paper per year. The one-time burden associated with a new method of submission is expected to be minimal because many documents are already created electronically for business reasons.

List of Subjects in 12 CFR Parts 1010 and 1012

Land registration; Reporting requirements; Certification of substantially equivalent State law; Purchasers' revocation rights; Unlawful sales practices; Advertising disclaimers; Filing assistance; and Adjudicatory proceedings.

Authority and Issuance

For the reasons set forth above, the Bureau amends Regulation J, 12 CFR part 1010, and Regulation L, 12 CFR part 1012, as set forth below:

PART 1010—LAND REGISTRATION (REGULATION J) 1. The authority citation for part 1010 continues to read as follows: Authority:

12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

2. Section 1010.1 is amended by revising paragraph (a) to read as follows:
§ 1010.1 Definitions.

(a) Statutory terms. All terms are used in accordance with their statutory meaning in 15 U.S.C. 1701, unless otherwise defined in paragraph (b) of this section or elsewhere in this part.

3. Section 1010.4 is amended by revising paragraphs (c) and (e) to read as follows:
§ 1010.4 Exemptions—general.

(c) The anti-fraud provisions of the Act require that certain representations be included in the contract in transactions which are not exempt under § 1010.5. Specifically, the Act requires that if a developer or agent represents that roads, sewers, water, gas or electric service or recreational amenities will be provided or completed by the developer, the contract must stipulate that the services or amenities will be provided or completed.

(e) A developer may present evidence, or otherwise discuss, in an informal hearing before the Office of Supervision Examinations, the Bureau's position on the jurisdiction or non-exempt status of a particular subdivision.

4. Section 1010.5 is revised to read as follows:
§ 1010.5 Statutory exemptions.

A listing of the statutory exemptions is contained in 15 U.S.C. 1702. In accordance with 15 U.S.C. 1702(a)(2), if the sale involves a condominium or multi-unit construction, a presale clause conditioning the sale of a unit on a certain percentage of sales of other units is permissible if it is legally binding on the parties and is for a period not to exceed 180 days. However, the 180-day provision cannot extend the 2-year period for performance. The permissible 180 days is calculated from the date the first purchaser signs a sales contract in the project or, if a phased project, from the date the first purchaser signs the first sales contract in each phase.

5. Section 1010.20 is amended by revising paragraphs (a) and (b) to read as follows:
§ 1010.20 Requirements for registering a subdivision—Statement of Record—filing and form.

(a) Filing. (1) In order to register a subdivision and receive an effective date, the developer or owner of the subdivision must file a Statement of Record with the Director by either:

(i) U.S. Mail, to the following official address: Consumer Financial Protection Bureau, Interstate Land Sales Registration Program, 1700 G Street NW., Washington, DC 20552; or

(ii) Electronic means designated on the ILSA program page on the Bureau's Web site at www.consumerfinance.gov/.

(2) When the Statement of Record is filed, a fee in the amount set out in § 1010.35(b) must be paid in accordance with § 1010.35(a).

(b) Form. (1) The Statement of Record shall be in the format specified in § 1010.100 and shall be completed in accordance with the instructions in §§ 1010.102, 1010.105 through 1010.118, 1010.200, 1010.208 through 1010.216, and 1010.219. It shall be supported by the documents required by §§ 1010.208 through 1010.216 and 1010.219. It shall include any other information or documents which the Director may require as being necessary or appropriate for the protection of purchasers.

(2) The requirements relating to paper type, tabs, folding, and ordering for filings with the Bureau in § 1010.102(a), (g), and (h) do not apply if a Statement of Record is filed with the Bureau via electronic means designated on the Bureau's Web site pursuant to § 1010.20(a).

6. Section 1010.21 is amended by revising paragraph (b)(1) to read as follows:
§ 1010.21 Effective dates.

(b) * * *

(1) A developer, or owner, may request that the effective date of its Statement of Record be suspended, provided there are no administrative proceedings pending against either of them at the time the request is submitted. The request must include any consolidations or amendments which have been made to the initial Statement of Record and may be submitted via the electronic means of submission described in § 1010.20(a). Forms for this purpose will be furnished by the Director upon request.

7. Section 1010.23 is amended by revising paragraph (a) to read as follows:
§ 1010.23 Amendment—filing and form.

(a) Filing. If any change occurs in any representation of material fact required to be stated in an effective Statement of Record, an amendment shall be filed. The amendment shall be filed within 15 days of the date on which the developer knows, or should have known, that there has been a change in material fact. The amendment may be filed via the electronic means of submission described in § 1010.20(a).

8. Section 1010.35 is amended by revising paragraph (a)(2) to read as follows:
§ 1010.35 Payment of fees.

(a) * * *

(2) Information regarding the current mailing address or electronic payment procedures is available from: Consumer Financial Protection Bureau, Interstate Land Sales Registration Program, 1700 G Street NW., Washington, DC 20552, or on the Bureau's Web site at www.consumerfinance.gov.

9. Section 1010.102 is amended by revising paragraphs (a), (e), (h), and (m) to read as follows:
§ 1010.102 General instructions for completing the Statement of Record.

(a) Paper and type. The Statement of Record shall be on good quality, unglazed white or pastel paper. Letter size paper, approximately 81/2 × 11 inches in size, will be used for the Property Report portion, and either letter size paper, approximately 81/2 × 11 inches in size, or legal size paper, approximately 81/2 × 14 inches in size, will be used for the Additional Information and Documentation portion. Side margins shall be no less than 1 inch and no greater than 11/2 inches. Top and bottom margins shall be no less than 1 inch. In the preparation of the charts to be included in the Property Report, the developer may vary from the above margin requirements or print the charts lengthwise on the required size paper if such measures are necessary to make the charts readable. The Statement of Record shall be prepared in an easily readable, uniform font.

(e) Headings, subheadings, captions, introductory paragraphs, warnings. Property Report subject “headings” are those descriptive introductory words which appear immediately after section numbers 1010.106 through 1010.116 (e.g. § 1010.108 has “General Information” and § 1010.111 has “Utilities”). Each such heading shall be printed in the Property Report in underlined capital letters and centered at the top of a new page. Section numbers shall not be printed in the Property Report. Property Report subheadings are those descriptive introductory words which appear in italics in the regulations at the beginning of paragraphs designated by paragraph letters (a), (b), (c) etc. An example of a subheading is “water” found immediately after the paragraph letter (a) in § 1010.111. These subheadings will be printed in the Property Report only if they are relevant to the subject subdivision. If printed these subheadings shall be capitalized and shall begin at the left hand margin of the page. Property Report “captions” are those descriptive introductory words which appear in italics in the Regulations at the beginning of paragraphs designated by numbers (1), (2), (3), etc. An example of such captions is “Sales Contract and Delivery of Deed” found immediately after the paragraph number “(1)” in § 1010.109(b). These captions are to be printed in the Property Report only if they are applicable to the subject subdivision. If printed, these captions shall be centered on the page from the side margins, and shall have only the first letter of each word capitalized. Headings and subheadings will be used in the Property Report in accordance with the sample page appearing in section IX of the appendix to this part. Introductory paragraphs will follow headings if they are applicable and necessary for a readable entry into the subject matters, but note, the introductory paragraphs for “Title to the Property and Land Use” are to be used in every case as provided in § 1010.109(a)(1). Subheadings and captions which do not apply to the subdivision should be omitted from the Property Report portion and answered “not applicable” in the Additional Information and Documentation portion, unless specifically required to be included elsewhere in these instructions. Warnings shall be printed substantially as they appear in the instructions in §§ 1010.105 through 1010.118. They shall be printed in capital letters and may be enclosed in a box. The paragraphs in the Property Report portion need not be numbered. A sample page is set forth in section IX of the appendix to this part: Sample Page for Statement of Record.

(h) Ordering. The Statement of Record shall be filed with the Property Report portion on top, including any documents which may be required to be attached when delivered to the purchaser, followed by the Additional Information and Documentation portion.

(m) Final version of Property Report. On the date that a Statement of Record becomes effective, the Property Report portion shall become the Property Report for the subject subdivision. The version of the Property Report delivered to prospective lot purchasers shall be verbatim to that found effective by the Director and shall have no covers, pictures, emblems, logograms or identifying insignia other than as required by these regulations. It shall meet the same standards as to grade of paper, type size, margins, style and color of print as those set herein for the Statement of Record, except where required otherwise by these regulations. However, the date of typing or preparation of the pages and the ILSRP number shall not appear in the final version. If the final version of the Property Report is commercially printed, or photocopied by a process which results in a commercial printing quality, and is bound on the left side, both sides of the pages may be used for printed material. If it is typed or photocopied by a process which does not result in a clear and legible product on both sides of the page or is bound at the top, printing shall be done on only one side of the page. If a Statement of Record is filed with the Bureau via electronic means pursuant to § 1010.20(a), the version of the Property Report delivered to prospective lot purchasers shall meet the same standards that apply under these regulations to a Statement of Record not filed with the Bureau via electronic means. One copy of the final version of the Property Report, in the exact form in which it is delivered to prospective lot purchasers, shall be sent to ILSRP Office within 20 days of the date on which the Statement of Record, amendment, or consolidation is allowed to become effective by the Director. If a Property Report in a foreign language is used as required by § 1011.25(g), a copy of that Property Report together with a copy of the translated documents shall be furnished the Director within 20 days of the date on which the advertising is first used. A Property Report prepared pursuant to these regulations shall not be distributed to potential lot purchasers until after the Statement of Record of which it is a part or any amendment to that Statement of Record has been made effective by the Director.

10. Section 1010.103 is amended by revising paragraph (a) to read as follows:
§ 1010.103 Developer obligated improvements.

(a) If the developer represents either orally or in writing that it will provide or complete roads or facilities for water, sewer, gas, electricity or recreational amenities, it must be contractually obligated to do so, and the obligation shall be clearly stated in the Property Report. While the developer may disclose relevant facts about completion, the obligation to complete cannot be conditioned, other than as permitted by 15 U.S.C. 1703(a)(2), and an estimated completion date (month and year) must be stated in the Property Report. However, a developer that has only tentative plans to complete may so state in the Property Report, provided that the statement clearly identifies conditions to which the completion of the facilities are subject and states that there are no guarantees the facilities will be completed.

11. Section 1010.209 is amended by revising paragraph (f)(3)(iv) to read as follows:
§ 1010.209 Title and land use.

(f) * * *

(3) * * *

(iv) If it is represented that the developer will provide or complete roads or facilities for waters, sewer, gas, electric service or recreational amenities, the contract must contain a provision that the developer is obligated to provide or complete such roads, facilities and amenities.

12. Section 1010.215 is amended by revising paragraph (a) to read as follows:
§ 1010.215 Subdivision characteristics and climate.

(a) Submit a copy of a current geological survey topographic map, or maps, of the largest scale available from the U.S. Geological Survey with an outline of the entire subdivision and the area included in this Statement of Record clearly indicated. Do not shade the areas on the maps which have been outlined.

13. Section 1010.310 is amended by revising paragraph (b) to read as follows:
§ 1010.310 Annual report of activity.

(b) The report shall be submitted within 30 days of the annual anniversary of the effective date of the initial Statement of Record. The report may be submitted via the electronic means described in § 1010.20(a).

Subpart C—Certification of Substantially Equivalent State Law 14. Section 1010.500 is amended by revising paragraph (a) to read as follows:
§ 1010.500 General.

(a) This subpart establishes procedures and criteria for certifying state land sale or lease disclosure programs and state land development standards programs. The purpose of State Certification is to lessen the administrative burden on the individual developer, arising where there are duplicative state and Federal registration and disclosure requirements, without affecting the level of protection given to the individual purchaser or lessee. If the Director determines that a state has adopted and is effectively administering a program that gives purchasers and lessees the same level of protection given to them by the Interstate Land Sales Registration Program, then the Director shall certify that state. Developers who accomplish an effective registration with a state in which the land is located after the Director has certified the state may satisfy the registration requirements of the Director by filing with the Director materials designated by agreement with certified states in lieu of the Federal Statement of Record and Property Report.

15. Section 1010.503 is amended by revising paragraph (a) to read as follows:
§ 1010.503 Notice of certification.

(a) If the Director determines that a state qualifies for certification under this subpart, the Director shall so notify the state in writing. The state will be effectively certified under the section and as of the date specified in the notice.

16. Section 1010.504 is amended by revising paragraphs (a) introductory text, (a)(1), and (c) to read as follows:
§ 1010.504 Cooperation among certified States and between certified States and the Director.

(a) By filing an Application for Certification of State Land Sales Program pursuant to this subpart, a state agrees that, if it is certified by the Director, it will:

(1) Accept for filing and allow to be distributed as the sole disclosure document, a disclosure document currently in effect in the situs certified State. Only those documents filed with the situs state after certification by the Director must automatically be accepted by other certified states;

(c) No state shall be prevented from establishing substantive or disclosure requirements which exceed the Federal standard provided that such requirements are not in conflict with the Act or these regulations. For example, a certified State may impose additional disclosure requirements on developers of land located within its borders but may not impose additional disclosure requirements on developers whose disclosure documents it is required to accept pursuant to paragraph (a)(1) of this section. However, a certified state may impose additional nondisclosure requirements on out of state developers even though the developer is registered in the certified State in which the land is located.

17. Section 1010.505 is amended by revising the section heading to read as follows:
§ 1010.505 Withdrawal of State certification.
18. Section 1010.506 is amended by revising paragraphs (a) and (f) to read as follows:
§ 1010.506 State/Federal filing requirements.

(a)(1) If the Director has certified a state under this subpart, the Director shall accept for filing disclosure materials or other acceptable documents which have been approved by the certified state within which the subdivision is located. Only those filings made by the developer with the state after the state was certified by the Director shall be automatically accepted by the Director.

(2) Retroactive application of the effectiveness of state's certification to a specified date may be granted on a state-by-state basis, where the Director determines that retroactive application will not result in automatic Federal registration of any state filing that has not met the requirements of the certified state laws.

(f) If a certified state suspends the registration of a particular subdivision for any reason, the subdivision's Federal registration with the Director shall be automatically suspended as a result of the state action. No action need be taken by the Director to effect the suspension.

19. Section 1010.507 is amended by revising the section heading and paragraph (a) to read as follows:
§ 1010.507 Effect of suspension or withdrawal of certification granted under 15 U.S.C. 1708(a)(1): Full disclosure requirement.

(a) If a state certified under 15 U.S.C. 1708(a)(1) suspends its own certification or has its certification withdrawn under § 1010.505, the Federal disclosure materials accepted and made effective by the Director, pursuant to § 1010.506, prior to the suspension or withdrawal shall remain in effect unless otherwise suspended by the Director.

20. Section 1010.508 is amended by revising the section heading and paragraph (a) to read as follows:
§ 1010.508 Effect of suspension of certification granted under 15 U.S.C. 1708(a)(2): Sufficient protection requirement.

(a) If a state certified under 15 U.S.C 1708(a)(2) suspends its own certification or has its certification withdrawn under § 1010.505, the effectiveness of the Federal disclosure materials accepted and made effective by the Director, pursuant to § 1010.506, prior to the suspension or withdrawal shall terminate ninety (90) days after the notice of withdrawal order is published in the Federal Register as provided in § 1010.505(c).

21. Section 1010.552 is amended by revising paragraph (a) to read as follows:
§ 1010.552 Previously accepted State filings.

(a) Materials filed with a state and accepted by the HUD Secretary as a Statement of Record prior to January 1, 1981, pursuant to 24 CFR 1010.52 through 1010.59 (as published in the Federal Register on April 10, 1979) may continue in effect. However, developers must comply with the applicable amendments to the Federal act and the regulations thereunder. In particular, see §§ 1010.558 and 1010.559, which require that the Property Report and contracts or agreements contain notice of purchaser's revocation rights. In addition, see 15 U.S.C. 1703(a)(2)(D), which provides that it is unlawful to make any representations with regard to the developer's obligation to provide or complete roads, water, sewers, gas, electrical facilities or recreational amenities, unless the developer is obligated to do so in the contract.

22. Appendix A is amended: a. In section III, under the center heading “Suppliers and Utilities and Issuers of Permits” by revising the third paragraph; and b. By revising section VIII.

The revisions read as follows:

Appendix A to Part 1010—Standard and Model Forms and Clauses III. Sample Lot Information Statement and Sample Receipt—§ 1010.15(b)(11) Suppliers of Utilities and Issuers or Permits

If misrepresentations are made in the sale of this lot to you, you may have rights under the Interstate Land Sales Full Disclosure Act. If you have evidence of any scheme, artifice or device used to defraud you, you may wish to contact: Consumer Financial Protection Bureau, Interstate Land Sales Registration Program, 1700 G Street NW., Washington DC 20552.

VIII. Property Report for Statement of Record—§ 1010.100(b) Property Report Heading and Section Number Cover Sheet 1010.105 Table of Contents 1010.106 Risks of Buying Land 1010.107 General Information 1010.108 Title and Land Use 1010.109

(a) General Instructions

(b) Method of Sale

(c) Encumbrances, Mortgages and Liens

(d) Recording the Contract and Deed

(e) Payments

(f) Restrictions

(g) Plats, Zoning, Surveying, Permits, Environment

Roads 1010.110 Utilities 1010.111

(a) Water

(b) Sewer

(c) Electricity

(d) Telephone

(e) Fuel or other Energy Source

Financial Information 1010.112 Local Services 1010.113 Recreational Facilities 1010.114 Subdivision Characteristics and Climate 1010.115

(a) General Topography

(b) Water Coverage

(c) Drainage and Fill

(d) Flood Plain

(e) Flooding and Soil Erosion

(f) Nuisances

(g) Hazards

(h) Climate

(i) Occupancy

Additional Information 1010.116

(a) Property Owners' Association

(b) Taxes

(c) Violations and Litigation

(d) Resale or Exchange Program

(e) Unusual Situations

1. Leases

2. Foreign Subdivision

3. Time Sharing

4. Membership

(f) Equal Opportunity in Lot Sales

(g) Listing of lots

Cost Sheet 1010.117 Receipt, Agent Certification and Cancellation Page 1010.118 ADDITIONAL INFORMATION AND DOCUMENTATION General Information 1010.208 Title and Land Use 1010.209 Roads 1010.210 Utilities 1010.211 Financial Information 1010.212 Recreational Facilities 1010.214 Subdivision Characteristics 1010.215 Additional Information 1010.216 Affirmation 1010.219

The Bureau's OMB control number for this information collection is: 3170-0012.

PART 1012—SPECIAL RULES OF PRACTICE (REGULATION L) 24. The authority citation for part 1012 continues to read as follows: Authority:

12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

25. Section 1012.35 is revised to read as follows:
§ 1012.35 Prefiling assistance.

Persons intending to file with the Bureau of Consumer Financial Protection, Office of Supervision Examinations may receive advice of a general nature as to the preparation of the filing including information as to proper format to be used and the scope of the items to be included in the format. Inquiries and requests for informal discussions with staff members should be directed to the Consumer Financial Protection Bureau, Interstate Land Sales Registration Program, 1700 G Street NW., Washington, DC 20552.

26. Section 1012.40 is amended by revising paragraph (a) introductory text to read as follows:
§ 1012.40 Processing of filings.

(a) Statements of Record and accompanying filing fees will be received on behalf of the Director by the Office of Supervision Examinations, for determination of whether the criteria set forth in paragraphs (a)(1) through (3) of this section have been satisfied. Where it appears that all three criteria are satisfied and it is otherwise practicable, acceleration of the effectiveness of the Statement of Record will normally be granted.

27. Section 1012.236 is amended by revising paragraph (b) to read as follows:
§ 1012.236 Notice of proceedings to withdraw a State's certification.

(b) A clear and concise statement of material facts, sufficient to inform the respondent with reasonable definiteness of the basis for the Director's determination, pursuant to § 1010.505, that the State's laws, regulations and the administration thereof, taken as a whole, no longer meet the requirements of subpart C of part 1010.

Dated: May 1, 2016. Richard Cordray, Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-10715 Filed 5-10-16; 8:45 am] BILLING CODE 4810-AM-P
DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2015-0247; Directorate Identifier 2014-NM-178-AD; Amendment 39-18513; AD 2016-10-02] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

Federal Aviation Administration (FAA), DOT.

ACTION:

Final rule.

SUMMARY:

We are adopting a new airworthiness directive (AD) for certain The Boeing Company Model 777-200 and -300 series airplanes equipped with Rolls-Royce Trent 800 series engines. This AD was prompted by reports of heat damage to the strut aft fairing heat shield primary seal, as well as heat and wear damage to the heat shield insulation blankets. This AD requires repetitive inspections for cracks and heat damage to the strut aft fairing lower spar web structure (a flammable fluid zone barrier), for wear to the heat shield primary seal, and, as applicable, for heat and wear damage to heat shield insulation blankets; and related investigative and corrective actions if necessary. This AD also provides optional terminating action for the repetitive inspections. We are issuing this AD to detect and correct cracks and heat damage to the strut aft fairing lower spar web structure (a flammable fluid zone barrier), wear to the heat shield primary seal, and heat and wear damage to heat shield insulation blankets, which could lead to through-cracks in the aft fairing lower web structure and heating of the aft fairing lower web structure, and consequent uncontrolled fire in the aft fairing, fuel tank ignition or possible departure of the engine.

DATES:

This AD is effective June 15, 2016.

The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of June 15, 2016.

ADDRESSES:

For service information identified in this final rule, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P. O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone: 206-544-5000, extension 1; fax: 206-766-5680; Internet: https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at https://www.regulations.gov by searching and locating Docket No. FAA-2015-0247.

Examining the AD Docket

You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-0247; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is Docket Management Facility, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT:

Kevin Nguyen, Aerospace Engineer, Propulsion Branch, ANM-140S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6501; fax: 425-917-6590; email: [email protected]

SUPPLEMENTARY INFORMATION: Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain The Boeing Company Model 777-200 and -300 series airplanes equipped with Rolls-Royce Trent 800 series engines. The NPRM published in the Federal Register on March 12, 2015 (80 FR 12954) (“the NPRM”). The NPRM was prompted by reports of heat damage to the strut aft fairing heat shield primary seal, as well as heat and wear damage to the heat shield insulation blankets. The NPRM proposed to require repetitive inspections for cracks and heat damage to the strut aft fairing lower spar web structure (a flammable fluid zone barrier), for wear to the heat shield primary seal, and, as applicable, for heat and wear damage to heat shield insulation blankets; and related investigative and corrective actions if necessary. The NPRM also provided optional terminating action for the repetitive inspections. We are issuing this AD to detect and correct cracks and heat damage to the strut aft fairing lower spar web structure (a flammable fluid zone barrier), wear to the heat shield primary seal, and heat and wear damage to heat shield insulation blankets, which could lead to through-cracks in the aft fairing lower web structure and heating of the aft fairing lower web structure, and consequent uncontrolled fire in the aft fairing, fuel tank ignition or possible departure of the engine.

Comments

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

Request To Clarify Precipitating Event and Unsafe Condition

Boeing requested that we revise the SUMMARY and parts of the Discussion section of the NPRM to clarify that we received reports of heat damage to the strut aft fairing heat shield primary seal as well as heat and wear damage to the heat shield insulation blankets. Boeing also requested that we revise the SUMMARY of the NPRM and paragraph (e) of the proposed AD to clarify that the unsafe condition could lead to through-cracks in the aft fairing lower web structure and heating of the aft fairing lower web structure. Boeing further requested that we revise the Discussion section of the NPRM to indicate that the design of the strut aft fairing #1 heat shield (a titanium pan casting) and #1 heat shield insulation blanket allows hot turbulent gas from the exhaust nozzle to cause wear and degradation of the front face of the #1 insulation blanket, enter the heat shield cavity (the space or cavity between the heat shields and insulation blankets), and contact the strut aft fairing lower spar web structure. Boeing additionally pointed out that continuous exposure to hot turbulent gas further damages the primary seal and #1 insulation blanket, increasing the temperature in the heat shield cavity, and causes damage to the insulation blankets and lower web structure.

We agree that the requested changes provide clarity about the unsafe condition and consistency to the entire AD, and have revised the SUMMARY of this final rule and paragraph (e) of this AD accordingly. However, the requested revisions to the Discussion section of the NPRM are not included since certain paragraphs of the Discussion section of NPRMs are not restated in final rules.

Request To Remove References to the Lower Spar Web Structure as a Firewall

Boeing requested that we remove references to the strut aft fairing lower spar web structures as a firewall from the preamble of the NPRM and paragraph (e) of the proposed AD. Boeing indicated that the strut aft fairing lower spar web structure acts as a flammable fluid zone barrier, not a firewall. Boeing pointed out that a fire zone is defined as a region where flammable fluid and/or vapor leakage can occur where there is an ignition source present. Boeing also pointed out that a flammable fluid leakage zone is defined as an area in which flammable fluid and/or vapor leakage can occur, but where no ignition sources are present, and that since there are no ignition sources present in the strut aft fairing cavity, The Boeing Company 777 strut fire protection document defines the strut aft fairing cavity as a flammable fluid leakage zone.

We agree with the commenter, and have revised the preamble of this final rule and paragraph (e) of this AD accordingly.

Request To Include Information Notice in the Final Rule

Air New Zealand (ANZ) requested that we revise paragraph (h) of the proposed AD to include reference to Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015. ANZ pointed out that Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015, includes a statement to clarify part interchangeability and part intermixability. ANZ also pointed out that Boeing Service Bulletin 777-54-0030, dated May 27, 2014, does not include the statement to clarify part interchangeability and part intermixability and that the modification included in the optional terminating action could therefore potentially be removed by installing older design parts as specified in Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014. ANZ noted that Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015, is not approved by the FAA or any other regulatory authority.

We acknowledge that Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015, contains the updated part interchangeability and part intermixability restriction statement for certain parts (such as insulation blankets). Boeing has issued Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015, which contains the information specified in Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015. Once an airplane has been modified as specified in Boeing Service Bulletin 777-54-0030, dated May 27, 2014, or Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015 (optional terminating action of installing redesigned or newer insulation blankets, and other associated parts), and the operator has shown compliance with paragraph (h)(1) of this AD, the modification cannot be removed without requesting approval of an Alternative Method of Compliance (AMOC). Any change to install the older design parts would invalidate the terminating action accomplished as specified in Boeing Service Bulletin 777-54-0030, dated May 27, 2014, or Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015.

Therefore, we have revised paragraph (h)(1) of this AD to refer to Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015, and provided credit for actions accomplished using Boeing Service Bulletin 777-54-0030, dated May 27, 2014, in paragraph (j)(2) of this AD.

ANZ stated that they believe the AMOC statement in the impending Airworthiness Notice should include Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015. We infer that ANZ is requesting an AMOC for that information notice.

We disagree with giving AMOC approval for Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015, because we are requiring Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015, that already includes the information contained in Boeing Information Notice 777-54-0030 IN 01, dated April 7, 2015.

Request for Revised Service Information and Credit

ANZ requested that we revise paragraph (j) of the proposed AD to include credit for actions accomplished as specified in Boeing Service Bulletin 777-54-0030, dated May 27, 2014. ANZ pointed out that they have accomplished the actions required by paragraph (h)(1) of the proposed AD, on multiple 777-200 airplanes in their fleet, as specified in Boeing Service Bulletin 777-54-0030, dated May 27, 2014. ANZ also stated that they believe that credit for accomplishing the actions required by paragraph (h)(1) of the proposed AD, as specified in Boeing Service Bulletin 777-54-0030, dated May 27, 2014, should be added to paragraph (j) of the proposed AD.

We agree with the request to include actions accomplished as specified in Boeing Service Bulletin 777-54-0030, dated May 27, 2014, in paragraph (j) of this AD. Therefore, as stated previously, we have revised this final rule to provide credit for actions accomplished using Boeing Service Bulletin 777-54-0030, dated May 27, 2014, in paragraph (j)(2) of this AD.

Request To Correct a Typographical Error

Boeing requested that we correct a typographical error by inserting missing dollar signs in the Cost of Compliance column of the On-Condition Costs table.

We agree and have revised this final rule to include the missing information.

Clarification of Actions

Boeing issued Information Notice 777-54A0031 IN 01, dated September 24, 2015, to clarify access information when removing and installing pan casting number 6. Information Notice 777-54A0031 IN 01, dated September 24, 2015, specifies that when removing pan casting number 6 in FIGURE 9 and FIGURE 10 of Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014, it is acceptable to remove and keep the bracket attached to the drain lines or remove the P-clamps for access. We refer to Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014, as the appropriate source of service information for accomplishing the actions required by paragraph (g) of this AD. Note 12 in Paragraph 3.A., “General Information,” of Boeing Alert Service Bulletin 777-54A0031, dated June 7, 2013; and Revision 1, dated May 9, 2014; contains statements informing and permitting removal of more parts for access when necessary. Also, operators may have been performing these same or similar access steps when removing pan casting number 6. Thus, the clarification in the information notice is neither new nor additional work. Further, this clarification of access information is already included in Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015, which is the appropriate source of service information for accomplishing the actions required by paragraph (h)(1) of this AD. Therefore, we have determined it is not necessary to include reference to Information Notice 777-54A0031 IN 01, dated September 24, 2015, in the regulatory text of this AD.

Clarification of Credit

Although the Accomplishment Instructions of Boeing Alert Service Bulletin 777-54A0031, dated June 7, 2013, correctly show all nine insulation blankets for doing the actions, paragraph 2., “Material Information” only lists eight insulation blankets and is missing part number 313W5421-29. Therefore, we have clarified paragraph (j)(1) of this AD to specify that credit for previous actions are acceptable, provided that insulation blanket part number 313W5421-29 is inspected and reinstalled, or replaced with a new insulation blanket; as applicable, as specified in the Accomplishment Instructions of Boeing Alert Service Bulletin 777-54A0031, dated June 7, 2013.

Conclusion

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

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

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

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

Related Service Information Under 1 CFR Part 51

We reviewed the following service information:

• Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014.

• Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015.

The service information describes procedures for repetitive inspections for heat damage to the strut aft fairing lower spar web structure (a flammable fluid zone barrier) and heat shield primary seal, and heat and wear damage to heat shield insulation blankets; and related investigative and corrective actions. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

Costs of Compliance

We estimate that this AD affects 57 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

Estimated Costs Action Labor cost Parts cost Cost per product Cost on U.S. operators Inspections 40 work-hours × $85 per hour = $3,400 per inspection cycle $0 $3,400 per inspection cycle $193,800 per inspection cycle

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

On-condition Costs Action Labor cost Parts cost Cost per product Heat shield primary seal replacement 10 work-hours × $85 per hour = $850 $1,940 $2,790 Cracked or damaged parts replacement 110 work-hours × $85 per hour = $9,350 $52,992 $62,342

According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

Authority for This Rulemaking

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

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

Regulatory Findings

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

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

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

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

(3) Will not affect intrastate aviation in Alaska, and

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

List of Subjects in 14 CFR Part 39

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

Adoption of the Amendment

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

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

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

§ 39.13 [Amended]
2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-10-02 The Boeing Company: Amendment 39-18513; Docket No. FAA-2015-0247; Directorate Identifier 2014-NM-178-AD. (a) Effective Date

This AD is effective June 15, 2016.

(b) Affected ADs

None.

(c) Applicability

This AD applies to The Boeing Company Model 777-200 and -300 series airplanes equipped with Rolls-Royce Trent 800 series engines, certificated in any category, as identified in Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014.

(d) Subject

Air Transport Association (ATA) of America Code 54, Nacelles/Pylons.

(e) Unsafe Condition

This AD was prompted by reports of heat damage to the strut aft fairing heat shield primary seal, as well as heat and wear damage to the heat shield insulation blankets. We are issuing this AD to detect and correct cracks and heat damage to the strut aft fairing lower spar web structure (a flammable fluid zone barrier), wear to the heat shield primary seal, and heat and wear damage to heat shield insulation blankets, which could lead to through-cracks in the aft fairing lower web structure and heating of the aft fairing lower web structure, and consequent uncontrolled fire in the aft fairing, fuel tank ignition or possible departure of the engine.

(f) Compliance

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

(g) Repetitive Inspections

At the applicable time specified in paragraph 1.E., “Compliance,” of Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014, except as required by paragraph (i) of this AD: Do the inspections specified in paragraphs (g)(1), (g)(2), and (g)(3) of this AD, and do all applicable related investigative and corrective actions, in accordance with the Accomplishment Instructions of Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014. Do all applicable related investigative and corrective actions before further flight. Repeat the inspections specified in paragraphs (g)(1), (g)(2), and (g)(3) of this AD at the applicable time specified in paragraph 1.E., “Compliance,” of Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014.

(1) Do a detailed inspection for cracks and heat damage of the aft fairing lower spar upper surface.

(2) Do a conductivity inspection for heat damage of the aft fairing lower spar upper surface.

(3) Do a detailed inspection for wear of the heat shield primary seal.

(h) Optional Terminating Action

The concurrent accomplishment of the actions specified in paragraphs (h)(1) and (h)(2) of this AD terminates the requirements of paragraph (g) of this AD.

(1) Replacement of all heat shield insulation blankets (rub strips, heat shield pan casting, Velcro strips, aft fairing web drain sump, drain screen, and drain tubes, as applicable) in accordance with the Accomplishment Instructions of Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015.

(2) A one-time detailed inspection for cracks and heat damage of the aft fairing lower spar upper surface, conductivity inspection for heat damage of the aft fairing lower spar upper surface, and detailed inspection for wear of heat shield primary seal, and all applicable related investigative and corrective actions, in accordance with the Accomplishment Instructions of Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014, provided all applicable related investigative and corrective actions are done before further flight.

(i) Exception to Service Information Specifications

Where Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014, specifies a compliance time “After the Original Issue Date of this Service Bulletin,” this AD requires compliance within the specified compliance time after the effective date of this AD.

(j) Credit for Previous Actions

(1) This paragraph provides credit for the actions specified in paragraphs (g)(1), (g)(2), (g)(3), and (h)(2) of this AD, if those actions were performed before the effective date of this AD using Boeing Alert Service Bulletin 777-54A0031, dated June 7, 2013, provided that insulation blanket part number 313W5421-29 is inspected and reinstalled, or replaced with a new insulation blanket, as applicable, as specified in the Accomplishment Instructions of Boeing Alert Service Bulletin 777-54A0031, dated June 7, 2013. This service information is not incorporated by reference in this AD.

(2) This paragraph provides credit for the actions specified in paragraph (h)(1) of this AD, if those actions were performed before the effective date of this AD using Boeing Service Bulletin 777-54-0030, dated May 27, 2014. This service information is not incorporated by reference in this AD.

(k) Alternative Methods of Compliance (AMOCs)

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

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

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

(l) Related Information

(1) For more information about this AD, contact Kevin Nguyen, Aerospace Engineer, Propulsion Branch, ANM-140S, FAA, Seattle ACO, 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6501; fax: 425-917-6590; email: [email protected]

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

(m) Material Incorporated by Reference

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

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

(i) Boeing Service Bulletin 777-54A0031, Revision 1, dated May 9, 2014.

(ii) Boeing Service Bulletin 777-54-0030, Revision 1, dated September 30, 2015.

(3) For Boeing service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P. O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone: 206-544-5000, extension 1; fax: 206-766-5680; Internet: https://www.myboeingfleet.com.

(4) You may view this service information at FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

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

Issued in Renton, Washington, on April 28, 2016. Dionne Palermo, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
[FR Doc. 2016-10931 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-4256; Directorate Identifier 2016-CE-002-AD; Amendment 39-18512; AD 2016-10-01] RIN 2120-AA64 Airworthiness Directives; M7 Aerospace LLC Airplanes AGENCY:

Federal Aviation Administration (FAA), DOT.

ACTION:

Final rule.

SUMMARY:

We are adopting a new airworthiness directive (AD) for all M7 Aerospace LLC Models SA226-AT, SA226-T, 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. We received reports of failed elevator control rod ends due to corrosion and lack of lubrication. This AD requires initial and repetitive inspections and lubrication of the elevator control rod ends and bearings with replacement as necessary. We are issuing this AD to correct the unsafe condition on these products.

DATES:

This AD is effective June 15, 2016.

The Director of the Federal Register approved the incorporation by reference of certain publications listed in this AD as of June 15, 2016.

ADDRESSES:

For service information identified in this final rule, contact 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] 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-4256.

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-2016-4256; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The address for the Docket Office (phone: 800-647-5527) is Document Management Facility, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT:

Andrew McAnaul, Aerospace Engineer, FAA, ASW-143 (c/o San Antonio MIDO), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; phone: (210) 308-3365; fax: (210) 308-3370; email: [email protected]

SUPPLEMENTARY INFORMATION: Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all M7 Aerospace LLC Models SA226-AT, SA226-T, 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. The NPRM published in the Federal Register on March 4, 2016 (81 FR 11469). The NPRM was prompted by reports of broken elevator control rod link assemblies between the elevator torque tube and the elevator quadrant due to corrosion and lack of lubrication on M7 Aerospace SA26, SA226, and SA227 airplanes. The NPRM proposed to require initial and repetitive inspections of the elevator control rod ends and bearings with replacement as necessary. We are issuing this AD to correct the unsafe condition on these products.

Comments

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (81 FR 11469, March 4, 2016) or on the determination of the cost to the public.

Conclusion

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

• Are consistent with the intent that was proposed in the NPRM (81 FR 11469, March 4, 2016) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (81 FR 11469, March 4, 2016).

Related Service Information Under 1 CFR Part 51

We reviewed M7 Aerospace Service Bulletin (SB) 226-27-080 R1, M7 Aerospace LLC SB 227-27-060 R1, and M7 Aerospace LLC SB CC7-27-032 R1, all Issued: November 5, 2015, and Revised: February 23, 2016. The service information describes procedures for inspection of the elevator control link assemblies between the elevator torque tubes and the elevator quadrant for frozen (stiff, hard to move) bearings or broken/cracked links (rod ends) with instructions for lubrication and replacement if necessary. All of the related 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 AD.

Costs of Compliance

We estimate that this AD affects 350 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

Estimated Costs Action Labor cost Parts cost Cost per
  • product
  • Cost on U.S. operators
    Inspection and lubrication 2 work-hours × $85 per hour = $170 Not applicable $170 $59,500

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

    On-condition Costs Action Labor cost Parts cost Cost per
  • product
  • Replace Rod End 4 work-hours × $85 per hour = $340 $30 $370
    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

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

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

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

    (3) Will not affect intrastate aviation in Alaska, and

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

    List of Subjects in 14 CFR Part 39

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

    Adoption of the Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): 2016-10-01 M7 Aerospace LLC: Amendment 39-18512; Docket No. FAA-2016-4256; Directorate Identifier 2016-CE-002-AD. (a) Effective Date

    This AD is effective June 15, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to M7 Aerospace LLC Models SA226-AT, SA226-T, 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 2730, Elevator Control System.

    (e) Unsafe Condition

    This AD was prompted by reports of failed elevator control rod ends due to corrosion and lack of lubrication. We are issuing this AD to require initial and repetitive inspections and lubrication of the elevator control rod ends and bearings with replacement as necessary. We are proposing this AD to correct the unsafe condition on these products.

    (f) Compliance

    Comply with paragraphs (g)(1) through (g)(5) of this AD using the following service bulletins within the compliance times specified, unless already done:

    (1) For Models SA226-AT, SA226-T, SA226-T(B), and SA226-TC: M7 Aerospace LLC Service Bulletin (SB) 226-27-080 R1, Issued: November 5, 2015, and Revised: February 23, 2016;

    (2) For Models SA227-AC (C-26A), SA227-AT, SA227-BC (C-26A), and SA227-TT: M7 Aerospace LLC SB 227-27-060 R1, Issued: November 5, 2015, and Revised: February 23, 2016; or

    (3) For Models SA227-CC and SA227-DC (C-26B): M7 Aerospace LLC SB CC7-27-032 R1, Issued: November 5, 2015, and Revised: February 23, 2016.

    (g) Actions

    (1) If abnormally high resistance is reported when operating the elevators, before further flight after June 15, 2016 (the effective date of this AD), inspect and lubricate installed elevator control links following paragraph 2.A. of the Accomplishment Instructions of the service bulletins identified in paragraphs (f)(1), (f)(2), or (f)(3) of this AD, as applicable.

    (2) Remove the elevator control links and inspect following paragraph 2.B. (and 2.C. when applicable) and lubricate the bearings following paragraph 2.E. of the Accomplishment Instructions of the service bulletins identified in paragraphs (f)(1), (f)(2), or (f)(3) of this AD, as applicable, at whichever of the following occurs first:

    (i) At the next Zone related Phase or Letter Check inspection after June 15, 2016 (the effective date of this AD) or within the next 600 hours time-in-service after June 15, 2016 (the effective date of this AD), whichever occurs later; or

    (ii) Within the next 6 months after June 15, 2016 (the effective date of this AD).

    (3) Repetitively remove and inspect the elevator control links not to exceed every 12 months following any inspection required in paragraph (g)(1) or (g)(2) of this AD following paragraph 2.B. (and 2.C. when applicable) and lubricate the bearings following paragraph 2.E. of the Accomplishment Instructions of the service bulletins identified in paragraphs (f)(1), (f)(2), or (f)(3) of this AD, as applicable.

    (4) If during any inspection required in paragraphs (g)(1), (g)(2) or (g)(3) of this AD, any link assemblies between the elevator torque tubes and the elevator quadrant are found to have frozen (stiff, hard to move) bearings or broken/cracked links (rod ends), before further flight, replace the rod ends following paragraph 2.D. and lubricate the bearings following with paragraph 2.E. of the Accomplishment Instructions of the service bulletins identified in paragraphs (f)(1), (f)(2), or (f)(3) of this AD, as applicable.

    (5) Repetitively lubricate the rod end bearings (male and female) on both elevator control link assemblies following the time limits in paragraph 1.D.4) of the applicable SB, but not to exceed every 6 months, and following the procedures in paragraph 2.E. of the Accomplishment Instructions of the service bulletins identified in paragraphs (f)(1), (f)(2), or (f)(3) of this AD, as applicable.

    (h) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, Fort Worth Airplane Certification Office, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (i) of this AD.

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

    (i) Related Information

    For more information about this AD, contact Andrew McAnaul, Aerospace Engineer, FAA, ASW-143 (c/o San Antonio MIDO), 10100 Reunion Place, Suite 650, San Antonio, Texas 78216; phone: (210) 308-3365; fax: (210) 308-3370; email: [email protected]

    (j) Material Incorporated by Reference

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

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

    (i) M7 Aerospace Service Bulletin (SB) 226-27-080 R1, dated February 23, 2016;

    (ii) M7 Aerospace LLC SB 227-27-060 R1, dated February 23, 2016; and

    (iii) M7 Aerospace LLC SB CC7-27-032 R1, dated February 23, 2016.

    (3) For M7 Aerospace LLC service information identified in this AD, contact 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]

    (4) You may view this service information at 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.

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

    Issued in Kansas City, Missouri, on May 3, 2016. David R. Showers, Acting Manager, Small Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-10872 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6628; Directorate Identifier 2016-CE-013-AD; Amendment 39-18514; AD 2016-10-03] RIN 2120-AA64 Airworthiness Directives; Viking Air Limited Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Final rule; request for comments.

    SUMMARY:

    We are adopting a new airworthiness directive (AD) for Viking Air Limited Model DHC-3 airplanes that are modified with the Baron Short Take Off and Landing (STOL) kit (Supplemental Type Certificate SA94-114 or SA 00287NY). This AD results from mandatory continuing airworthiness information (MCAI) issued by the aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as a center of gravity that is too far aft contributing to a stall during takeoff and loss of control during other phases of flight. We are issuing this AD to require actions to address the unsafe condition on these products.

    DATES:

    This AD is effective May 31, 2016.

    The Director of the Federal Register approved the incorporation by reference of a certain publication listed in the AD as of May 31, 2016.

    We must receive comments on this AD by June 27, 2016.

    ADDRESSES:

    You may send comments by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: (202) 493-2251.

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

    Hand Delivery: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For service information identified in this AD, contact Stolairus Aviation Inc., (formerly known as AOG Air Support, Inc.), 6095 Airport Way, Kelowna, British Columbia V1V 1S1; phone: (250) 491-7511; fax: (25) 491-7522; Internet: http://www.stolairus.com. 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. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6628.

    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-2016-6628; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone (800) 647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

    Aziz Ahmed, Aerospace Engineer, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, New York 11590; telephone: (516) 287-7329; fax: (516) 794-5531; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    Discussion

    Transport Canada, which is the aviation authority for Canada, has issued AD No. CF-2016-05, dated January 25, 2016 (referred to after this as “the MCAI”), to correct an unsafe condition for Viking Air Limited Model DHC-3 airplanes that are modified with the Baron Short Take Off and Landing (STOL) kit (Supplemental Type Certificate SA94-114 or SA 00287NY). The MCAI states (paraphrased):

    The investigation of a fatal crash of a turbo-propeller powered DHC-3 airplane modified with a Baron STOL kit determined that the probable cause was a rearward shift in the center of gravity, which resulted in a stall during takeoff. A center of gravity that is too far aft can contribute to a stall during takeoff and may result in loss of control during other phases of flight.

    You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6628.

    Related Service Information Under 1 CFR Part 51

    Stolarious Aviation Inc. has issued Flight Manual Supplement #4, de Havilland DHC-3 Otter, Baron STOL Kit Installation, DOT STC # SA 94-114/FAA STC # SA 00287NY, Revision 3, dated May 22, 2015. The service information consists of a revision to the Baron STOL kit installation flight manual supplement (FMS). 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 the AD.

    FAA's Determination and Requirements of the AD

    This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are issuing this AD because we evaluated all information provided by the State of Design Authority and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

    FAA's Determination of the Effective Date

    An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because a center of gravity that is too far aft could lead to a stall during takeoff and loss of control during other phases of flight. Therefore, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in fewer than 30 days.

    Comments Invited

    This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-6628; Directorate Identifier 2016-CE-013-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this AD 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 AD.

    Costs of Compliance

    We estimate that this AD will affect 36 products of U.S. registry. We also estimate that it will take about 1 work-hour per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour.

    Based on these figures, we estimate the cost of the AD on U.S. operators to be $3,060, or $85 per product.

    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

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

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

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

    (3) Will not affect intrastate aviation in Alaska, and

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

    List of Subjects in 14 CFR Part 39

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

    Adoption of the Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new AD: 2016-10-03 Viking Air Limited: Amendment 39-18514 Docket No. FAA-2016-6628; Directorate Identifier 2016-CE-013-AD. (a) Effective Date

    This airworthiness directive (AD) becomes effective May 31, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Viking Air Limited Model DHC-3 airplanes, all serial numbers, that are:

    (1) Modified with the Baron Short Take Off and Landing (STOL) kit (Supplemental Type Certificate SA94-114 or SA 00287NY); and

    (2) certificated in any category.

    (d) Subject

    Air Transport Association of America (ATA) Code 8: Leveling and Weighing.

    (e) Reason

    This AD was prompted by mandatory continuing airworthiness information (MCAI) originated by an aviation authority of another country to identify and correct an unsafe condition on an aviation product. The MCAI describes the unsafe condition as an accident report that indicated that the center of gravity was too far aft and contributed to a stall during takeoff. We are issuing this AD to correct the center of gravity and prevent such a stall during takeoff and loss of control during other phases of flight.

    (f) Actions and Compliance

    Unless already done, within 30 days after May 31, 2016 (the effective date of this AD), remove whichever previous revision of the Otter Baron short take-off and landing (STOL) kit installation flight manual supplement (FMS) that is currently being used and incorporate Stolairus Aviation Inc. Flight Manual Supplement #4 for de Havilland DHC-3 Otter with the Baron STOL Kit Installation, Revision 3, dated May 22, 2015. This action may be performed by the owner/operator (pilot) holding at least a private pilot certificate and must be entered into the aircraft records showing compliance with this AD in accordance with 14 CFR 43.9 (a)(1)(4) and 14 CFR 91.417(a)(2)(v). The record must be maintained as required by 14 CFR 91.173 or 135.439.

    (g) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, Standards Office, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. Send information to ATTN: Aziz Ahmed, Aerospace Engineer, FAA, New York Aircraft Certification Office (ACO), 1600 Stewart Avenue, Suite 410, Westbury, New York 11590; telephone: (516) 287-7329; fax: (516) 794-5531; email: [email protected]. Before using any approved AMOC on any airplane to which the AMOC applies, notify your appropriate principal inspector (PI) in the FAA Flight Standards District Office (FSDO), or lacking a PI, your local FSDO.

    (2) Airworthy Product: For any requirement in this AD to obtain corrective actions from a manufacturer or other source, use these actions if they are FAA-approved. Corrective actions are considered FAA-approved if they are approved by the State of Design Authority (or their delegated agent). You are required to assure the product is airworthy before it is returned to service.

    (h) Related Information

    Refer to MCAI Transport Canada AD CF-2016-05, dated January 25, 2016, for related information. You may examine the MCAI on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6628.

    (i) Material Incorporated by Reference

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

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

    (i) Stolairus Aviation Inc., Flight Manual Supplement #4, de Havilland DHC-3 Otter, Baron STOL Kit Installation, DOT STC # SA 94-114/FAA STC # SA 00287 NY, Revision 3, dated May 22, 2015.

    (ii) Reserved.

    (3) For Stolairus Aviation Inc. service information identified in this AD, contact Stolairus Aviation Inc. (formerly known as AOG Air Support, Inc.), 6095 Airport Way, Kelowna, British Columbia V1V 1S1; phone: (250) 491-7511; fax: (25) 491-7522; internet: http://www.stolairus.com.

    (4) You may view this 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. It is also available on the Internet at http://www.regulations.gov by searching for locating Docket No. FAA-2016-6628.

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

    Issued in Kansas City, Missouri on May 4, 2016. David R. Showers, Acting Manager, Small Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-10928 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA-2015-5801; Airspace Docket No. 15-AGL-18] Establishment of Class E Airspace; Beach, ND 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 Beach Airport, Beach, ND, to accommodate new Standard Instrument Approach Procedures for the safety and management of Instrument Flight Rules (IFR) operations at the airport.

    DATES:

    Effective 0901 UTC, July 21, 2016. 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 7400.9 and publication of conforming amendments.

    ADDRESSES:

    FAA Order 7400.9Z, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at http://www.faa.gov/air_traffic/publications. For further information, you can contact the Airspace Policy Group, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: 202-267-8783. The Order is also available for inspection at the National Archives and Records Administration (NARA). For information on the availability of FAA Order 7400.9Z at NARA, call 202-741-6030, or go to http://www.archives.gov/federal_register/code_of_federal-regulations/ibr_locations.html.

    FAA Order 7400.9, Airspace Designations and Reporting Points is published yearly and effective on September 15.

    FOR FURTHER INFORMATION CONTACT:

    Rebecca Shelby, Central Service Center, Operations Support Group, Federal Aviation Administration, Southwest Region, 10101 Hillwood Parkway, Fort Worth, TX 76177; telephone: 817-222-5857.

    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 Class E airspace at Beach Airport, Beach ND.

    History

    On February 4, 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 Beach Airport, Beach, ND. (81 FR 5948). Docket No. FAA-2015-5801. 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 6005 of FAA Order 7400.9Z, dated August 6, 2015, and effective September 15, 2015, 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.

    Availability and Summary of Documents for Incorporation by Reference

    This document amends FAA Order 7400.9Z, Airspace Designations and Reporting Points, dated August 6, 2015, and effective September 15, 2015. FAA Order 7400.9Z is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.9Z lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

    The Rule

    This action amends Title 14, Code of Federal Regulations (14 CFR), Part 71 by establishing Class E airspace extending upward from 700 feet above the surface within an 9-mile radius of Beach Airport, Beach, ND, to accommodate new Standard Instrument Approach Procedures for IFR operations at 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 exists that warrant preparation of an environmental assessment.

    List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (Air).

    Adoption of the Amendment

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

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

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

    § 71.1 [Amended]
    2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.9Z, Airspace Designations and Reporting Points, dated August 6, 2015, and effective September 15, 2015, is amended as follows: Paragraph 6005 Class E Airspace Areas Extending Upward From 700 Feet or More Above the Surface of the Earth AGL ND E5 Beach, ND [New] Beach Airport, ND (Lat. 46°55′31″ N., long. 103°58′55″ W.)

    That airspace extending upward from 700 feet above the surface within a 9-mile radius of Beach Airport.

    Issued in Fort Worth, TX, on April 27, 2016. Vonnie Royal, Acting Manager, Operations Support Group, ATO Central Service Center.
    [FR Doc. 2016-10736 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF HEALTH AND HUMAN SERVICES Food and Drug Administration 21 CFR Part 514 [Docket No. FDA-2012-N-0447] RIN 0910-AG45 Antimicrobial Animal Drug Sales and Distribution Reporting AGENCY:

    Food and Drug Administration, HHS.

    ACTION:

    Final rule.

    SUMMARY:

    The Food and Drug Administration (FDA or we) is issuing a final rule to require that the sponsor of each approved or conditionally approved new animal drug product that contains an antimicrobial active ingredient submit an annual report to us on the amount of each such ingredient in the drug product that is sold or distributed for use in food-producing animals, including information on any distributor-labeled product. This final rule codifies the reporting requirements established in section 105 of the Animal Drug User Fee Amendments of 2008 (ADUFA). The final rule also includes an additional reporting provision intended to enhance our understanding of antimicrobial new animal drug sales intended for use in specific food-producing animal species and the relationship between such sales and antimicrobial resistance.

    DATES:

    This rule is effective July 11, 2016. For the applicable compliance dates, please see section V, “Effective and Compliance Dates” in SUPPLEMENTARY INFORMATION.

    ADDRESSES:

    For access to the docket to read background documents or comments received, go to http://www.regulations.gov and insert the docket number found in brackets in the heading of this final rule into the “Search” box and follow the prompts, and/or go to the Division of Dockets Management, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.

    FOR FURTHER INFORMATION CONTACT:

    With regard to the final rule: Neal Bataller, Center for Veterinary Medicine (HFV-210), Food and Drug Administration, 7519 Standish Pl., Rockville, MD 20855, 240-402-5745, [email protected]

    With regard to the information collection: FDA PRA Staff, Office of Operations, Food and Drug Administration, 8455 Colesville Rd., COLE-14526, Silver Spring, MD 20993-0002, [email protected]

    SUPPLEMENTARY INFORMATION:

    Table of Contents I. Executive Summary A. Purpose of the Final Rule B. Summary of the Major Provisions of the Final Rule C. Legal Authority D. Costs and Benefits II. Background A. Need for the Regulation/History of the Rulemaking B. Summary of Comments to the Proposed Rule C. General Overview of the Final Rule III. Legal Authority IV. Comments on the Proposed Rule and FDA Response A. Introduction B. Description of General Comments and FDA Response C. Comments on our Legal Authority and FDA Response D. Specific Comments and FDA Response V. Effective and Compliance Dates VI. Economic Analysis of Impacts VII. Analysis of Environmental Impact VIII. Paperwork Reduction Act of 1995 IX. Federalism X. References I. Executive Summary A. Purpose of the Final Rule

    The purpose of this rulemaking is to change the way we collect and report information related to the distribution and sale of approved or conditionally approved antimicrobial new animal drug products for use in food-producing animals.

    Sponsors of approved or conditionally approved applications for new animal drugs containing an antimicrobial active ingredient are required by section 512 of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360b), as amended by section 105 of ADUFA (ADUFA 105) (Title I of Pub. L. 110-316), to submit to us an annual report on the amount of each such ingredient in the drug that is sold or distributed for use in food-producing animals. We are also required by ADUFA 105 to publish annual summary reports of the data we receive from animal drug sponsors. In accordance with the law, sponsors of the affected antimicrobial new animal drug products began submitting their sales and distribution data to us on an annual basis, and we have published summaries of such data for each calendar year beginning with 2009. Since that time, we have published two documents inviting public input on potential changes to our regulations relating to records and reports for approved new animal drugs, including an advance notice of proposed rulemaking (77 FR 44177, July 27, 2012) and a proposed rule (80 FR 28863, May 20, 2015). This final rule amends our existing records and reports regulation in part 514 (21 CFR part 514) to incorporate the sales and distribution data reporting requirements specific to antimicrobial new animal drugs that were added to the FD&C Act by ADUFA 105. ADUFA 105 was enacted to assist us in our continuing analysis of the interactions (including drug resistance), efficacy, and safety of antimicrobials approved for use in both humans and food-producing animals for the purpose of mitigating the public health risk associated with antimicrobial resistance. This rule includes an additional reporting provision intended to improve our understanding of antimicrobial animal drug sales intended for use in specific food-producing animal species. This additional provision assists us in assessing antimicrobial sales trends in the major food-producing animal species and examining how such trends may relate to antimicrobial resistance.

    Finalizing this rule will assist us in assessing the rate at which sponsors are voluntarily revising their FDA-approved labeled use conditions to promote the judicious use of medically important antimicrobial drugs in food-producing animals. In December 2013, we published guidance for industry (GFI) #213 (http://www.fda.gov/downloads/AnimalVeterinary/GuidanceComplianceEnforcement/GuidanceforIndustry/UCM299624.pdf), a guidance that calls on sponsors of approved medically important antimicrobial new animal drugs administered through medicated feed or water to voluntarily make changes to remove production uses (growth promotion and feed efficiency) from their product labels and bring the remaining therapeutic uses of these products (to treat, control, or prevent disease) under the oversight of a veterinarian by the end of December 2016. All affected drug sponsors committed to implementing the changes described in guidance for industry (GFI) #213 by the December 2016 target date. Once the changes are fully implemented, it will be illegal to use these medically important antibiotics for production purposes, and animal producers will first need to obtain authorization from a licensed veterinarian to use them for therapeutic purposes (i.e., prevention, control, or treatment of a specifically identified disease).

    Finalizing this rule also implements Sub-Objective 2.4.2 (“Enhance collection and reporting of data regarding antibiotic drugs sold and distributed for use in food-producing animals”) of the “National Action Plan for Combating Antibiotic-Resistant Bacteria” (National Action Plan) (https://www.whitehouse.gov/sites/default/files/docs/national_action_plan_for_combating_antibotic-resistant_bacteria.pdf). The National Action Plan, released by the White House on March 27, 2015, was developed in response to Executive Order 13676: Combating Antibiotic-Resistant Bacteria, which was issued by President Barack Obama on September 18, 2014, in conjunction with the National Strategy for Combating Antibiotic-Resistant Bacteria. The National Action Plan is intended to guide the activities of the U.S. Government as well as the actions of public health, health care, and veterinary partners in a common effort to address the urgent and serious public health threat of drug-resistant bacterial infections. Objective 2.4 of the National Action Plan is to “enhance monitoring of antibiotic-resistance patterns, as well as antibiotic sales, usage, and management practices, at multiple points in the production chain from food-animals on-farm, through processing, and retail meat.”

    The provisions included in this final rule take into account stakeholder input received in response to multiple opportunities for public comment, including the advance notice of proposed rulemaking and the proposed rule.

    B. Summary of the Major Provisions of the Final Rule

    The rule amends the records and reports regulation in part 514 to include the following:

    • Procedures relating to the submission to us of annual sales and distribution data reports by sponsors of approved or conditionally approved antimicrobial new animal drug products sold or distributed for use in food-producing animals. Sponsors are already submitting such reports as required by ADUFA 105.

    • Procedures relating to the requirement for sponsors of approved or conditionally approved antimicrobial new animal drugs to begin submitting species-specific estimates of product sales as a percentage of their total sales. This new reporting requirement was included based on our authority under section 512(l)(1) of the FD&C Act.

    • Procedures applicable to our preparation and publication of summary reports on an annual basis based on the sales and distribution data we receive from sponsors of approved or conditionally approved antimicrobial new animal drug products. The final rule includes specific parameters for the content of the annual summary reports as well as provisions intended to protect confidential business information and national security, consistent with ADUFA 105 and this Agency's regulations at § 20.61 (21 CFR 20.61).

    • Provisions that will give sponsors of approved or conditionally approved antimicrobial new animal drug products that are sold or distributed for use in food-producing animals the opportunity to avoid duplicative reporting of product sales and distribution data to us under part 514.

    C. Legal Authority

    Our legal authority for issuing this final rule is provided by section 512(l) of the FD&C Act relating to records and reports concerning approved and conditionally approved new animal drugs. In addition, section 701(a) of the FD&C Act (21 U.S.C. 371(a)) gives us general rulemaking authority to issue regulations for the efficient enforcement of the FD&C Act.

    D. Costs and Benefits

    We estimate one-time costs to industry from this final rule at about $134,600. We estimate annual costs at about $57,300. These costs equate to an estimated total annualized cost of about $76,500 at a 7 percent discount rate over 10 years and about $73,100 at a 3 percent discount rate over 10 years. The total annualized costs include the administrative cost to review the rule ($8,800), plus the cost to those sponsors who wish to avoid duplicative reporting requirements under part 514 ($4,900), plus the cost of providing the species-specific estimates of the percent of the drug product distributed domestically ($62,700).

    The final rule provides some flexibility in terms of the manner in which new animal drug sponsors report sales and distribution data under both § 514.80(b)(4) and § 514.87, by allowing the sponsor the option to satisfy its obligations under both provisions by making only one set of report submissions under certain circumstances. We estimate this will reduce labor costs for new animal drug sponsors by $103,200 annually.

    Another benefit of the final rule is the cost savings associated with sponsors reporting their monthly sales and distribution data to us in terms of product units rather than calculating the amount of antimicrobial active ingredients associated with these monthly product sales and distribution data, as is currently the case. We estimate the calculation reductions will amount to an annual benefit to animal drug sponsors of about $19,100. We estimate total annual benefits to industry at about $122,300.

    II. Background A. Need for the Regulation/History of the Rulemaking

    Section 512(l)(1) of the FD&C Act, which was added by the Animal Drug Amendments of 1968 (Pub. L. 90-399), requires sponsors of approved or conditionally approved new animal drugs to establish and maintain records and make such reports of data relating to experience and other data or information received or obtained by the sponsor with respect to such drug as required by regulation or order. Part 514 of FDA's regulations implements section 512(l) of the FD&C Act and requires new animal drug sponsors to report various types of information to FDA relating to their approved drug products, including periodic drug experience reports under § 514.80(b)(4). Such reports must contain detailed information as specified in the regulations, including information concerning the quantities of the animal drug product distributed under the sponsor's approved application. The requirement for periodic reports under § 514.80(b)(4) applies to all sponsors of approved new animal drug products and is separate from the reporting requirements subsequently established under ADUFA 105 relating to antimicrobial new animal drugs.

    This continuous monitoring of approved new animal drug applications (NADAs) by collecting post-approval information from sponsors is important because data previously submitted to FDA as part of the approval process may no longer be adequate, as animal drug effects can change over time and less apparent effects including, for example, on antimicrobial resistance, can sometimes take years to become evident. For this reason, post-approval reports are one of the primary means by which FDA can obtain information regarding safety or effectiveness problems with marketed new animal drugs.

    In an effort to address mounting public health concerns about antimicrobial drug resistance, Congress, in 2008, enacted ADUFA 105 to enhance the reports collected by FDA concerning marketed new animal drug products that contain an antimicrobial active ingredient. ADUFA 105 amended section 512(l) of the FD&C Act by adding section 512(l)(3). Under new section 512(l)(3) of the FD&C Act, sponsors of antimicrobial new animal drugs approved or conditionally approved for use in food-producing animals must submit to us on an annual basis a report specifying the amount of each antimicrobial active ingredient in the drug that is sold or distributed for use in food-producing animals. Specifically, sponsors are required to report the amount of each antimicrobial active ingredient as follows: (1) By container size, strength, and dosage form; (2) by quantities distributed domestically and quantities exported; and (3) for each dosage form, a listing of the target animals, indications, and production classes that are specified on the approved label of the product. The information must be reported for the preceding calendar year, include separate information for each month of the calendar year, and be submitted to us each year no later than March 31. The statute also requires FDA to publish summary reports of the antimicrobial drug sales and distribution data collected from the drug sponsors on an annual basis, and further requires that such data be reported by antimicrobial class (section 512(l)(3) of the FD&C Act). In accordance with the law, sponsors of the affected antimicrobial new animal drug products began submitting their sales and distribution data to us on an annual basis, and we have published summaries of such data for each calendar year beginning with 2009.

    In the Federal Register of May 20, 2015 (80 FR 28863), we proposed to amend our existing animal drug records and reports regulation in part 514 to incorporate the antimicrobial drug sales and distribution data reporting requirements established by ADUFA 105. We proposed (80 FR 28863 at 28864) to amend part 514 to include administrative practices and procedures for sponsors of antimicrobial new animal drugs sold or distributed for use in food-producing animals who must report annually under section 512(l)(3) of the FD&C Act. We also proposed (80 FR 28863 at 28864) to collect species-specific data to assist us in assessing antimicrobial sales trends in the major food-producing animal species and examining how such trends may relate to antimicrobial resistance. We set forth the rationale that having the improved data would support our ongoing efforts to encourage the judicious use of antimicrobials in food-producing animals to help ensure the continued availability of safe and effective antimicrobials for animals and humans (80 FR 28863 at 28864).

    We believe that on-farm use data also are needed to obtain additional information necessary to help gauge the success of antibiotic stewardship efforts and guide their continued evolution and optimization, and assess associations between antibiotic use practices and resistance. Shortly after we issued the proposed rule, in the Federal Register of August 20, 2015 (80 FR 50638), we published a notice announcing plans to hold a public meeting on September 30, 2015, which we jointly sponsored with the U.S. Department of Agriculture (USDA) and the Centers for Disease Control and Prevention (CDC) to obtain public input on possible approaches for collecting additional on-farm antimicrobial drug use and resistance data. Such additional data are intended to supplement existing information, including data on the quantity of antimicrobials sold or distributed for use in food-producing animals and data on antimicrobial use and resistance, for example, data collected under the National Animal Health Monitoring System (NAHMS) and the National Antimicrobial Resistance Monitoring System (NARMS). In the notice of public meeting, we explained that data from multiple sources are needed to provide a comprehensive and science-based picture of antimicrobial drug use and resistance in animal agriculture (80 FR 50638 at 50639). Taking into account the comments received from this public meeting, we are continuing to work with the USDA and the CDC in developing this plan to help ensure the continued availability of safe and effective antimicrobials for use in humans and animals. The information that we will receive under this final rule is part of this coordinated, interagency effort to assess and minimize antimicrobial resistance to help ensure the continued availability of safe and effective antimicrobial drugs for use in treating infectious disease in animals and humans.

    B. Summary of Comments to the Proposed Rule

    We received approximately 440 individual comments on the proposed rule from veterinary, feed manufacturing, and livestock production associations, as well as consumer advocacy groups and individuals, and a member of Congress. Some comments support our rulemaking and our ongoing efforts to address the problem of antimicrobial resistance, while others express concern about the manner in which data are going to be collected, interpreted, and used. Some comments offer suggestions for specific changes for us to consider making to the subject regulations.

    C. General Overview of the Final Rule

    This final rule amends our animal drug records and reports regulation at part 514 to include administrative practices and procedures for sponsors of antimicrobial new animal drugs sold or distributed for use in food-producing animals who must report annually under section 512(l)(3) of the FD&C Act. In addition, the rule includes a provision based on our broader authority under section 512(l)(1) that requires sponsors to report antimicrobial new animal drug sales intended for use in specific food-producing animal species. In this rulemaking, we finalize the provisions in the proposed rule.

    III. Legal Authority

    Our legal authority for issuing this final rule is provided by section 512(l) of the FD&C Act relating to records and reports concerning approved new animal drugs and section 701(a) of the FD&C Act. Section 512(l) gives FDA broad authority to collect information from sponsors concerning their approved or conditionally approved new animal drug products. Specifically, under section 512(l)(1) of the FD&C Act, animal drug sponsors with approved or conditionally approved NADAs must “make such reports to the Secretary, of data relating to experience, including experience with uses authorized under subsection (a)(4)(A) [relating to extralabel use], and other data or information, received or otherwise obtained by such applicant with respect to such drug, or with respect to animal feeds bearing or containing such drug, as the Secretary may by general regulation, or by order with respect to such application, prescribe on the basis of a finding that such records and reports are necessary in order to enable the Secretary to determine, or facilitate a determination, whether there is or may be ground for invoking subsection (e) or subsection (m)(4) of this section [authorizing FDA to withdraw approval of a new animal drug or revoke a license to manufacture medicated feed].” The statute provides for withdrawal of approval if FDA finds that new information shows that the drug is no longer shown to be safe for use under the approved conditions of use or the drug is ineffective for uses prescribed or recommended in the drug's labeling (21 U.S.C. 360b(e)(1)).

    Pursuant to its authority under section 512(l)(1) of the FD&C Act, FDA issued recordkeeping and reporting regulations relating to experience with approved new animal drugs. These regulations, which are found at part 514, include the requirement at § 514.80(b)(4) for animal drug sponsors to submit periodic drug experience reports to FDA every 6 months for the first 2 years following approval of their application and subsequently on an annual basis. The periodic reports that sponsors are required to submit under § 514.80(b)(4) must include detailed information as specified in the regulations, including information concerning the quantities of the animal drug product distributed under the sponsor's approved application. The requirement for sponsors to submit distribution data to us under § 514.80(b)(4) predates the enactment of ADUFA 105.

    In addition to the broad authority already granted to FDA under section 512(l)(1) of the FD&C Act, in 2008, Congress established additional reporting requirements under ADUFA 105 for sponsors of antimicrobial new animal drug products. These new reporting requirements, which are set out in section 512(l)(3) of the FD&C Act, did not require the Agency to issue implementing regulations first in order for them to take effect. With respect to approved or conditionally approved new animal drugs containing an antimicrobial active ingredient, section 512(l)(3)(A) through (C) of the FD&C Act requires sponsors of such products to submit an annual report to FDA on the “amount of each antimicrobial active ingredient in the drug that is sold or distributed for use in food-producing animals, including information on any distributor labeled product” by March 31 of each year with separate data included for each month of the preceding calendar year. In addition, section 512(l)(3)(E) of the FD&C Act requires FDA to prepare summaries of the information reported by drug sponsors concerning their antimicrobial new animal drugs and to make those summaries available to the public. In accordance with ADUFA 105, sponsors of the affected antimicrobial new animal drug products have submitted their sales and distribution data to us, and we have published summaries of such data, for each calendar year since 2009.

    In enacting ADUFA 105, Congress clarified that “[t]he reports required [to be submitted by animal drug sponsors] under section 512(l)(3) of the Federal Food, Drug, and Cosmetic Act, as added by subsection (a) [of ADUFA 105], shall be separate from periodic drug experience reports that are required under section 514.80(b)(4) of title 21, Code of Federal Regulations.” (see subsection (c) of ADUFA 105).

    Section 701(a) of the FD&C Act gives us general rulemaking authority to issue regulations for the efficient enforcement of the FD&C Act.

    IV. Comments on the Proposed Rule and FDA Response A. Introduction

    This section summarizes comments we received in response to the proposed rule and our response to those comments. We received approximately 440 individual comments on the proposed rule by the close of the comment period, each addressing one or more topics. Approximately 400 of those comments resulted from write-in campaigns. Several of the comments were signed by more than one person or group. We received comments from veterinary, feed manufacturing, and livestock production associations, as well as consumer advocacy groups and individuals, and a member of Congress. Some comments support our rulemaking and our ongoing efforts to address the problem of antimicrobial resistance, while others express concern about the manner in which data are going to be collected, interpreted, and used. Some comments offer suggestions for specific changes for us to consider making to the subject regulations. We considered the comments we received in response to the proposed rule in preparing this final rule. After considering these comments, we are not making any changes to the codified language that was included in the proposed rule.

    In sections IV.B. through IV.D., we describe the comments received on the proposed rule and provide our responses. To make it easier to identify the comments and our responses, the word “Comment,” in parentheses, appears before the comment's description, and the word “Response,” in parentheses, appears before our response. We have numbered each comment to help distinguish between different comments. We have grouped similar comments together under the same number and, in some cases, we have separated different subjects discussed in the same comment and designated them as distinct comments for purposes of our responses. The number assigned to each comment or comment topic is purely for organizational purposes and does not signify the comment's value or importance or the order in which comments were received.

    B. Description of General Comments and FDA Response

    Many comments make general remarks supporting or opposing the proposed rule without focusing on a particular proposed provision. In the following paragraphs of this section, we discuss and respond to such general comments.

    (Comment 1) Many comments from a variety of stakeholders, including veterinary, feed manufacturing, and animal production associations, drug manufacturing firms, as well as consumer advocacy groups and individuals, generally support our efforts aimed at gathering reliable information on the use of antimicrobials in food-producing animals, improving the manner in which that information is reported, enhancing our understanding of antimicrobial animal drug sales intended for use in specific food-producing animal species, and working alongside our Federal partners to share data for the purpose of minimizing antimicrobial resistance.

    (Response 1) We appreciate the general support that the comments express. As noted in section II.A., this rulemaking is part of a larger effort to address the problem of antimicrobial resistance. The rule is expected to provide us with information on the sales of antimicrobials intended for use in food-producing animals, including information regarding the sales of these products among the various animal species for which they are intended. Having species-specific estimates of product sales and distribution in the four major food-producing categories of animal species (cattle, swine, chickens, turkeys) will be important in supporting efforts such as NARMS, the national surveillance program that tracks trends related to antimicrobial resistance in food-producing animals and humans, and complement data on antimicrobial use collected under NAHMS. The data will also complement the data collection plan with the USDA and the CDC to obtain additional on-farm use and resistance data. The collection of data from multiple sources, including enhanced sales data, is needed to provide a comprehensive and science-based picture of antimicrobial drug use and resistance in animal agriculture. Such information will further enhance our ongoing activities related to slowing the development of antimicrobial resistance to help ensure that safe and effective antimicrobial new animal drugs will remain available for use in human and animal medicine. We intend to continue working in collaboration with the USDA, the CDC, the pharmaceutical industry, veterinary organizations, animal producers, and other stakeholders to address this important public health issue.

    C. Comments on Our Legal Authority and FDA Response

    (Comment 2) Some comments suggest that we lack the legal authority to require drug sponsors to report species-specific distribution estimates.

    Specifically, one comment suggests that we lack authority under section 512(l)(3) of the FD&C Act, as added by ADUFA 105, to require species-specific distribution estimates. The comment suggests that the lack of express authority in section 512(l)(3) of the FD&C Act to require species-specific distribution estimates thus limits our broader authority relating to the collection of records and reports concerning experiences and other information with respect to approved new animal drugs under 512(l)(1) of the FD&C Act, and precludes us from requiring the submission of species-specific distribution estimates under that provision as well.

    Three comments suggest that in addition to lacking authority to require species-specific distribution estimates under section 512(l)(3) of the FD&C Act, we also lack authority under section 512(l)(1) of the FD&C Act because we have not made a “finding” that species-specific distribution estimates are necessary in order to facilitate a determination of whether there may be grounds for invoking the withdrawal provisions of the FD&C Act.

    (Response 2) FDA acknowledges that section 512(l)(3) of the FD&C Act, as added by ADUFA 105, does not explicitly address species-specific distribution estimates. In requiring such estimates, we rely not on section 512(l)(3) but rather on our broader authority under section 512(l)(1) of the FD&C to collect information concerning approved and conditionally approved new animal drugs under a regulation or order issued by FDA. (See Section III. Legal Authority.) Section 512(l)(1) of the FD&C Act reads in relevant part, “In the case of any new animal drug for which approval of an application filed pursuant to subsection (b) or section 571 is in effect, the applicant shall establish and maintain such records, and make such reports to the Secretary, of data relating to experience . . . and other data or information, received or otherwise obtained by such applicant with respect to such drug, or with respect to animal feeds bearing or containing such drug, as the Secretary may by general regulation, or by order with respect to such application, prescribe on the basis of a finding that such records and reports are necessary in order to enable the Secretary to determine, or facilitate a determination, whether there is or may be ground for” withdrawal of approval of the new animal drug at issue. FDA therefore has the authority to establish reporting requirements applicable to approved or conditionally approved new animal drugs by regulation or order if it finds those requirements are necessary to enable it to determine, or facilitate a determination, as to whether the drugs are no longer shown to be safe, are ineffective, or are otherwise subject to withdrawal under section 512(e) of the FD&C Act.

    Based on its authority under section 512(l)(1) of the FD&C Act, in March 2003, FDA issued regulations requiring recordkeeping and reports concerning experience with approved new animal drugs at § 514.80. Under § 514.80(b)(4), sponsors that have approved applications for new animal drugs, including sponsors of antimicrobial new animal drug products, must submit periodic drug experience reports to FDA every 6 months for the first 2 years following approval and annually thereafter. These periodic drug experience reports must contain, among other things, various types of information about the distribution of the sponsor's drug, including data concerning the quantity of the drug distributed domestically and the quantity exported. The requirement in § 514.80(b)(4) for sponsors to submit detailed distribution data concerning their approved new animal drugs predates the enactment of ADUFA 105. In enacting ADUFA 105, Congress left intact the periodic reporting requirements under § 514.80(b)(4)—including the requirement for distribution data—stating at ADUFA section 105(c) that the reporting requirements established under section 512(l)(3) of the FD&C Act for antimicrobial new animal drugs did not relieve the sponsors of their separate obligation to provide periodic drug experience reports to FDA under § 514.80(b)(4). In so doing, Congress clearly signaled that the reporting requirements relating to antimicrobial drugs in 512(l)(3) were intended to supplement rather than supplant FDA's existing authority under section 512(l)(1) to impose distribution data reporting requirements on the same parties covered by section 512(l)(3) of the FD&C Act.

    Further, the scant legislative history relating to ADUFA 105 that exists supports the conclusion that in establishing section 512(l)(3) Congress meant to enhance, not limit, our general authority under section 512(l)(1) of the FD&C Act to require information about marketed new animal drug products in order to ensure their continued safety and effectiveness. For example, in his remarks to other members of Congress, Chairman of the House Energy and Commerce Subcommittee on Health, Representative Frank Pallone, Jr., stated that the ADUFA legislation he had introduced earlier that year would “improve the uniform collection and reporting of data to FDA on the sales about animal drugs that contain an antibiotic ingredient” and that it “includes language that would enhance FDA's current data collection by creating a new antimicrobial animal drug use data report for all food-producing animals. The report puts critical information in one place for FDA; otherwise, the agency would have to search through warehouses of multiple paper reports.” 154 Congressional Record 17,287 (2008)(statement of Rep. Pallone). In remarks Representative Waxman made concerning the legislation, he stated, “The ADUFA bill we are considering includes a provision to increase the availability and accessibility of data on the amount of animal antibiotics being distributed” and that the “reauthorization [of ADUFA] has also given us an opportunity to look at providing FDA with new tools to address a related public health crisis, the problem of antibiotic resistance.” 154 Congressional Record 17,288 (2008) (statement of Rep. Waxman). These statements made by members of Congress strongly suggest that FDA was viewed as already having the requisite legal authority under section 512(l) and that the reason Congress established the requirement in section 512(l)(3) of the FD&C Act for an additional report relating to antimicrobial new animal drugs sold for use in food-producing animals was merely to improve the efficiency of the reporting process for such drugs so that we could more effectively address the problem of resistance associated with the use of antimicrobial drugs in food animal production. In addition to improving efficiency by establishing a more uniform process for the collection of important information about approved antimicrobial new animal drugs sold or distributed for use in food-producing animals, ADUFA 105 also streamlined the process for putting these reporting requirements in place by eliminating the need for the Agency to first engage in time-consuming rulemaking activities that otherwise would have been required under section 512(l)(1) of the FD&C Act prior to collecting such data.

    In light of what we consider to be clear evidence that Congress intended section 512(l)(3) of the FD&C Act to bolster rather than limit our existing authority to require information to be reported concerning approved new animal drugs, we conclude that the comment's assertion, that by establishing section 512(l)(3) Congress has somehow curtailed our ability to exercise authority we would otherwise have under section 512(l)(1), is without merit.

    We now respond to the comments asserting that we may not rely on section 512(l)(1) of the FD&C Act absent a finding that species-specific distribution estimates are necessary in order to facilitate a determination of whether there may be grounds for invoking the withdrawal provisions of the FD&C Act. Although we stated in the proposed rule that collection of species-specific sales and distribution estimates would help to ensure “the continued availability of safe and effective antimicrobials for animals and humans,” we agree that language more clearly stating our finding is appropriate. Accordingly, we find that the collection of species-specific sales and distribution estimates, in addition to other information about antimicrobial use in food-producing animals and drug resistance, is necessary to enable us to determine, or to facilitate a determination, as to whether there may be grounds for additional measures short of and, where appropriate, including withdrawal of approval or specific portions of the approval in certain instances in the future to minimize antimicrobial resistance and ensure the continued availability of safe and effective antimicrobials for use in treating animals and humans. In particular, such information is needed, among other reasons, to support ongoing efforts to promote the judicious use of antimicrobials in food-producing animals and evaluate the success of those efforts; to aid in our assessment of antimicrobial sales trends in the major food-producing animal species and our examination of how these species-specific sales trends may relate to antimicrobial resistance; and to help inform microbial food safety risk assessments. In addition, because many antimicrobial drugs are approved for use in multiple species, in those instances where we believe appropriate grounds may exist to withdraw approval, having species-specific information also will be necessary to help us determine which specific portions of the approval may need to be withdrawn.

    D. Specific Comments and FDA Response

    Many comments make specific remarks supporting or opposing a particular proposed provision. In this section, we discuss and respond to such comments. The order of the discussion reflects the order in the regulatory text.

    (Comment 3) Several comments support our effort to eliminate duplicative reporting of sales and distribution data by sponsors of antimicrobial new animal drugs.

    (Response 3) We agree with the comments and therefore, in this final rule, we are keeping language as proposed at § 514.80(b)(4)(i)(B). As described in the proposed rule (80 FR 28863 at 28871), we are providing an opportunity for sponsors of antimicrobial new animal drugs to modify the reporting period for these drug products in order to eliminate duplicative reporting of quantity marketed under current § 514.80(b)(4) and new § 514.87.

    (Comment 4) Several comments support reporting of sales and distribution data but suggest modification of the proposed requirement in § 514.87(a) and (b)(1) to report the antimicrobial active ingredient. One comment suggests that we reduce the scope of what we require to be reported so that we only collect data for what it characterizes as “medically important antimicrobials.” Another comment suggests that we expand the scope of what we require to be reported to include data on what the comment characterizes as live cultures and complex products “intentionally developed and marketed for antimicrobial production.”

    (Response 4) We have carefully considered the comments' suggested changes to the scope of reporting of the antimicrobial active ingredient. The requirement to report the antimicrobial active ingredient under § 514.87(a) reflects the requirement, under section 512(l)(3) of the FD&C Act, for each sponsor of a new animal drug product that is approved or conditionally approved and contains an antimicrobial active ingredient, to report to us on an annual basis the amount of each antimicrobial active ingredient in the drug product that is sold or distributed for use in food-producing animals. This includes products that are the subject of an approved NADA or abbreviated NADA, as well as products that are conditionally approved under section 571 of the FD&C Act (21 U.S.C. 360ccc). The requirement in § 514.87(a) also incorporates the requirement from section 512(l)(3) of the FD&C Act for animal drug sponsors to capture in their sales and distribution data reports information regarding any distributor labeled products (see section 512(l)(3)(A) of the FD&C Act). We decline to implement the suggestion to limit the reporting to “medically important antimicrobials” due to the statutory reporting requirements under section 512(l)(3) of the FD&C Act, which apply to a new animal drug product that is approved or conditionally approved and contains an antimicrobial active ingredient without limitation.

    With regard to the comment about live cultures and complex products, we understand the comment to be referring to products that contain one or more microorganisms. We carefully considered the issues the comment raises and are finalizing the proposed rule without change. Currently, there are no approved new animal drug products that contain microorganisms and such products do not appear in Appendix A, GFI #152 as being important in human clinical medicine (http://www.fda.gov/downloads/AnimalVeterinary/GuidanceComplianceEnforcement/GuidanceforIndustry/ucm052519.pdf). A live culture or complex product could potentially be the subject of a NADA if because of its intended use the particular product at issue meets the statutory definition of a drug in section 201(g) of the FD&C Act (21 U.S.C. 321(g)) (an article intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease or an article (other than food) intended to affect the structure or any function of the body) and the statutory definition of a new animal drug in section 201(v) of the FD&C Act. Furthermore, should a live culture or complex product be approved as a new animal drug, and should any of the active ingredients of that product be approved specifically for an antimicrobial use or be known to have antimicrobial properties, then sponsors of such an approved product would be required to submit data to us on the amount of each such ingredient in this drug product sold or distributed for use in food-producing animals.

    (Comment 5) Comments on the proposed rule generally support our effort to learn more about antimicrobial resistance, but several comments disagree with our proposal to collect species-specific estimates as proposed in § 514.87(c). Several comments question the utility of the information that would result from species-specific data. Several comments suggest that it was unclear how species-specific estimates will scientifically support NARMS, or complement NAHMS. Other comments state that species-specific sales estimates are inappropriate to report because the resulting data would not constitute sound scientific data. These comments assert that such data would be inaccurate due to complications and inconsistencies of data collection, would not reflect actual usage, would be subject to misinterpretation due to lack of complete information, and would not constitute sufficient data to evaluate the impact of policies and trends in antimicrobial resistance. Other comments support our collection of species-specific sales and distribution data as proposed in § 514.87(c). These comments assert that the resulting data would be beneficial to understanding how antimicrobials are used in food-producing animals, the relationship between sales/use and antimicrobial resistance, and the impact of our policies and practices to mitigate antimicrobial resistance.

    (Response 5) We have carefully considered the comments in favor of and opposing the reporting of species-specific sales and distribution data as specified in proposed § 514.87(c). We recognize the comments' concerns with regard to utility of the information but we respectfully disagree with the request to remove species-specific reporting from the rule. As we discussed in our response to Comment 1, having species-specific estimates of product sales and distribution for use in the four major food-producing categories of animal species (cattle, swine, chickens, turkeys) will be essential in supporting efforts to assess antimicrobial drug use and resistance in animal agriculture. This additional sales and distribution data will help inform microbial food safety risk assessments by providing a better indication of the extent to which a drug or drug class is used in a specific food animal species by a specific route of administration. Aggregate sales data do not provide this information and are more subject to misinterpretation.

    As noted in our response to comment 1, we also intend to consider estimates of species-specific sales and distribution data in conjunction with on-farm species-specific data on antimicrobial use, such as that collected under NAHMS. We expect such data to help us better understand the extent of antimicrobial use in the various major food animal species and provide additional context as we examine resistance data, such as those collected under NARMS. Data from multiple sources are needed to provide a comprehensive and science-based picture of antimicrobial drug use and resistance in animal agriculture. Such information is critical to our ongoing activities related to slowing the development of antimicrobial resistance and ensuring the continued availability of safe and effective antimicrobials for use in treating animals and humans. For the reasons discussed here and in response to comments 1 and 2, we are retaining the requirement for sponsors to provide species-specific sales and distribution estimates as set forth in § 514.87(c).

    (Comment 6) Several comments we received suggest that, instead of collecting species-specific sales estimates as proposed in § 514.87(c), antimicrobial use in food-producing animals should be monitored at the farm level. Some comments raise concerns about using sales data alone in analyses of antimicrobial drug use and resistance. There were multiple comments requesting that we collaborate with the USDA and the CDC to enhance existing collection efforts of on-farm antimicrobial use data that are accurate, detailed, and quantitative to supplement species-specific estimates of product sales. The commenters further request that we use the data to evaluate the impact of policies, understand the relationship between usage and resistance trends, and construct targeted interventions.

    (Response 6) We disagree with the request to remove species-specific reporting from the rule for the reasons discussed in our responses to comments 1, 2, and 5. We recognize that gathering information on the way medically important antimicrobials are used in food-producing animals is essential to: (1) Assess the rate at which sponsors are voluntarily revising their FDA-approved labeled use conditions to promote the judicious use of medically important antimicrobial drugs in food-producing animals, (2) help gauge the success of antibiotic stewardship efforts and guide their continued evolution and optimization, and (3) assess associations between antibiotic use practices and resistance.

    We agree with the suggestion to collaborate with the USDA and the CDC to enhance existing collection efforts of on-farm antimicrobial use data. We are collaborating with the USDA and the CDC to develop a plan for collecting additional on-farm data on antimicrobial use and resistance. Such data are intended to supplement existing information, including data on the quantity of antimicrobials sold or distributed for use in food-producing animals (reported under § 514.87 as established under this final rule) and data on antimicrobial use and resistance, for example, data collected under the NAHMS and NARMS programs. Data from multiple sources are needed to provide a comprehensive and science-based picture of antimicrobial drug use and resistance in animal agriculture and ensure the continued availability of safe and effective antimicrobials for use in treating animals and humans. Each source provides unique species-specific data; collecting species-specific sales and distribution data will support evaluation of other species-specific data, such as data collected under the NAHMS and NARMS programs.

    As discussed in section I.A. Purpose of the Final Rule, in December 2013, we published GFI #213, a guidance that calls on sponsors of approved medically important antimicrobial new animal drugs administered through medicated feed or water to voluntarily make changes to remove production uses (growth promotion and feed efficiency) from their product labels and bring the remaining therapeutic uses of these products (to treat, control, or prevent disease) under the oversight of a veterinarian by the end of December 2016. The sales data collected under this final rule will assist us in assessing the rate at which sponsors are voluntarily revising their FDA-approved labeled use conditions to align with GFI #213.

    As also discussed in section I.A., the National Action Plan, issued by the White House in March 2015, is intended to guide the activities of the U.S. Government as well as the actions of public health, health care, and veterinary partners in a common effort to address the urgent and serious public health threat of drug-resistant bacterial infections. Objective 2.4 of the National Action Plan is to enhance monitoring of antibiotic resistance patterns, as well as antibiotic sales, usage, and management practices, at multiple points in the production chain for food animals and retail meat. Sub-Objective 2.4.3 of the National Action Plan calls for the USDA and FDA to seek public input on a plan for collecting drug use and resistance data on farms. We are continuing to work with both the USDA and the CDC to develop this plan. A joint public meeting was held on September 30, 2015, to provide an opportunity for public comment on possible approaches for collecting additional antimicrobial drug use data.

    (Comment 7) Some comments suggest that, instead of or in addition to collecting the species-specific estimates that would be required as proposed in § 514.87(c), we should collect and report the information already provided in veterinary feed directive (VFD) orders and information related to these orders.

    (Response 7) The VFD regulation outlines the process for authorizing use of VFD drugs (animal drugs intended for use in or on animal feed that require the supervision of a licensed veterinarian) and provides veterinarians in all States with a framework for authorizing the use of these VFD drugs, including medically important antimicrobials, when needed for specific animal health purposes. The VFD regulation provides that all distributors, regardless of whether or not they manufacture animal feeds bearing or containing VFD drugs, must keep records of receipt and distribution for 2 years from the date of issuance in accordance with 21 CFR 558.6(c)(3).

    We appreciate the commenters' suggestions that we gather the information provided in VFD orders and information related to these orders. While there are some limitations to the gathering of such information, we agree that this information has value. For that reason, we continue to consider options to capture such information.

    We believe that VFD records are an important source of information for assessing veterinary oversight of VFD drugs and compliance with the VFD regulation. These records are required to be made available to FDA during inspections. Therefore, as part of these inspectional activities, we intend to use these records to review compliance with the VFD regulations, to ensure that the VFD drug and VFD feed are used according to the conditions and indications of use as specified in the approval, conditional approval, or index listing, and within the supervision and oversight of a licensed veterinarian.

    (Comment 8) One comment generally supports the collection of sales data, but suggests that we provide a specific methodology for making species-specific sales estimates to reduce the likelihood of inaccurate reporting of these estimates.

    (Response 8) We appreciate the commenter's interest in obtaining the most accurate data and their suggestion that we identify a specific methodology for developing species-specific sales estimates. We appreciate and agree with the need to gather the best data. We also recognize that the sponsors who are required to report have different ways of managing their businesses, including different ways of capturing sales and distribution data. In other words, different sponsors gather sales data on similar drug products in different ways and, sometimes, the same sponsor may gather sales data on different drug products within their own drug product portfolio in different ways. Because of these differences, it seems likely that sponsors' methods of gathering these sales data will vary considerably.

    We believe that animal drug sponsors currently have access to information obtained in the ordinary course of their business (for example, through proprietary marketing analyses) that can be used to formulate the methodology to estimate the percentage of annual product sales that are sold or distributed domestically for use in any of the four major food-producing species that appear on the approved product label. In addition, sponsors have different business models that determine the manner in which they gather sales data; thus, specific methodologies to accurately estimate species-specific sales will likely differ among sponsors. As we finalize this rule and establish the requirement that sponsors estimate species-specific sales for the major food-producing species, we recognize that specifying a uniform methodology for estimating species-specific sales might cause a firm to provide estimates in a manner not best suited to their individual business processes, leading the firm to expend more time to provide species-specific sales estimates that may be less accurate than those derived from utilizing their own methodology. The provision at § 514.87(c) requires that firms provide species-specific sales estimates. We expect these estimates to be based on the methodology that provides the sponsor's most accurate estimate of these sales.

    Also, as we noted in the proposed rule, this provision is not intended to require animal drug sponsors to conduct studies of on-farm drug use practices (80 FR 28863 at 28866). For these reasons, we decline at this time to provide a standard methodology for developing species-specific sales estimates.

    (Comment 9) One comment suggests that we should not collect the species-specific sales and distribution estimates that we proposed to require under § 514.87(c) until legal challenges over disclosure of confidential commercial information are resolved.

    (Response 9) We have carefully considered the issues regarding the protection of confidential commercial information. As we stated in the proposed rule, “[s]ince it is likely that many sponsors would consider their species-specific sales and distribution estimates as proprietary information, and that such estimates may often be derived from proprietary marketing analyses, FDA would, as described in proposed paragraph (e) [of § 514.87], consider the species-specific information reported by individual sponsors under paragraph (c) [of § 514.87] to be confidential business information consistent with section 512 (l)(3) of the FD&C Act and this Agency's regulations at 21 CFR 20.61.” (80 FR 28863 at 28867). In recognition of this concern, we further stated in the proposed rule that, consistent with the statute, FDA would not “independently report those antimicrobial classes with fewer than three distinct sponsors, and would further require that, in reporting the antimicrobial drug sales and distribution data it receives from drug sponsors, FDA must do so in a manner consistent with protecting both national security and confidential business information (see section 512(l)(3)(E)(i) and (ii) of the FD&C Act).” (80 FR 28863 at 28867.) After considering the comments received in response to the proposed rule, we conclude there are sufficient safeguards in place to ensure the protection of confidential commercial information, including the species-specific information required to be submitted by individual firms in accordance with § 514.87(c). Therefore, we are not removing the requirement for species-specific sales and distribution estimates under § 514.87(c) for confidentiality reasons as the comment requests and are finalizing the provision at § 514.87(e) relating to the confidentiality of sales and distribution data as proposed.

    (Comment 10) One comment suggests that we modify proposed § 514.87(c) to include fish on the list of animal species categories for which sponsors are required to report species-specific estimates.

    (Response 10) We carefully considered the suggestion to include fish on the list of animal species categories for which species-specific estimates must be submitted and decided to retain the categories that were identified in proposed § 514.87(c) without modification. We consider the most significant risk to the public health associated with antimicrobial resistance related to the use of antimicrobial drugs in animal agriculture to be human exposure to food containing antimicrobial-resistant bacteria resulting from the exposure of food-producing animals to antimicrobials. However, when considering the foodborne pathway, the potential for human exposure to antimicrobial-resistant pathogens currently is significantly less for food derived from minor species than it is for food derived from the food-producing major species. The exposure potential is less in part because the amount of food derived from cattle, swine, and poultry is much greater than the amount of food derived from sheep, goats, and aquaculture, the minor species from which the most food is derived (Refs. 1 and 2). In the United States, human foodborne illnesses are attributed mostly to plant and land animal commodities (Ref. 3). Furthermore, the majority of illnesses attributed to fish exposure are intoxications rather than bacterial illnesses (Ref. 4). Additionally, most fish and seafood consumed in the United States are imported products (Ref. 5).

    In addition, as discussed in the proposed rule, we believe having species-specific estimates of product sales and distribution for use in the four major food-producing categories of animal species (cattle, swine, chickens, turkeys) will be important in supporting efforts such as NARMS, a surveillance program that monitors trends in antimicrobial resistance among foodborne bacteria from humans, retail meats, and animals. NARMS retail meat and animal sampling focus on the same four major food-producing species included in § 514.87(c). NARMS does not currently have a surveillance system for antimicrobial resistance pathogens from aquaculture products. Since there is currently limited resistance data related to minor food-producing animals (including fish) and companion animals, requiring estimates of these additional species at this time would cause additional burden without clear benefit to our understanding of antimicrobial resistance. NARMS does collect some resistance data on import isolates of Salmonella, which include some seafood isolates; however, because these data are from imports, data on domestic distribution and sales of antimicrobials for use in aquaculture would not be informative to NARMS and our overall efforts to assess antimicrobial use and resistance domestically.

    (Comment 11) One comment suggests that we modify proposed § 514.87(c) to remove the category “other species/unknown” and replace it with two categories, “other species” and “unknown”, so that those estimates could be independently reported.

    (Response 11) We appreciate the suggestion to collect sales data on both “other species” and “unknown”; however, we have determined that there is not a clear benefit to having this information reported separately at this time. As noted in our response to comment 1, one of the reasons we believe that having species-specific estimates of product sales and distribution in the four major food-producing categories of animal species (cattle, swine, chickens, turkeys) will be important is to support data we obtain from NARMS. NARMS retail meat and animal sampling focus on the same four major food-producing species. The category “other species/unknown” will be used to capture the percentage of each new animal drug product that was sold or distributed for use in animal species other than the four major food-producing species or otherwise unknown to the reporting drug sponsor. Since there is currently limited resistance data related to minor food-producing animals and companion animals, requiring estimates of these additional species would cause additional burden without clear benefit.

    (Comment 12) One comment suggests that we should not report species-specific information in our annual reports, arguing that by doing so we would disclose confidential commercial information in violation of proposed § 514.87(e).

    (Response 12) As discussed in our response to comment 9, we have carefully considered the issues regarding the protection of confidential commercial information and the disclosure of species-specific information in our annual summary reports. After considering the comments received in response to the proposed rule, we are not persuaded that reporting species-specific information in our annual summary reports will lead to the disclosure of confidential commercial information. We will only provide sales data in our summary reports that has been aggregated to avoid disclosing confidential commercial information. We are finalizing the rule as proposed, which includes safeguards for the protection of confidential business information related to the reporting of species-specific estimates of sales by drug sponsors, consistent with section 512(l)(3)(E) of the FD&C Act and our disclosure regulations at § 20.61.

    (Comment 13) Several comments suggest we report a wider scope of information in our annual summary reports that would be required under proposed § 514.87(f). One comment suggests we should provide more detailed information on why antimicrobials are used; for example, to distinguish use for growth promotion or disease prevention from use for disease control or treatment. Another comment suggests that we should collaborate with the USDA and the CDC to develop a communication plan to explain the implications of collected data for human and animal health.

    (Response 13) We appreciate the comment that we report a wider scope of information in our annual summary reports. As required by ADUFA 105, sponsors of the affected antimicrobial new animal drug products began submitting their sales and distribution data to us on an annual basis, and we have published summary reports of such data for each calendar year beginning with 2009. Starting in 2014, we increased the amount of data provided in our annual summary reports by including “additional data tables on the importance of each drug class in human medicine, the approved routes of administration for these antimicrobials, whether these antimicrobials are available over-the-counter or require veterinary oversight, and whether the antimicrobial drug products are approved for therapeutic purposes, or both therapeutic and production purposes.” (80 FR 28863 at 28867.)

    Sponsors currently are not required to report sales and distribution data broken out by the specific purpose for which these drug products are used. Many sales of antimicrobials by drug sponsors are to distributors who, in turn, may sell to other distributors or to end users (e.g., feed mills or animal producers). Thus, this type of information (i.e., how the drug product sold by the sponsor is ultimately used in a labeled species) is generally not even known by the drug sponsor. Also, as we note in our response to comment 8, reporting species-specific estimates of sales and distribution under § 514.87 is not intended to require animal drug sponsors to conduct studies of on-farm drug use practices (80 FR 28863 at 28866) (e.g., use in particular species for particular indications). Because the sales and distribution data we are collecting from drug sponsors does not include information about how the drugs were ultimately used, such data also will not be included in our annual summary reports.

    As we note in our response to comments 1, 5, and 6, we recognize that data from multiple sources are needed to provide a comprehensive and science-based picture of antimicrobial drug use and resistance in animal agriculture. We are collaborating with the USDA and the CDC to develop a plan for collecting additional on-farm data on antimicrobial use and resistance. Such data are intended to supplement existing information, including data on the quantity of antimicrobials sold or distributed for use in food-producing animals (reported under § 514.87 as established under this final rule) and data on antimicrobial use and resistance, for example, data collected under the NAHMS and NARMS programs.

    We appreciate the comment suggesting that we collaborate with the USDA and the CDC to develop a communication plan to explain the implications of collected data for human and animal health. We will also continue to work with the USDA, the CDC, and other government agencies to analyze and report on the implications of the collected data.

    (Comment 14) We received several comments suggesting modifications to how we report the data that we proposed to collect. One comment suggests we should make as much of this data as possible available to the public, while protecting confidential business information. Other comments suggest we should publish monthly sales data and State- or regional-level data.

    (Response 14) We plan to report aggregate data on domestic sales and distribution for the entire reporting year, but not to include separate information for each month of the reporting year. ADUFA 105 requires drug sponsors to report sales and distribution data to us broken out by month; however, antimicrobial drug products may be used at any time up to several years after distribution. As noted in the proposed rule, we consider monthly fluctuations in drug product sales to be of limited value in reflecting when products may actually be administered to animals and interpreting antimicrobial resistance trends, since much of monthly patterns are more reflective of distribution and business practices rather than of any fluctuations in use by or sales to the end user (80 FR 28863 at 28867).

    Regarding the suggestion that we report State- or regional-level data, sponsors are not required to report sales and distribution data broken out by States or regions. As we note in our response to comment 13, many sales of antimicrobials by drug sponsors are to distributors who, in turn, may sell to other distributors or to end users (e.g., feed mills or animal producers). Thus, geographic distribution of sales as detailed as State- or regional-level sales data are generally not even known by the drug sponsors. For these reasons, we decline to make the modifications to our summary reports suggested by the commenters and are finalizing the language in § 514.87(f) as proposed.

    (Comment 15) Several comments ask that we adhere to the proposed deadline of December 31st of the following year for the annual reporting of sales data.

    (Response 15) We plan to publish our annual summary report for each calendar year by December 31st of the following year. We note that this deadline is widely supported by advocacy groups and some animal industry groups. Adhering to this deadline would provide up-to-date data to the stakeholders and would be necessary to inform current regulatory decisions.

    In addition to the comments specific to this rulemaking that we addressed previously in this preamble, we received general comments expressing views about the use of antimicrobials, antimicrobial resistance, animal health and husbandry practices, the expansion of NARMS sampling, the enhancement of on-farm collection of information, and human antimicrobial drug use. These comments express broad policy views and do not address specific points related to this rulemaking. Therefore, these general comments do not require a response.

    V. Effective and Compliance Dates

    This rule is effective July 11, 2016. Sponsors must comply with the reporting requirements in the final rule when submitting their reports covering the period of calendar year 2016.

    VI. Economic Analysis of Impacts

    We have examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). We have developed a comprehensive Economic Analysis of Impacts that assesses the impacts of the final rule. We believe that this final rule is not a significant regulatory action as defined by Executive Order 12866.

    The Regulatory Flexibility Act requires us to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because the final rule will impose average annualized costs that amount to less than 0.01 percent of average annual revenues on those small entities that we expect to sponsor NADAs, we have determined that the final rule will not have a significant economic impact on a substantial number of small entities.

    The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a written statement, which includes an assessment of anticipated costs and benefits, before issuing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $144 million, using the most current (2014) Implicit Price Deflator for the Gross Domestic Product. This final rule would not result in an expenditure in any year that meets or exceeds this amount.

    The Economic Analysis of Impacts of the final rule performed in accordance with Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act, and the Unfunded Mandates Reform Act is available at http://www.regulations.gov under the docket number(s) for this final rule and at http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

    VII. Analysis of Environmental Impact

    We have determined under 21 CFR 25.30(h) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

    VIII. Paperwork Reduction Act of 1995

    This final rule contains information collection provisions that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The title, description, and respondent description of the information collection provisions are shown in the following paragraphs with an estimate of the one-time and annual reporting and recordkeeping burdens. 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: Antimicrobial Animal Drug Distribution Reports and Recordkeeping (21 CFR part 514)—OMB Control No. 0910-0659—Revision

    Description: The ADUFA 105 legislation was enacted in 2008 to address the problem of antimicrobial resistance and to help ensure that we have the necessary information to examine safety concerns related to the use of antibiotics in food-producing animals. ADUFA 105 amended section 512 of the FD&C Act to require that sponsors of approved or conditionally approved applications for new animal drugs containing an antimicrobial active ingredient submit an annual report to us on the amount of each such ingredient in the drug that is sold or distributed for use in food-producing animals. Each report must specify: (1) The amount of each antimicrobial active ingredient by container size, strength, and dosage form; (2) quantities distributed domestically and quantities exported; and (3) a listing of the target animals, indications, and production classes that are specified on the approved label of the product. The report must cover the period of the preceding calendar year and include separate information for each month of the calendar year. This rule also includes an additional reporting provision intended to further enhance our understanding of antimicrobial animal drug sales intended for use in specific food-producing animal species. ADUFA 105 also requires us to publish annual summary reports of the data we receive. In accordance with ADUFA 105, sponsors of the affected antimicrobial new animal drug products have submitted their sales and distribution data to us, and we have published summaries of such data, for each calendar year since 2009. Collection of information on the amount of animal antimicrobials being distributed, including species-specific information, is necessary to support our ongoing efforts to encourage the judicious use of antimicrobials in food-producing animals to help ensure the continued availability of safe and effective antimicrobials for animals and humans. We intend to use these data to supplement existing information, including data collected under the NAHMS and NARMS programs. Data from multiple sources are needed to provide a comprehensive and science-based picture of antimicrobial drug use and resistance in animal agriculture.

    The final rule amends our records and reports regulation in part 514 to include the following:

    • Procedures relating to the submission to us of annual sales and distribution data reports by sponsors of approved or conditionally approved antimicrobial new animal drug products sold or distributed for use in food-producing animals.

    • Procedures relating to the requirement that such sponsors submit species-specific estimates of product sales as a percentage of total sales.

    • Procedures applicable to our preparation and publication of summary reports on an annual basis based on the sales and distribution data we receive from sponsors of approved antimicrobial new animal drug products. The final rule includes specific parameters for the content of the annual summary reports as well as provisions intended to protect confidential business information and national security, consistent with ADUFA 105 and this Agency's regulations at § 20.61.

    • Provisions that give sponsors of approved or conditionally approved antimicrobial new animal drug products that are sold or distributed for use in food-producing animals the opportunity to avoid duplicative reporting of product sales and distribution data to us under part 514.

    The final rule codifies in part 514 the reporting requirements established in ADUFA 105 and includes an additional reporting provision intended to enhance our understanding of new animal drug sales intended for use in specific food-producing animal species. The final rule also revises Form FDA 3744 by providing for species-specific information to be reported. Consequently FDA is revising the reporting requirements in the associated information collection. However, the final rule does not change the recordkeeping provisions already approved under OMB control number 0910-0659.

    Therefore, in compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506(c)(2)(B)), we requested public comment on the information collection provisions of the proposed rule (80 FR 28863 at 28868). We received some public comments on the information collection topics solicited in the proposed rule as addressed previously in section IV (supporting our effort to eliminate duplicative reporting, suggesting specific modifications and different approaches, questioning or supporting the utility of the information, suggesting we wait for resolution of the current legal disputes over disclosure of confidential commercial information and suggesting we provide a specific methodology for making species-specific sales estimates). However, none of the comments suggests that we modify our burden estimates.

    Description of Respondents: Animal Drug Manufacturers (Sponsors).

    The total annual estimated burden for this collection of information is 9,759 hours and 538 responses. This reflects a marginal increase in burden to that currently approved under OMB control number 0910-0659 resulting from the revised reporting provisions associated with the final rule. At the same time, a review of our records reflects an overall increase in respondents to the program from 26 to 27 and we have therefore adjusted our respondent numbers accordingly.

    We estimate the burden of this collection of information as follows:

    Table 1—Estimated One-Time Number Reporting Burden 1 21 CFR Section Number of
  • respondents
  • Number of
  • responses per
  • respondent
  • Total annual responses Average
  • burden per
  • response
  • Total hours
    514.87(a) through (e)—Administrative Review of the Rule: Sponsors With Active Applications 20 1 20 24 480 514.87(a) through (e)—Administrative Review of the Rule: Sponsors With Inactive Applications 7 1 7 1 7 514.87(c)—Report Species-Specific Estimate of Percent of Products Distributed Domestically 20 7.50 150 2 300 Total 787 1 There are no capital costs or operating and maintenance costs associated with this collection of information.

    We base our estimate of the average burden per response on our recent experience with the existing antimicrobial animal drug distribution reports program. We base our estimate of the number of affected respondents reported in tables 1 and 2 on a review of our records of sponsors with active and inactive applications, which show that in the past 3 years the number of sponsors have increased from 26 to 27.

    Table 1 shows the estimated one-time burden associated with the new reporting provisions of this final rule. We expect that current sponsors of approved or conditionally approved applications for antimicrobial new animal drugs sold or distributed for use in food-producing animals will need to review the provisions of the final rule and develop a compliance plan. Based on our records, we estimate there are a total of 27 sponsors, where 20 sponsors hold active (i.e., currently marketed) applications and 7 sponsors hold only inactive applications, as reflected in rows 1 and 2. We estimate that the 20 sponsors with active applications will take 24 hours to complete the review and develop a compliance plan. We expect that the seven sponsors with inactive applications will take 1 hour to complete the review and will not need to develop a compliance plan.

    We also estimate that the 20 sponsors with 150 applications will each spend approximately 2 hours to discuss and settle upon a method to calculate the species-specific information required under § 514.87(c). This estimate is reflected in row 3.

    Table 2—Estimated Annual Reporting Burden 1 21 CFR Section FDA form Number of
  • respondents
  • Number of
  • responses per
  • respondent
  • Total annual responses Average
  • burden per
  • response
  • Total hours
    514.87(a) through (e)—Annual Reports for Sponsors With Active Applications—Paper Submission 3744 10 7.5 75 62 4,650 514.87(a) through (e)—Annual Reports for Sponsors With Active Applications—Electronic Submission 3744 10 7.5 75 52 3,900 514.87(a) through (e)—Annual Reports for Sponsors With Inactive Applications—Paper Submission 3744 4 26.5 106 2 212 514.87(a) through (e)—Annual Reports for Sponsors With Inactive Applications—Electronic Submission 3744 3 35 105 2 210 Total 8,972 1 There are no capital costs or operating and maintenance costs associated with this collection of information.

    Table 2 shows the estimated recurring annual reporting burden associated with the final rule. While we expect new § 514.87(c) will require 3 burden hours resulting from including species-specific estimates, we believe 1 hour will be saved by eliminating the requirement for sponsors to calculate the amount of antimicrobial active ingredients associated with their monthly product sales and distribution data (§ 514.80(b)(4)(i)(A)). Consequently, we estimate that the 20 sponsors with active applications will each expend approximately 2 additional reporting hours annually for new § 514.87. Because the Agency, upon implementation of the rule, will accept both paper and electronic submissions, and we assume that half of the respondents will report electronically, we estimate 10 respondents for each submission method as shown in rows 1 and 2.

    While we estimate no increase in burden for the seven sponsors of inactive applications, we similarly will accept both paper and electronic submissions. Accordingly we have reported, unchanged, the 2 hours of burden already approved under OMB control number 0910-0659 in rows 3 and 4.

    This final rule also refers to other currently approved collections of information found in our regulations. These collections of information are subject to review by OMB under the Paperwork Reduction Act of 1995. The collections of information in § 514.80 are approved under OMB control number 0910-0284. The collections of information in 21 CFR 211.196 are approved under OMB control number 0910-0139.

    The information collection provisions of this final rule have been submitted to OMB for review as required by section 3507(d) of the Paperwork Reduction Act of 1995. Prior to the effective date of this final rule, FDA will publish a notice in the Federal Register announcing OMB's decision to approve, modify, or disapprove the information collection provisions in this final rule. An Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

    IX. Federalism

    We have analyzed this final rule in accordance with the principles set forth in Executive Order 13132. We have determined that the rule does not contain policies 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. Accordingly, we conclude that the rule does not contain policies that have federalism implications as defined in the Executive Order and, consequently, a federalism summary impact statement is not required.

    X. References

    The following references are on display in the Division of Dockets Management (see ADDRESSES) and are available for viewing by interested persons between 9 a.m. and 4 p.m. Monday through Friday; they are also available electronically at http://www.regulations.gov. FDA has verified the Web site addresses, as of the date this document publishes in the Federal Register, but Web sites are subject to change over time.

    1. USDA, “Livestock & Meat Domestic Data,” http://www.ers.usda.gov/data-products/livestock-meat-domestic-data. 2. “Food Fish Production and Sales by Species, by Size Category, by State and United States: 2005,” http://www.agcensus.usda.gov/Publications/2002/Aquaculture/aquacen2005_08.pdf. 3. Painter, J. A., R. M. Hoekstra, T. Ayers, et al., “Attribution of Foodborne Illnesses, Hospitalizations, and Deaths to Food Commodities by Using Outbreak Data, United States, 1998-2008,” Emerging Infectious Diseases, 19(3):407-415, 2013. 4. Gould, L. H., K. A. Walsh, A. R. Vieira, et al., “Surveillance for Foodborne Disease Outbreaks—United States, 1998-2008,” Morbidity and Mortality Weekly Report. Surveillance Summaries, 62(2):1-34, 2013. 5. “Aquaculture in the United States,” http://www.nmfs.noaa.gov/aquaculture/aquaculture_in_us.html. List of Subjects in 21 CFR Part 514

    Administrative practice and procedure, Animal drugs, Confidential business information, Reporting and recordkeeping requirements.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 514 is amended as follows:

    PART 514—NEW ANIMAL DRUG APPLICATIONS 1. The authority citation for part 514 is revised to read as follows: Authority:

    21 U.S.C. 321, 331, 351, 352, 354, 356a, 360b, 360ccc, 371, 379e, 381.

    2. In § 514.80, revise the fifth sentence of paragraph (b)(4) introductory text and paragraph (b)(4)(i) to read as follows:
    § 514.80 Records and reports concerning experience with approved new animal drugs.

    (b) * * *

    (4) * * * The yearly periodic drug experience reports must be submitted within 90 days of the anniversary date of the approval of the NADA or ANADA. * * *

    (i) Distribution data. (A) Information about the distribution of each new animal drug product, including information on any distributor-labeled product. This information must include the total number of distributed units of each size, strength, or potency (e.g., 100,000 bottles of 100 5-milligram tablets; 50,000 10-milliliter vials of 5-percent solution). This information must be presented in two categories: Quantities distributed domestically and quantities exported.

    (B) Applicants submitting annual sales and distribution reports for antimicrobial new animal drug products under § 514.87 have the option not to report distribution data under paragraph (b)(4)(i)(A) of this section for the approved applications that include these same products, but only provided each of the following conditions are met:

    (1) Applicants must have submitted complete periodic drug experience reports under this section for such applications for at least 2 full years after the date of their initial approval.

    (2) Applicants must ensure that the beginning of the reporting period for the annual periodic drug experience reports for such applications is January 1. For applications that currently have a reporting period that begins on a date other than January 1, applicants must request a change in reporting submission date such that the reporting period begins on January 1 and ends on December 31, as described in paragraph (b)(4) of this section.

    (3) Applicants that change their reporting submission date must also submit a special drug experience report, as described in paragraph (b)(5)(i) of this section, that addresses any gaps in distribution data caused by the change in date of submission.

    (4) Applicants who choose not to report under paragraph (b)(4)(i)(A) of this section must ensure that full sales and distribution data for each product approved under such applications are alternatively reported under § 514.87, including products that are labeled for use only in nonfood-producing animals.

    3. Add § 514.87 to subpart B to read as follows:
    § 514.87 Annual reports for antimicrobial animal drug sales and distribution.

    (a) The applicant for each new animal drug product approved under section 512 of the Federal Food, Drug, and Cosmetic Act, or conditionally approved under section 571 of the Federal Food, Drug, and Cosmetic Act, and containing an antimicrobial active ingredient, must submit an annual report to FDA on the amount of each such antimicrobial active ingredient in the drug that is sold or distributed in the reporting year for use in food-producing animal species, including information on any distributor-labeled product.

    (b) This report must identify the approved or conditionally approved application and must include the following information for each new animal drug product described in paragraph (a) of this section:

    (1) A listing of each antimicrobial active ingredient contained in the product;

    (2) A description of each product sold or distributed by unit, including the container size, strength, and dosage form of such product units;

    (3) For each such product, a listing of the target animal species, indications, and production classes that are specified on the approved label;

    (4) For each such product, the number of units sold or distributed in the United States (i.e., domestic sales) for each month of the reporting year; and

    (5) For each such product, the number of units sold or distributed outside the United States (i.e., quantities exported) for each month of the reporting year.

    (c) Each report must also provide a species-specific estimate of the percentage of each product described in paragraph (b)(2) of this section that was sold or distributed domestically in the reporting year for use in any of the following animal species categories, but only for such species that appear on the approved label: Cattle, swine, chickens, turkeys. The total of the species-specific percentages reported for each product must account for 100 percent of its sales and distribution; therefore, a fifth category of “other species/unknown” must also be reported.

    (d) Each report must:

    (1) Be submitted not later than March 31 each year;

    (2) Cover the period of the preceding calendar year; and

    (3) Be submitted using Form FDA 3744, “Antimicrobial Animal Drug Distribution Report.”

    (e) Sales and distribution data and information reported under this section will be considered to fall within the exemption for confidential commercial information established in § 20.61 of this chapter and will not be publicly disclosed, except that summary reports of such information aggregated in such a way that does not reveal information that is not available for public disclosure under this provision will be prepared by FDA and made available to the public as provided in paragraph (f) of this section.

    (f) FDA will publish an annual summary report of the data and information it receives under this section for each calendar year by December 31 of the following year. Such annual reports must include a summary of sales and distribution data and information by antimicrobial drug class and may include additional summary data and information as determined by FDA. In order to protect confidential commercial information, each individual datum appearing in the summary report must:

    (1) Reflect combined product sales and distribution data and information obtained from three or more distinct sponsors of approved products that were actively sold or distributed that reporting year, and

    (2) Be reported in a manner consistent with protecting both national security and confidential commercial information.

    Dated: May 6, 2016. Leslie Kux, Associate Commissioner for Policy.
    [FR Doc. 2016-11082 Filed 5-10-16; 8:45 am] BILLING CODE 4164-01-P
    DEPARTMENT OF JUSTICE Drug Enforcement Administration 21 CFR Part 1308 [Docket No. DEA-417] Schedules of Controlled Substances: Placement of UR-144, XLR11, and AKB48 into Schedule I AGENCY:

    Drug Enforcement Administration, Department of Justice.

    ACTION:

    Final rule.

    SUMMARY:

    With the issuance of this final rule, the Drug Enforcement Administration places (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144), [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11), and N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48), including their salts, isomers, and salts of isomers whenever the existence of such salts, isomers, and salts of isomers is possible, into schedule I of the Controlled Substances Act. This scheduling action is pursuant to the Controlled Substances Act which requires that such actions be made on the record after opportunity for a hearing through formal rulemaking. This action imposes the regulatory controls and administrative, civil, and criminal sanctions applicable to schedule I controlled substances on persons who handle (manufacture, distribute, reverse distribute, import, export, engage in research, conduct instructional activities or chemical analysis, or possess), or propose to handle UR-144, XLR11, or AKB48.

    DATES:

    Effective: May 11, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Barbara J. Boockholdt, Office of Diversion Control, Drug Enforcement Administration; Mailing Address: 8701 Morrissette Drive, Springfield, Virginia 22152; Telephone: (202) 598-6812.

    SUPPLEMENTARY INFORMATION: Legal Authority

    The Drug Enforcement Administration (DEA) implements and enforces titles II and III of the Comprehensive Drug Abuse Prevention and Control Act of 1970, as amended. 21 U.S.C. 801-971. Titles II and III are referred to as the “Controlled Substances Act” and the “Controlled Substances Import and Export Act,” respectively, and are collectively referred to as the “Controlled Substances Act” or the “CSA” for the purposes of this action. 21 U.S.C. 801-971. The DEA publishes the implementing regulations for these statutes in title 21 of the Code of Federal Regulations (CFR), chapter II.

    The CSA and its implementing regulations are designed to prevent, detect, and eliminate the diversion of controlled substances and listed chemicals into the illicit market while ensuring an adequate supply is available for the legitimate medical, scientific, research, and industrial needs of the United States. Controlled substances have the potential for abuse and dependence and are controlled to protect the public health and safety.

    Under the CSA, each controlled substance is classified into one of five schedules based upon its potential for abuse, its currently accepted medical use in treatment in the United States, and the degree of dependence the substance may cause. 21 U.S.C. 812. The initial schedules of controlled substances established by Congress are found at 21 U.S.C. 812(c) and the current list of scheduled substances is published at 21 CFR part 1308. 21 U.S.C. 812(a).

    Pursuant to 21 U.S.C. 811(a)(1), the Attorney General may, by rule, “add to such a schedule or transfer between such schedules any drug or other substance if he . . . finds that such drug or other substance has a potential for abuse, and . . . makes with respect to such drug or other substance the findings prescribed by subsection (b) of section 812 of this title for the schedule in which such drug is to be placed . . . .” The Attorney General has delegated scheduling authority under 21 U.S.C. 811 to the Administrator of the DEA, 28 CFR 0.100, who in turn has redelegated that authority to the Deputy Administrator of the DEA, 28 CFR part 0, appendix to subpart R.

    The CSA provides that proceedings for the issuance, amendment, or repeal of the scheduling of any drug or other substance may be initiated by the Attorney General (1) on her own motion; (2) at the request of the Secretary of the Department of Health and Human Services (HHS); 1 or (3) on the petition of any interested party. 21 U.S.C. 811(a). This action was initiated by the former DEA Administrator on her own motion and is supported by a recommendation from the Assistant Secretary of the HHS and an evaluation of all other relevant data by the DEA. This action imposes the regulatory controls and administrative, civil, and criminal sanctions of schedule I controlled substances on any person who handles, or proposes to handle, UR-144, XLR11, or AKB48.

    1 As set forth in a memorandum of understanding entered into by the Food and Drug Administration (FDA) and the National Institute on Drug Abuse (NIDA), the FDA acts as the lead agency within the HHS in carrying out the Secretary's scheduling responsibilities under the CSA, with the concurrence of NIDA. 50 FR 9518, Mar. 8, 1985. The Secretary of the HHS has delegated to the Assistant Secretary for Health of the HHS the authority to make domestic drug scheduling recommendations. 58 FR 35460, July 1, 1993. Accordingly, all subsequent references to “Secretary” have been replaced with “Assistant Secretary.”

    Background

    On April 12, 2013, the DEA published a notice of intent to temporarily place (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144), [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11), and N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48) into schedule I pursuant to the temporary scheduling provisions of the CSA. 78 FR 21858. On May 16, 2013, the DEA published a final order amending 21 CFR 1308.11(h) to temporarily place these three synthetic cannabinoids into schedule I of the CSA pursuant to the temporary scheduling provisions of 21 U.S.C. 811(h). 78 FR 28735. That final order was effective on the date of publication, and was based on findings by the DEA that the temporary scheduling of these three synthetic cannabinoids was necessary to avoid an imminent hazard to the public safety pursuant to 21 U.S.C. 811(h)(1). Section 201(h)(2) of the CSA requires that the temporary control of these substances expire two years from the effective date of the scheduling order, or on May 15, 2015. 21 U.S.C. 811(h)(2). However, the CSA also provides that the temporary scheduling may be extended for up to one year during the pendency of proceedings under 21 U.S.C. 811(a)(1). Id. Accordingly, on May 14, 2015, the DEA published a notice of proposed rulemaking (NPRM) to permanently control UR-144, XLR11, and AKB48 in schedule I of the CSA. 80 FR 27611. Specifically, the DEA proposed to add these substances to 21 CFR 1308.11(g), cannabimimetic agents. On May 15, 2015, the DEA extended the temporary scheduling of UR-144, XLR11, and AKB48 by one year, until May 15, 2016. 80 FR 27854. On March 22, 2016, the DEA published a corrected notice of proposed rulemaking, proposing the placement of these substances as hallucinogenic substances under 21 CFR 1308.11(d), and providing an opportunity to comment on this proposed change. 81 FR 15188.

    DEA and HHS Eight Factor Analyses

    On May 11, 2015, the HHS provided the DEA with three scientific and medical evaluation documents prepared by the FDA entitled “Basis for the recommendation to place 1-pentyl-1H-indol-3-yl-2,2,3,3-tetramethylcyclopropyl methanone (UR-144) and its salts in Schedule 1 of the Controlled Substances Act (CSA);” “Basis for the recommendation to place 1-(5-fluoro-pentyl)-1H-indol-3-yl 2,2,3,3-tetramethylcyclopropyl methanone (XLR11) and its salts in Schedule 1 of the Controlled Substances Act (CSA);” and “Basis for the recommendation to place (N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide) (AKB48; APINACA) and its salts in Schedule 1 of the Controlled Substances Act (CSA).” After considering the eight factors in 21 U.S.C. 811(c), including consideration of each substance's abuse potential, legitimate medical use, and dependence liability, the Assistant Secretary of the HHS recommended that UR-144, XLR11, and AKB48 be controlled in schedule I of the CSA. In response, the DEA conducted its own eightfactor analysis of UR-144, XLR11, and AKB48. The DEA and HHS analyses are available in their entirety in the public docket for this rule (DEA-2015-0007/agency Docket Number DEA-417) at http://www.regulations.gov under “Supporting Documents.”

    Determination To Schedule UR-144, XLR11, and AKB48

    After a review of the available data, including the scientific and medical evaluations and the scheduling recommendations from the HHS, the DEA published an NPRM entitled “Schedules of Controlled Substances: Placement of UR-144, XLR11, and AKB48 into Schedule I,” proposing to control UR-144, XLR11, and AKB48 in schedule I of the CSA. 80 FR 27611, May 14, 2015. The proposed rule provided an opportunity for interested persons to file a request for hearing in accordance with the DEA regulations on or before June 15, 2015. No requests for such a hearing were received by the DEA. The NPRM also provided an opportunity for interested persons to submit written comments on the proposal on or before June 15, 2015.

    Comments Received

    The DEA received three comments on the proposed rule to control UR-144, XLR11, and AKB48 in schedule I of the CSA. One commenter stated that the “longwinded and unnecessarily difficult names of the chemical substances mentioned” were offensive and that they should be changed “in the name of a truly transparent government.” A second commenter questioned the safety of methadone, and the third commenter opposed the control of UR-144, XLR11, and AKB48.

    Two comments were received in response to the publication of the NPRM correction, for which comments were to be limited to addressing the change in the proposed placement in the CFR for the substances as hallucinogenic substances rather than cannabimimetic agents Both comments addressed whether or not these substances should be scheduled, with one commenter supporting scheduling and the other opposing. Thus, both comments were outside the scope for which comments were being accepted.

    Comments Received in Response to NPRM.

    Request to Shorten Chemical Names. One commenter stated that the chemical names for UR-144, XLR11, and AKB48 were unnecessarily difficult to understand and requested they be shortened.

    DEA Response: In order to ensure the public is aware of the specific substances that were proposed to be controlled, and are controlled, as schedule I substances, the DEA used both the standard chemical names for UR-144, XLR11, and AKB48 and the common street level names that correspond to each substance. All names known by the DEA for UR-144, XLR11, and AKB48 were provided in the NPRM, the NPRM correction, and in this final rule. In addition, to prevent any confusion with nomenclature or other references to these substances, the DEA also used shortened names for these substances, including UR-144, XLR11, 5-fluoro-UR-144, AKB48, and APINACA. Each of the names provided in the NPRM, the NPRM correction, and this final rule are commonly accepted identifiers for the three substances.

    Comment Regarding Methadone. One commenter stated that methadone is very dangerous to use, especially with the consumption of alcohol.

    DEA Response: Methadone is a schedule II synthetic opioid and is not affected by this rule.

    Request Not to Control UR-144, XLR11, and AKB48. One commenter opposed controlling UR-144, XLR11, and AKB48 stating “there is no reason to have this law.”

    DEA Response: As outlined in detail in the HHS and DEA eight-factor analyses, there is substantial evidence to support control of UR-144, XLR11, and AKB48 in schedule I of the CSA.

    The use of UR-144, XLR11, and/or AKB48 has been linked to serious adverse effects including vomiting, nausea, anxiety, agitation, seizures, hallucinations, tachycardia, and stroke, which require visits to emergency facilities. In addition to the serious adverse effects, the misuse and abuse of UR-144, XLR11, and/or AKB48 has been shown to result in death. As reported by the National Forensic Laboratory Information System (NFLIS), there have been over 46,000 reports for UR-144, XLR11, and AKB48 since 2011 in at least 44 states. As determined by the HHS, there is no accepted medical use for UR-144, XLR11, and AKB48.

    Scheduling Conclusion

    After consideration of the relevant matter presented as a result of public comment, the scientific and medical evaluations and accompanying recommendations of the HHS, and its own eight-factor analyses, the DEA finds that these facts and all other relevant data constitute substantial evidence of potential for abuse of UR-144, XLR11, and AKB48. As such, the DEA is permanently scheduling UR-144, XLR11, and AKB48 as controlled substances under the CSA.2

    2 UR-144, XLR11, and AKB48 were initially proposed to be scheduled under § 1308.11(g). However, they do not meet the structural requirement for “cannabimimetic agents.” Consistent with the analysis set forth in the DEA's 8-factor analysis, on March 22, 2016, the DEA published a corrected notice of proposed rulemaking, with opportunity for comment, proposing the placement of these substances as hallucinogenic substances under 21 CFR 1308.11(d). 81 FR 15188. The substances are being placed under § 1308.11(d), hallucinogenic substances, under this final rule.

    Determination of Appropriate Schedule

    The CSA establishes five schedules of controlled substances known as schedules I, II, III, IV, and V. The CSA also outlines the findings required to place a drug or other substance in any particular schedule. 21 U.S.C. 812(b). After consideration of the analyses and recommendations of the Assistant Secretary for HHS and review of all other available data, the Administrator of the DEA, pursuant to 21 U.S.C. 811(a) and 21 U.S.C. 812(b)(1), finds that:

    (1) (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144), [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11), and N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48) have a high potential for abuse that is comparable to other schedule I substances such as delta-9-tetrahydrocannabinol (Δ9-THC) and JWH-018;

    (2) (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144), [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11), and N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48) have no currently accepted medical use in treatment in the United States; and

    (3) There is a lack of accepted safety for use of (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144), [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11) and N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48) under medical supervision.

    Based on these findings, the Administrator of the DEA concludes that (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144), [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11), and N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48) including their salts, isomers and salts of isomers, whenever the existence of such salts, isomers, and salts of isomers is possible, warrant control in schedule I of the CSA. 21 U.S.C. 812(b)(1).

    Requirements for Handling UR-144, XLR11, and AKB48

    UR-144, XLR11, and AKB48 are currently scheduled on a temporary basis in schedule I 3 and therefore continue to be subject to the regulatory controls and administrative, civil, and criminal sanctions applicable to the manufacture, distribution, reverse distribution, importation, exportation, engagement in research and conduct of instructional activities or chemical analysis, and possession of schedule I controlled substances, including those listed below. These controls will continue on a permanent basis:

    3 UR-144, XLR11, and AKB48 are currently subject to schedule I controls on a temporary basis, pursuant to 21 U.S.C. 811(h). 80 FR 27854, May 15, 2016.

    1. Registration. Any person who handles (manufactures, distributes, reverse distributes, imports, exports, engages in research, or conducts instructional activities or chemical analysis with, or possesses) UR-144, XLR11, or AKB48, or who desires to handle UR-144, XLR11, or AKB48 must be registered with the DEA to conduct such activities pursuant to 21 U.S.C. 822, 823, 957, and 958, and in accordance with 21 CFR parts 1301 and 1312.

    2. Disposal of Stocks. UR-144, XLR11, and AKB 48 must be disposed of in accordance with 21 CFR part 1317, in addition to all other applicable federal, state, local, and tribal laws.

    3. Security. UR-144, XLR11, and AKB48 continue to be subject to schedule I security requirements and must be handled and stored pursuant to 21 U.S.C. 821, 823, and 871(b), and in accordance with 21 CFR 1301.71-1301.93.

    4. Labeling and Packaging. All labels, labeling, and packaging for commercial containers of UR-144, XLR11, and AKB48 must comply with 21 U.S.C. 825 and 958(e), and be in accordance with 21 CFR part 1302.

    5. Quota. Only registered manufacturers are permitted to manufacture UR-144, XLR11, or AKB48 in accordance with a quota assigned pursuant to 21 U.S.C. 826 and in accordance with 21 CFR part 1303.

    6. Inventory. Every DEA registrant required to keep records and who possesses any quantity of UR-144, XLR11, or AKB48 is required to maintain an inventory of all stocks of UR-144, XLR11, and/or AKB48 on hand, pursuant to 21 U.S.C. 827 and 958, and in accordance with 21 CFR 1304.03, 1304.04, and 1304.11.

    7. Records and Reports. Every DEA registrant must maintain records and submit reports pursuant to 21 U.S.C. 827 and 958, and in accordance with 21 CFR parts 1304, 1312, and 1317. Manufacturers and distributors must submit reports regarding UR-144, XLR11, and/or AKB48 to the Automation of Reports and Consolidated Order System (ARCOS) pursuant to 21 U.S.C. 827 and in accordance with 21 CFR 1304 and 1312.

    8. Order Forms. Every DEA registrant who distributes UR-144, XLR11, and/or AKB48 must continue to comply with the order form requirements, pursuant to 21 U.S.C. 828 and 21 CFR part 1305.

    9. Importation and Exportation. All importation and exportation of UR-144, XLR11, and AKB48 must be in compliance with 21 U.S.C. 952, 953, 957, and 958, and in accordance with 21 CFR part 1312.

    10. Liability. Any activity involving UR-144, XLR11, or AKB48 not authorized by, or in violation of, the CSA or its implementing regulations continues to be unlawful, and may subject the person to administrative, civil, and/or criminal sanctions.

    Regulatory Analyses Administrative Procedure Act

    The Administrative Procedure Act (APA) generally requires that rules enacted in accordance with the procedures of 5 U.S.C. 553 to be effective not less than 30 days after publication of the proposed rule. 5 U.S.C. 553(d). However, the APA provides three exceptions for when an agency may make a rule effective sooner than 30 days after publication, including if the agency finds for good cause why the rule should be effective sooner and publishes those reasons with the rule. 5 U.S.C. 553(d)(3). The DEA finds that there is good cause for this scheduling action to be immediately effective upon publication. A delay in the effective date is unnecessary and contrary to the public interest. It is unnecessary because UR-144, XLR11, and AKB48 are already controlled under 21 U.S.C. 811(h). Additionally, a delay in the effective date could potentially temporarily eliminate these substances from being controlled, thereby resulting in an imminent hazard to the public safety. As noted above, the use of UR-144, XLR11, and/or AKB48 has been linked to serious adverse effects including vomiting, nausea, anxiety, agitation, seizures, hallucinations, tachycardia, and stroke, which require visits to emergency facilities. In addition to the serious adverse effects, the misuse and abuse of UR-144, XLR11, and/or AKB48 has been shown to result in death.

    Executive Orders 12866 and 13563, Regulatory Planning and Review, and 13563, Improving Regulation and Regulatory Review

    In accordance with 21 U.S.C. 811(a), this scheduling action is subject to formal rulemaking procedures done “on the record after opportunity for a hearing,” which are conducted pursuant to the provisions of 5 U.S.C. 556 and 557. The CSA sets forth the criteria for scheduling a drug or other substance. Such actions are exempt from review by the Office of Management and Budget (OMB) pursuant to section 3(d)(1) of Executive Order 12866 and the principles reaffirmed in Executive Order 13563.

    Executive Order 12988, Civil Justice Reform

    This regulation meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate drafting errors and ambiguity, minimize litigation, provide a clear legal standard for affected conduct, and promote simplification and burden reduction.

    Executive Order 13132, Federalism

    This rulemaking does not have federalism implications warranting the application of Executive Order 13132. The proposed rule does not have substantial direct effects on the States, on the relationship between the national government and the States, or the distribution of power and responsibilities among the various levels of government.

    Executive Order 13175, Consultation and Coordination With Indian Tribal Governments

    This rule does not have tribal implications warranting the application of Executive Order 13175. It does not have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

    Regulatory Flexibility Act

    The Administrator, in accordance with the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-602, has reviewed this final rule and by approving it certifies that it will not have a significant economic impact on a substantial number of small entities. On May 16, 2013, the DEA published a final order amending 21 CFR 1308.11(h) to temporarily place these three synthetic cannabinoids into schedule I of the CSA pursuant to the temporary scheduling provisions of 21 U.S.C. 811(h). 78 FR 28735. On May 15, 2015, the DEA published a final order extending the temporary placement of these substances in schedule I of the CSA for up to one year pursuant to 21 U.S.C. 811(h)(2). 80 FR 27854. Accordingly, all entities that currently handle or plan to handle these synthetic cannabinoids are estimated to have already established and implemented the systems and processes required to handle UR-144, XLR11, and AKB48. Therefore, the DEA anticipates that this rule will impose minimal or no economic impact on businesses that currently handle UR-144, XLR11, or AKB48 for lawful purposes. This estimate applies to entities large and small. Accordingly, the DEA has concluded that this rule will not have a significant effect on a substantial number of small entities.

    Unfunded Mandates Reform Act of 1995

    On the basis of information contained in the “Regulatory Flexibility Act” section above, the DEA has determined and certifies pursuant to the Unfunded Mandates Reform Act (UMRA) of 1995, 2 U.S.C. 1501 et seq., that this action will not result in any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted for inflation) in any one year. Therefore, neither a Small Government Agency Plan nor any other action is required under provisions of the UMRA of 1995.

    Paperwork Reduction Act of 1995

    This action does not impose a new collection of information under the Paperwork Reduction Act of 1995. 44 U.S.C. 3501-3521. This action would not impose recordkeeping or reporting requirements on State or local governments, individuals, businesses, or organizations. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

    Congressional Review Act

    This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996 (Congressional Review Act (CRA)). This rule will not result in: “an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of U.S.-based companies to compete with foreign based companies in domestic and export markets.” However, pursuant to the CRA, the DEA has submitted a copy of this final rule to both Houses of Congress and to the Comptroller General.

    List of Subjects in 21 CFR Part 1308

    Administrative practice and procedure, Drug traffic control, Reporting and recordkeeping requirements.

    For the reasons set out above, 21 CFR part 1308 is amended as follows:

    PART 1308—SCHEDULES OF CONTROLLED SUBSTANCES 1. The authority citation for 21 CFR part 1308 continues to read as follows: Authority:

    21 U.S.C. 811, 812, 871(b), unless otherwise noted.

    2. In § 1308.11: a. Add paragraphs (d) (48) through (50); and b. Remove paragraphs (h)(1) through (3) and redesignate paragraphs (h)(4) through (25) as paragraphs (h)(1) through (22), respectively.

    The additions read as follows:

    § 1308.11 Schedule I.

    (d) * * *

    (48) (1-pentyl-1H-indol-3-yl)(2,2,3,3-tetramethylcyclopropyl)methanone (UR-144) (7144) (49) [1-(5-fluoro-pentyl)-1H-indol-3-yl](2,2,3,3-tetramethylcyclopropyl)methanone (5-fluoro-UR-144, XLR11) (7011) (50) N-(1-adamantyl)-1-pentyl-1H-indazole-3-carboxamide (APINACA, AKB48) (7048)
    Dated: May 6, 2016. Chuck Rosenberg, Acting Administrator.
    [FR Doc. 2016-11204 Filed 5-10-16; 8:45 am] BILLING CODE 4410-09-P
    DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 165 [Docket No. USCG-2016-0137] Safety Zone; Fourth of July Fireworks, City of Eureka, Humboldt Bay, Eureka, CA AGENCY:

    Coast Guard, DHS.

    ACTION:

    Notice of enforcement of regulation.

    SUMMARY:

    The Coast Guard will enforce the safety zone for the Fourth of July Fireworks, City of Eureka in the Captain of the Port, San Francisco area of responsibility during the dates and times noted below. This action is necessary to protect life and property of the maritime public from the hazards associated with the fireworks display. During the enforcement period, unauthorized persons or vessels are prohibited from entering into, transiting through, or anchoring in the safety zone, unless authorized by the Patrol Commander (PATCOM).

    DATES:

    The regulations in 33 CFR 165.1191, Table 1, Item number 3, will be enforced from 10 a.m. on July 3, 2016 through 10:40 p.m. on July 4, 2016.

    FOR FURTHER INFORMATION CONTACT:

    If you have questions on this notice, call or email Lieutenant Junior Grade Christina Ramirez, Sector San Francisco Waterways Safety Division, U.S. Coast Guard; telephone 415-399-3585, email [email protected]

    SUPPLEMENTARY INFORMATION:

    The Coast Guard will enforce a safety zone in navigable waters around and under the fireworks barge within a radius of 100 feet during the loading, transit, and arrival of the fireworks barge to the display location and until the start of the fireworks display.

    From 10 a.m. until 6 p.m. on July 3, 2016 the fireworks barge will be loaded off of Schneider Dock in Eureka, CA in approximate position 40°47′50″ N, 124°11′11″ W (NAD 83). The fireworks barge will remain at the Schneider Dock until the start of the transit. From 2:30 p.m. to 3:30 p.m. on July 4, 2016 the loaded barge will transit from Schneider Dock to the launch site off of Woodley Island near Eureka, CA at approximate position 40°48′29″ N, 124°10′06″ W (NAD 83) where it will remain until the commencement of the fireworks display. Upon the commencement of the 25 minute fireworks display, scheduled to begin at 10 p.m. on July 4, 2016, the safety zone will increase in size to encompass the navigable waters around and under the fireworks barge within a radius 1,000 feet at approximate position 40°48′29″ N, 124°10′06″ W (NAD 83) for the Fourth of July Fireworks, City of Eureka in 33 CFR 165.1191, Table 1, Item number 3.

    This safety zone will be in effect from 10 a.m. on July 3, 2016 until 10:40 p.m. on July 4, 2016.

    Under the provisions of 33 CFR 165.1191, unauthorized persons or vessels are prohibited from entering into, transiting through, or anchoring in the safety zone during all applicable effective dates and times, unless authorized to do so by the PATCOM. Additionally, each person who receives notice of a lawful order or direction issued by an official patrol vessel shall obey the order or direction. The PATCOM is empowered to forbid entry into and control the regulated area. The PATCOM shall be designated by the Commander, Coast Guard Sector San Francisco. The PATCOM may, upon request, allow the transit of commercial vessels through regulated areas when it is safe to do so.

    This rule is issued under authority of 33 CFR 165.1191 and 5 U.S.C. 552(a). In addition to this notice in the Federal Register, the Coast Guard will provide the maritime community with extensive advance notification of the safety zone and its enforcement period via the Local Notice to Mariners.

    If the Captain of the Port determines that the regulated area need not be enforced for the full duration stated in this notice, a Broadcast Notice to Mariners may be used to grant general permission to enter the regulated area.

    Dated: April 15, 2016. Gregory G. Stump, Captain, U.S. Coast Guard, Captain of the Port San Francisco.
    [FR Doc. 2016-11130 Filed 5-10-16; 8:45 am] BILLING CODE 9110-04-P
    POSTAL SERVICE 39 CFR Part 601 Purchasing of Property and Services AGENCY:

    Postal ServiceTM.

    ACTION:

    Final rule.

    SUMMARY:

    The Postal Service is revising its purchasing regulations governing contract claims and disputes to modify and clarify the language concerning the right of appeal which must be included in the contracting officer's final decision with regard to a contract claim or dispute.

    DATES:

    Effective: May 11, 2016.

    ADDRESSES:

    Written inquiries may be addressed to Supply Management Infrastructure, USPS, Room 1141, 475 L'Enfant Plaza SW., Washington, DC 20260.

    FOR FURTHER INFORMATION CONTACT:

    Shelita V. Taylor, 202-268-4327.

    SUPPLEMENTARY INFORMATION:

    This document revises paragraph (g)(7) of 39 CFR 601.109, Contract claims and disputes. As revised, § 601.109(g)(7) will ensure that the contracting officer's final decision regarding a contract claim or dispute contains language that fully and accurately advises the contractor of the right and process to appeal that final decision to the Postal Service Board of Contract Appeals. As revised, this paragraph mandates that a supplier or other contractor must file a notice of appeal within ninety days from the date the contracting officer's final decision letter is received. This document also corrects the address of the USPS Judicial Officer Department's Electronic Filing System Web site.

    List of Subjects in 39 CFR Part 601

    Government procurement.

    Accordingly, for the reasons stated, 39 CFR part 601 is amended as follows:

    PART 601—PURCHASING OF PROPERTY AND SERVICES 1. The authority citation for 39 CFR part 601 continues to read as follows: Authority:

    39 U.S.C. 401, 404, 410, 411, 2008, 5001-5605.

    2. In § 601.109, revise paragraph (g)(7) to read as follows:
    § 601.109 Contract claims and disputes.

    (g) * * *

    (7) Wording of decisions. The contracting officer's final decision must contain the following paragraph: “This is the final decision of the contracting officer pursuant to the Contract Disputes Act of 1978 and the clause of your contract entitled Claims and Disputes. You may appeal this decision to the Postal Service Board of Contract Appeals by filing a notice of appeal within ninety days from the date you receive this decision. You may file the notice of appeal online through the USPS Judicial Officer Department's Electronic Filing System Web site located at https://uspsjoe.justware.com/JusticeWeb, or by mailing or otherwise furnishing the notice of appeal to the Postal Service Board of Contract Appeals. You also may appeal by mailing, or otherwise furnishing written notice of appeal to the contracting officer within ninety days from the date you receive this decision. The notice should identify the contract by number, reference this decision, and indicate that an appeal is intended. Alternatively, you may bring an action directly in the United States Court of Federal Claims within twelve months from the date you receive this decision.”

    Stanley F. Mires, Attorney, Federal Compliance.
    [FR Doc. 2016-11043 Filed 5-10-16; 8:45 am] BILLING CODE 7710-12-P
    DEPARTMENT OF HEALTH AND HUMAN SERVICES 45 CFR Parts 155 and 156 [CMS-9933-IFC] RIN 0938-AS87 Patient Protection and Affordable Care Act; Amendments to Special Enrollment Periods and the Consumer Operated and Oriented Plan Program AGENCY:

    Centers for Medicare & Medicaid Services (CMS), HHS.

    ACTION:

    Interim final rule with comment period.

    SUMMARY:

    This interim final rule with comment establishes provisions that alter the parameters of select special enrollment periods and that revise certain rules governing consumer operated and oriented plans (CO-OPs).

    DATES:

    Effective date: These regulations are effective on May 11, 2016, with the exception of the amendments to 45 CFR 155.420, which are effective on July 11, 2016.

    Comment date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on July 5, 2016.

    ADDRESSES:

    In commenting, please refer to file code CMS-9933-IFC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

    You may submit comments in one of four ways (please choose only one of the ways listed)

    1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the “Submit a comment” instructions.

    2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9933-IFC, P.O. Box 8016, Baltimore, MD 21244-8016.

    Please allow sufficient time for mailed comments to be received before the close of the comment period.

    3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9933-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period:

    a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

    (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

    b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

    Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

    For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

    FOR FURTHER INFORMATION CONTACT:

    Jeff Wu, (301) 492-4305, or Lindsey Murtagh, (301) 492-4106, for general information. Rachel Arguello, (301) 492-4263, for matters related to special enrollment periods. Kevin Kendrick, (301) 492-4134, for matters related to CO-OPs.

    SUPPLEMENTARY INFORMATION:

    Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to view public comments.

    Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

    I. Executive Summary

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended (the Affordable Care Act) enacted a set of reforms that make quality health insurance coverage and care more affordable and accessible to millions of Americans. These reforms include the creation of competitive marketplaces called Affordable Insurance Exchanges, or “Exchanges” (in this final rule, we also call an Exchange a Health Insurance MarketplaceSM, or MarketplaceSM1 ) through which qualified individuals and qualified employers can purchase health insurance coverage during open enrollment periods or special enrollment periods, if eligible. These Affordable Care Act reforms also include the establishment of a loan program to foster the creation of Consumer Operated and Oriented Plans (CO-OPs) to offer qualified health plans (QHPs) to individuals and small employers. In previous rulemaking, we have outlined the major provisions and parameters related to these programs.

    1 Health Insurance MarketplaceSM and MarketplaceSM are service marks of the U.S. Department of Health & Human Services.

    Section 1311(c)(6) of the Affordable Care Act establishes enrollment periods, including special enrollment periods for qualified individuals, for enrollment into QHPs through an Exchange. This interim final rule with comment amends the eligibility requirements of the special enrollment period for individuals who gain access to new QHPs as a result of a permanent move so that this special enrollment period is generally available only to those individuals who had minimum essential coverage prior to their permanent move. This change aligns the eligibility requirements with the intent of this special enrollment period (that is, to afford individuals the full range of plan options when they relocate), and promotes stability in the health insurance market. This interim final rule with comment does not alter the eligibility for special enrollment periods for (1) those being released from incarceration; (2) those moving to the United States from abroad; or (3) those who previously were in a non-Medicaid expansion State and ineligible for advance payments of the premium tax credit because of a household income below 100 percent of the Federal poverty level, and ineligible for Medicaid during the same timeframe, who make a permanent move to a State where they are newly eligible for advance payments of the premium tax credit.

    We are also eliminating the January 1, 2017 implementation deadline for an Exchange to offer advanced availability of the special enrollment period for certain individuals who gain access to new QHPs as a result of a permanent move; and for offering a new special enrollment period for loss of a dependent or for no longer being considered a dependent due to divorce, legal separation, or death. This leaves the implementation of both provisions at the option of the Exchange. We do not believe it is appropriate to require Exchanges to expand eligibility for an existing special enrollment period or offer a new special enrollment period when both could introduce additional uncertainty to the Exchange risk pool at this time.

    Section 1322 of the Affordable Care Act establishes the CO-OP program, which is a loan program that funds the establishment of private, non-profit, consumer-operated, consumer-oriented health plan issuers of QHPs. As with many new businesses entering complex, competitive markets, a number of the CO-OPs have encountered challenging market conditions in their early years. Although the Affordable Care Act appropriated $6 billion for the CO-OP program, $4.9 billion was subsequently rescinded, and there are no remaining funds available to award to these entities. In the absence of additional Federal loans to CO-OPs, many of these entities would benefit from the infusion of private capital to assist them in achieving long-term stability and competitive success in the market.

    In this interim final rule with comment, we amend certain CO-OP governance requirements to provide greater flexibility and facilitate private market transactions that can provide access to needed capital. These amendments will permit a CO-OP to recruit potential directors from a broader pool of qualified candidates. We also provide greater clarity with respect to what constitutes non-compliance with rules governing a CO-OP's business and the transactions into which it may enter. These changes will provide CO-OPs with flexibility common among private market health insurance issuers, and will support the financial viability of CO-OPs, while at the same time maintaining the fundamental member-governed, member-focused nature of the CO-OP program, and enabling CO-OPs to continue to benefit their enrollees.

    II. Background A. Legislative and Regulatory Overview

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010. The Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised several provisions of the Patient Protection and Affordable Care Act, was enacted on March 30, 2010. In this final rule, we refer to the two statutes collectively as the Affordable Care Act.

    Subtitles A and C of title I of the Affordable Care Act reorganized, amended, and added to the provisions of part A of title XXVII of the Public Health Service Act (PHS Act) relating to group health plans and health insurance issuers in the group and individual markets.

    Section 1311(c)(6)(C) of the Affordable Care Act directs the Secretary of HHS to require an Exchange to provide for special enrollment periods specified in section 9801 of the Internal Revenue Code of 1986 and other special enrollment periods under circumstances similar to such periods under part D of title XVIII of the Social Security Act.

    Section 1322 of the Affordable Care Act directs the Secretary to establish the CO-OP program to foster the creation of consumer-governed, private non-profit health insurance issuers to offer QHPs in the individual and small group markets in the States in which they are licensed. The CO-OP program, in addition to improving consumer choice and plan accountability, also seeks to promote integrated models of care and enhance competition in the Exchanges. Section 1322 establishes eligibility standards for the CO-OP program and terms for loans, and provides basic standards that organizations must meet to participate in this program and become a CO-OP, including market participation and governance requirements.

    1. Special Enrollment Periods

    In the July 15, 2011 Federal Register (76 FR 41865), we published a proposed rule establishing special enrollment periods for the individual Health Insurance Exchange. We implemented these special enrollment periods in a final rule published in the March 27, 2012 Federal Register (77 FR 18309) (Exchange Establishment Rule). In the January 22, 2013 Federal Register (78 FR 4594), we published a proposed rule amending certain special enrollment periods, including the special enrollment periods described in 45 CFR 155.420(d)(3) and (7). We finalized these rules in the July 15, 2013 Federal Register (78 FR 42321).

    In the June 19, 2013 Federal Register (78 FR 37032), we proposed to add a special enrollment period at 45 CFR 155.420(d)(10). We finalized this proposal in the Oct. 30, 2013 Federal Register (78 FR 65095). In the May 27, 2014 Federal Register (79 FR 30348), we published a proposed rule amending § 155.420(b), (c), (d)(4), (d)(5), (d)(9), (d)(10), and (e). We finalized these provisions in the May 27, 2014 Federal Register (79 FR 30348). In the October 1, 2014 Federal Register (79 FR 59138), we published a correcting amendment related to § 155.420(b).

    In the November 26, 2014 Federal Register (79 FR 70673), we proposed to amend § 155.420(b), (c), (d)(1), (d)(2), (d)(4), and (d)(6). We finalized these provisions in the February 27, 2015 Federal Register (80 FR 10866). In the July 7, 2015 Federal Register (80 FR 38653), we issued a correcting amendment to § 155.420(b)(d)(2). In the December 2, 2015 Federal Register (80 FR 75487) (proposed 2017 Payment Notice), we sought comment and data related to existing special enrollment periods, including data relating to the potential abuse of special enrollment periods. In the March 8, 2016 Federal Register (81 FR 12203) (2017 Payment Notice), we stated that in order to review the integrity of special enrollment periods, the Federally-facilitated Exchange (FFE) will conduct an assessment by collecting and reviewing documents from consumers to confirm their eligibility for the special enrollment periods under which they enrolled.

    2. CO-OP Program

    In the July 20, 2011 Federal Register (76 FR 43237), we published a proposed rule governing the CO-OP program (proposed CO-OP Rule). On December 13, 2011, we published the final CO-OP Rule (76 FR 77392).

    In the March 27, 2012 Federal Register, we published a final rule implementing components of the Exchanges and setting forth standards for eligibility for Exchanges (77 FR 18474) (Exchange Establishment Rule). This rule amended the regulations regarding the CO-OP program.

    B. Stakeholder Consultation and Input

    HHS consulted stakeholders on the policies related to implementation of the Affordable Care Act, including special enrollment periods and CO-OPs. We have held a number of listening sessions with consumers, providers, employers, health plans, the actuarial community, and State representatives, to gather public input. We consulted with stakeholders through regular meetings with the National Association of Insurance Commissioners, regular contact with States, and meetings with health insurance issuers, organizations participating in the CO-OP program, trade groups, consumer advocates, employers, and other interested parties. We have held a number of recent meetings with issuers (including CO-OPs), regulators, and consumer groups relating to the effects of special enrollment periods on the risk pool, and on CO-OPs' attempts to raise private capital. We considered all public input we received as we developed the policies in this interim final rule with comment.

    III. Provisions of the Interim Final Rule A. Special Enrollment Periods (§ 155.420)

    Special enrollment periods provide a critical pathway to coverage for qualified individuals who experience qualifying events and need to enroll in or change plans outside of the annual open enrollment period or during open enrollment with a coverage effective date earlier than generally provided during the open enrollment period. One such special enrollment period described in 45 CFR 155.420(d)(7) may be granted to a qualified individual or enrollee, or his or her dependent, who gains access to new QHPs as a result of a permanent move.

    As discussed in the Exchange Establishment Rule (77 FR 18310, 18392), the special enrollment period in § 155.420(d)(7) was intended to afford individuals the full range of plan options when they relocate, which maximizes consumer choice and increases competition in the health insurance market. However, this special enrollment period was never intended to provide an opportunity for enrollment in coverage where individuals make a permanent move solely for the purpose of gaining health coverage outside of the annual open enrollment period. Stakeholders have raised significant concerns that while such use of this special enrollment period may be consistent with the plain language of the rule, it is not aligned with the provision's intent. This use has the potential to destabilize the health insurance market by creating an opportunity for adverse selection where persons undertake a permanent move solely for the purpose of gaining health coverage, in which they would otherwise not be qualified to enroll. Because of concerns that unintended uses of the permanent move special enrollment period will lead to adverse selection and immediate, unexpected losses in the remaining months of this year, which could lead to significant premium increases or issuers exiting the market, we believe that action is needed as soon as possible, and delaying the rule revisions would be impracticable and contrary to the public interest.

    Therefore, we are amending the eligibility parameters for this special enrollment period by adding requirements in § 155.420(d)(7)(i) and (ii). In paragraph (i), we require that individuals be enrolled in minimum essential coverage as described in 26 CFR 1.5000A-1(b) for one or more days in the 60 days preceding the date of the permanent move in order to qualify for the special enrollment period based on a permanent move.

    The addition of paragraph (i) requires further amendments to the rule to maintain the availability of the permanent move special enrollment period for certain other individuals who should continue to be able to access this special enrollment period without the requirement of being previously enrolled in minimum essential coverage. Specifically, we make a necessary addition in paragraph (d)(7)(ii) to maintain eligibility for a special enrollment period for individuals previously living outside of the United States or in a United States territory who move to a location within the United States, so long as they seek to enroll in coverage within 60 days of completing their permanent move.

    In light of the addition of these new requirements, we are making a further change to § 155.420(d)(7) and to (d)(3) related to incarcerated individuals. As noted in the preamble to the Exchange Establishment Rule (77 FR 18392), qualified individuals newly released from incarceration are eligible for the special enrollment period afforded to individuals under the current version of paragraph (d)(7). However, paragraph (d)(7) as amended in this interim final rule no longer enables these individuals to qualify for the special enrollment period because the health care coverage offered to incarcerated individuals in correctional facilities is generally not considered minimum essential coverage. Incarcerated individuals are also not eligible for Exchange coverage.

    Therefore, we are amending paragraph § 155.420(d)(3) to include individuals who become newly eligible for a QHP due to a release from incarceration (other than incarceration pending disposition of charges), in addition to those who become newly eligible for a QHP by becoming a United States citizen or national or a lawfully present non-citizen already included in this paragraph. In so doing, we are removing the current language in paragraph (d)(3) that states that a qualified individual or his or her dependent “which was not previously a citizen, national, or lawfully present individual gains such status” and are replacing it with a cross reference to § 155.305(a)(1). This does not change the scope of the current special enrollment period and the population who may currently qualify. We are adding a cross reference to § 155.305(a)(2) for individuals who are no longer incarcerated, other than incarcerated pending disposition of charges.

    In order that, at their option, Exchanges may continue to offer advanced availability of the special enrollment period for those who become newly eligible for a QHP due to a release from incarceration now included in paragraph (d)(3), we are amending paragraph § 155.420(c)(2) to include this population. Should Exchanges exercise or already have exercised this option to offer advance availability to those who become newly eligible for a QHP due to a release from incarceration, the Exchange must ensure that the coverage effective date is on the first day of the month following the release from incarceration, as was required when this population was included in the special enrollment period in paragraph (d)(7) of this section. Accordingly, we are amending § 155.420(b)(2)(iv) to include those who become newly eligible for a QHP due to a release from incarceration now included in paragraph (d)(3).

    The amendment to § 155.420(d)(7) also makes the special enrollment period for a permanent move inaccessible to qualified individuals who were previously living in a non-Medicaid expansion State and, during the same timeframe, were ineligible for advance payments of the premium tax credit solely because of a household income below 100 percent of the Federal poverty level (FPL), but who become newly eligible for advance payments of the premium tax credit as a result of a permanent move to another State. By being previously ineligible for both Exchange coverage with advance payments of the premium tax credit (because of their household income) and Medicaid (solely because of the State's decision not to expand), these individuals likely would have been exempted from the requirement under section 5000A(e)(1) of the Code and its implementing regulations to maintain minimum essential coverage or eligible for an exemption from the minimum essential coverage requirement under 45 CFR 155.605(d) or (e), and therefore are unlikely to qualify for the special enrollment period for a permanent move, as amended. In order to continue to provide for a special enrollment period for these individuals, we are amending § 155.420(d)(6)(iv) to include individuals who were previously living in a non-Medicaid expansion State and, during the same timeframe, were ineligible for Medicaid, but who become newly eligible for advance payments of the premium tax credit as a result of a permanent move. This change secures the continued availability of a special enrollment period to qualified individuals who move out of a non-Medicaid expansion State to a State where they may newly qualify for advance payments premium tax credit, but who might no longer qualify for the special enrollment period under § 155.420(d)(7), as amended in this interim final rule, because they did not previously have minimum essential coverage for one or more days in the 60 days preceding the date of the permanent move.

    In addition, as discussed in the 2017 Payment Notice, we intend to conduct an assessment of QHP enrollments that were made through special enrollment periods in the FFE to ensure that consumers' eligibility for these special enrollment periods were properly determined. Until the FFE has collected and analyzed data on consumer eligibility for special enrollment periods and taken other actions to ensure that consumers are not inappropriately accessing and enrolling in coverage through existing special enrollment periods, we believe it is unnecessary and contrary to the public interest to require Exchanges to offer advanced availability of the special enrollment period in § 155.420(d)(7) or to implement the new special enrollment period in paragraph (d)(2)(ii) of this section because it could introduce additional uncertainty to the risk pool at this time.

    We also considered that information technology system resources are needed to implement these provisions by January 1, 2017, and are concerned that the requirement to meet the January 1, 2017, deadline could cause needless expenditures of Exchange funds for operational changes to the extent that we propose and finalize rule amendments that delete the requirement to provide by a specific date advance availability for the special enrollment periods under (d)(7) or offer the special enrollment periods under (d)(2)(ii) based on our current program integrity efforts. In light of the competing financial and operational priorities of Exchanges, we believe it is contrary to the public interest to require that Exchanges meet the January 1, 2017, deadline. We have therefore determined that there is a need to take immediate action to delete this future deadline, rather than engaging in notice and comment rulemaking on this change, in order to avoid the unnecessary expenditure of funds by Exchanges to comply with the January 1, 2017, implementation deadline. Therefore, we are amending the following special enrollment period provisions to leave the implementation timeline for advanced availability at the discretion of the Exchange.

    Section 155.420(c)(2) provides for advanced availability of the special enrollment period for a qualified individual or enrollee, or his or her dependent who gains access to new QHPs as a result of a permanent move as described in paragraph (d)(7) of this section, meaning that a qualified individual or enrollee, or his or her dependent, has 60 days before or after the triggering event (the permanent move) to select a QHP. Paragraph (c)(2) also provides that this advanced availability be available by January 1, 2017 or earlier, at the option of the Exchange. We are amending this paragraph to remove the requirement for Exchanges to offer advanced availability of the permanent move special enrollment period by January 1, 2017, which keeps this provision at the option of the Exchange.

    We also amend paragraph (d)(2)(ii), which provides for a special enrollment period for an enrollee who loses a dependent or is no longer considered a dependent due to divorce, legal separation, or death, to remove the requirement that Exchanges offer this special enrollment period by January 1, 2017. We note that, if a loss of a dependent or no longer being considered a dependent due to divorce, legal separation, or death results in a loss of minimum essential coverage, such individuals may qualify for the special enrollment period for loss of minimum essential coverage. Implementation of this provision remains at the option of the Exchange.

    We note that certain special enrollment periods in 45 CFR 155.420 are incorporated in the guaranteed availability regulations at § 147.104(b) and applied to issuers offering non-grandfathered individual coverage through or outside of the Exchange, and incorporated in the SHOP regulations at § 155.725(j) and § 156.285(b) and applied to QHP coverage offered through the SHOP. The changes to special enrollment periods in this interim final rule with comment therefore apply to the guaranteed availability and SHOP regulations, to the extent applicable.

    B. CO-OP Program

    Subpart F of part 156 of title 45 of the Code of Federal Regulations sets forth the standards applicable to the CO-OP Program. In this interim final rule with comment, we are making a number of changes to the rules governing CO-OPs to provide additional flexibility for CO-OP issuers to enter into strategic financial transactions with other entities, to improve the issuer's capital position and to further the ability of the program to facilitate the offering of competitive, high-quality health insurance on Exchanges that increases competition and consumer choice. Given the financial challenges faced by some CO-OPs recently, and the lack of opportunity for further Federal funding, we believe that these changes are needed as soon as possible. Furthermore, the CO-OPs have requested maximum flexibility in governance requirements to assist their efforts to enter into new, beneficial business relationships.

    1. Definitions (§ 156.505)

    In this interim final rule with comment, we are amending the definitions of “pre-existing issuer” and “representative” to permit CO-OPs increased flexibility to explore and advance business opportunities, and increase the pool of eligible candidates for their boards of directors. Both terms are used in provisions governing the standards for membership of a CO-OP board of directors. The amended definitions expand the universe of individuals eligible for membership on a CO-OP board of directors, while ensuring that appropriate standards remain in place to protect against conflicts of interest and insurance industry involvement and interference.

    The definition of the term “pre-existing issuer” is amended to limit the definition to State-licensed health insurance issuers that competed in the individual and small group commercial health insurance markets on July 16, 2009, as required by section 1322(c)(2)(A) of the Affordable Care Act).

    The definition of the term “representative” is revised to mean an officer, director, or trustee of an organization, or group of organizations; or a senior executive or high level representative of the Federal government, or a State or local government or a sub-unit thereof.

    Section 156.515(b)(2) (which we are amending in this interim final rule with comment) provides limitations on board membership that prohibit any agent or employee of a State government or a unit of State government from serving on a CO-OP's board of directors. This standard was established to codify the requirement in section 1322(e) of the Affordable Care Act, which states that no representative of any Federal, State or local government (or of any political subdivision or instrumentality thereof) and no representative of a person described in section 1322(c)(2)(A) (referring to entities that were health insurance issuers on July 16, 2009) may serve on the board of directors of a qualified nonprofit health insurance issuer or with a private purchasing council established under section 1322(d), and to ensure that board members are free of conflicts of interest that could arise from their dual roles as a government representative and a CO-OP board member. For example, a State elected official may act to serve political objectives influenced by established, State-regulated competitors of the CO-OP in the insurance market, rather than acting in the best interest of the CO-OP program. Insurance company employees may pose a similar risk of conflict of interest as government employees—a representative of a competitor may be tempted not to make governance decisions based solely on the best interests of the CO-OP and its members.

    The term “representative” is not statutorily defined for purposes of section 1322 of the Affordable Care Act. Based on experience in the early years of the CO-OP program, we believe the current regulatory definition is too broad, and captures individuals for whom these concerns regarding conflicts of interests are not warranted. Specifically, we do not believe it is necessary to include within the definition of representative government employees who are neither senior executives nor high- level representatives (that is, employees, agents, trustees, or other persons who possess the ability to decide organization-wide or governmental policies or goals), and individuals who are not officers, directors or trustees of an organization or groups of organizations. Although these individuals may be associated with a governmental entity or pre-existing issuer due to their employment relationship, they are unlikely to hold a position in which they would be expected or required to represent their employer's interests in their outside activities. We, therefore, believe it is a reasonable interpretation of the prohibition in section 1322(e) to exclude from the definition of representative individuals who are neither senior executives nor high-level representatives of a government unit, or an officer, director or trustee of an organization or group of organization. Furthermore, we are aware of at least one instance in which this prohibition prevented an individual from joining a CO-OP board of directors, despite the individual having significant expertise that would have been beneficial to the CO-OP and with no discernible conflict of interest arising from the individual's position as a State employee.

    Current regulations also prohibit board membership by any agent or employee of an entity that held an insurance license and was subject to State insurance law on July 16, 2009 (a “pre-existing issuer” under the regulations). Under the original definition of “pre-existing issuer,” this would prohibit participation from agents and employees of issuers that (1) do not compete in the markets for which CO-OPs were developed to bring competition (individual or small group health insurance markets), and (2) do not market any standard commercial health insurance available to the general public. However, employees of insurance companies that do not compete in the general commercial health insurance market also do not pose a clear or significant risk for conflicts of interest, and may have expertise that could be valuable to a CO-OP board. Therefore, exclusion of these groups of employees exceeds the purpose of the rule while unnecessarily restricting the available pool of qualified candidates for the CO-OP boards of directors. By amending the definition of “pre-existing issuer” to exclude issuers that do not compete in the individual or group health insurance markets, we narrow the exclusion so that employees of these companies may serve on CO-OP boards. We believe that the concept of a “pre-existing issuer” in the statute was intended to protect CO-OPs from conflicts of interest by barring persons associated with organizations that offer individual and group health insurance policies to the general public from participating on CO-OP boards of directors. This definition of “pre-existing issuer” is consistent with that intent. These revisions would permit representatives of licensees that market only Medicare, Medicaid, or other health insurance products that are not individual and small group insurance (for example, dental, vision, disability products) to sit on a CO-OP board.

    2. CO-OP Standards (§ 156.515)

    Under 45 CFR 156.515(b)(1), a CO-OP must be governed by a board of directors, with all of its directors elected by a majority vote of a quorum of the CO-OP's members that are age 18 or older, and the voting directors on the board must be members of the CO-OP. These requirements are based on the statutory requirement that the governance of a CO-OP be “subject to a majority vote of its members.”

    We are amending these standards to require that only a majority of directors be elected by the members and to remove the requirement that a majority of voting directors be members of the CO-OP. This revision allows entities offering loans, investments, and services to participate on the board of directors, as is common practice in the private sector, while maintaining the overall control of the board by the members of the CO-OP. We are making this change in response to program experience demonstrating that the inability to grant designated board positions to prospective partners or investors may create obstacles to potentially favorable business arrangements for CO-OPs. This amendment also provides opportunities for CO-OPs to enlist qualified individuals from outside their membership to participate in board governance. CO-OPs have experienced significant obstacles in identifying qualified and willing CO-OP members to serve on their boards of directors, in particular with regard to State requirements concerning industry experience and expertise that directors of insurance companies must possess. However, we believe that these changes will not alter the fundamental member-driven and member-governed nature of CO-OPs, since all of the CO-OP's directors will have a duty to further the CO-OP's goals, and since the membership of the CO-OP will retain control of a majority of the seats on the board of directors, thus ensuring that ultimate control will lie with directors responsible to the membership.

    Section 156.515(b)(2) establishes the standards the board must meet. Section 156.515(b)(2)(i) is revised to comport with proposed changes in the types of representatives permitted to sit on the board of directors while still retaining ethical, conflict of interest, and disclosure standards. We note that any fiduciary duties that exist under State law would continue to apply. Section 156.515(b)(2)(ii) is revised to provide that each director has one vote. Section 156.515(b)(2)(iv), which provided that positions on the board designated for individuals with specialized expertise, experience, or affiliation cannot constitute a majority of the board, is removed and reserved. Our intent in doing so is to increase flexibility for CO-OPs to include on their board of directors members with suitable expertise, to improve governance and potentially facilitate strategic transactions. Section 156.515(b)(2)(v) is revised to permit representatives of State or local governments or organizations described in § 156.510(b)(1)(i) to participate on CO-OP boards of directors, provided the CO-OP does not issue policies in the State in which the government representative serves or the organization operates. This amendment is also intended to provide CO-OPs with increased flexibility regarding board membership, as well as to increase business opportunities for CO-OPs.

    We also note that the requirements of § 156.515(c)(1) have at times posed an obstacle to potential strategic partners of CO-OPs. That paragraph states that at least two-thirds of the policies issued by a CO-OP must be QHPs issued in the individual and small group markets in States in which a CO-OP is licensed. This regulatory requirement is based on a statutory requirement that “substantially all” of the “activities” of CO-OPs consist of issuing QHPs in the individual and small group markets. We understand that considerable uncertainty accompanies the implementation of business plans, particularly for new entrants to complex, dynamic markets, and in relation to a standard that measures voluntary actions taken by third parties. Section 1322 of the Affordable Care Act requires CO-OP loan repayment if this substantially all standard is not met and the CO-OP fails to correct such failure within a reasonable period of time. HHS clarifies that, if a CO-OP fails to meet the standard in a given year, it would not necessarily require immediate loan repayment as long as the CO-OP is in compliance with 45 CFR 156.515(c)(2); has a specific plan and timetable to meet the two-thirds requirement, and acts with demonstrable diligence and good faith to meet the standard. A CO-OP must ultimately come back into compliance with the two-thirds standard in future years.

    This clarification reflects HHS's experience in the early years of the CO-OP program, when some CO-OPs were deterred from implementing plans to enter into potentially beneficial new lines of business, such as Medicare or Medicaid products or ancillary lines such as dental or vision, out of concern that they could inadvertently, temporarily, end up with less than two-thirds of policies issued being QHPs in the individual and small group markets.

    3. Loan Terms (§ 156.520)

    Under § 156.520(f), a CO-OP may not convert or sell to a for-profit or non-consumer operated entity, or undertake a transaction that would result in the CO-OP implementing a governance structure that does not meet our regulatory standards. We note that the question has arisen as to whether this provision prohibits the sale or conversion of policies to a non-CO-OP issuer in connection with the wind-down of a CO-OP. If a CO-OP is out of compliance with this provision, the CO-OP will cease to be a qualified non-profit health insurance issuer, and certain rights under the CO-OP Loan Agreement will become available to CMS, including the right to accelerate repayment of the loans or terminate the Loan Agreement itself. However, in the appropriate circumstances, to preserve coverage for enrollees upon the insolvency of the issuer, notwithstanding those remedies, we recognize that a CO-OP could elect to enter into such a transaction.

    We seek comment on these provisions.

    C. Risk Adjustment

    Based on our experience operating the 2014 benefit year risk adjustment program, HHS has become aware that certain issuers, including some new, rapidly growing, and smaller issuers, owed substantial risk adjustment charges that they did not anticipate. HHS has had a number of discussions with issuers and State regulators on ways to help ease issuers' transition to the new health insurance markets and the effects of unanticipated risk adjustment charge amounts. We believe that a robust risk adjustment program that addresses new market dynamics due to rating reforms and guaranteed issue is critical to the proper functioning of these new markets. However, we are sympathetic to these concerns and recognize that States are the primary regulators of their insurance markets. We encourage States to examine whether any local approaches, under State legal authority, are warranted to help ease this transition to new health insurance markets. Additionally, we will also continue to seek ways to improve the risk adjustment methodology. We updated the risk adjustment models in the 2017 Payment Notice, and we are exploring future improvements to the HHS risk adjustment methodology.

    IV. Waiver of Proposed Rulemaking and Delay in Effective Date

    Under the Administrative Procedure Act (APA) (5 U.S.C. 551, et seq.), a notice of proposed rulemaking and an opportunity for public comment are generally required before promulgation of a regulation. We also ordinarily provide a 30-day delay in the effective date of the provisions of a rule in accordance with the APA (5 U.S.C. 553(d)), which requires a 30-day delayed effective date, unless the rule is a major rule and subject to the 60-day delayed effective date required by the Congressional Review Act (5 U.S.C. 801(a)(3)) for major rules.

    However, the procedure can be waived if the agency, for good cause, finds that notice and public comment and delay in effective date are impracticable, unnecessary, or contrary to the public interest and incorporates a statement of the finding and its reasons in the rule issued. 5 U.S.C. 553(d)(3); 5 U.S.C. 808(2).

    HHS has determined that issuing this regulation in proposed form, such that it would not become effective until after public comments are submitted, considered and responded to in a final rule, would be impracticable and contrary to the public interest.

    Regarding the amendments to special enrollment periods, HHS has determined that taking immediate action to amend the parameters of the special enrollment period for qualified individuals, enrollees, or their dependents who gain access to new QHPs as a result of a permanent move, so that it is aligned with the provision's intent, is imperative to guarding against adverse selection and gaming of the permanent move special enrollment period. Immediate action is also necessary to assuring issuer confidence in the appropriate pricing to account for the Exchange risk pool. This issuer confidence is necessary to maintain robust issuer participation in and competition on the Exchanges and to encourage affordability of coverage for enrollees and the continuity of care that is supported by the continued availability of plans on the Exchanges that were available in the previous year. Therefore, HHS has determined that delaying the effective date of the special enrollment period regulatory changes to allow for proposed rulemaking and comment is contrary to the public interest because consumers would be negatively impacted absent robust participation by issuers and by the risk of insurance rate increases that can result from unchecked adverse selection.

    In addition, HHS has determined it needs to take immediate action to remove the January 1, 2017 implementation deadline for (1) offering advance availability of the special enrollment period for qualified individuals who gain access to new QHPs as a result of a permanent move and (2) for offering the special enrollment period for losing a dependent or no longer being considered a dependent due to divorce, legal separation, or death. Postponing this change to allow for proposed rulemaking and comment could result in unnecessary expenditures of dollars by Exchanges on information technology system builds to comply with deadlines that may not be implemented if HHS's current study of special enrollment periods leads to removal of the January 2017 implementation date. If a State is permitted under a no cost extension of its 1311 grant funding to use those funds for establishment activities, including those related to special enrollment periods, it is possible this could also result in the unnecessary expenditure of Federal grant funds. Therefore, delaying action to remove this implementation deadline is contrary to the public interest because it could lead to the unnecessary expenditure of State and possibly Federal funds.

    We also believe that it would be impracticable and contrary to the public interest to delay the implementation of the amendments to the CO-OP program regulations. A large fraction of the CO-OPs have ceased operations due to financial conditions and other issues in the past year. The amendments in this rule are intended to enhance the ability of CO-OPs to attract investors or develop new relationships or products that we anticipate will support their short- and long-term financial viability. We believe having the flexibility provided by these amendments may help some CO-OPs engage in new opportunities, and have determined that it would not be in the public interest to delay implementation of this rule. Specifically, we believe it is essential that these regulation changes be effective by the summer of 2016 when, due to the prevailing business cycle, CO-OPs, regulators, and HHS must determine whether a CO-OP will be in a position to enter open enrollment for plan year 2017, and develop and operationalize forms and rates accordingly.

    HHS has determined the continued viability of CO-OPs and their participation in open enrollment for plan year 2017 is important to encouraging competition in the individual and small group markets. Because no additional Federal loan funds can be awarded, and all awarded funds have been disbursed for most CO-OPs, a large number of CO-OPs are seeking to stabilize their balance sheets this summer. In order for CO-OPs to benefit from the governance changes described in this interim final rule with comment, those changes must be implemented immediately. Therefore, HHS has determined that delaying the effective date of the regulatory changes to allow for proposed rulemaking, comment or a delayed effective date would be detrimental to the public interest, as markets with healthy competition are essential to consumer choice of affordable coverage options. In addition, by permitting a broader group of people to serve as board members, the rule relieves a restriction on how CO-OPs may operate, which also justifies waiver of the delay in effective date.

    We find good cause to waive the notice of proposed rulemaking and to issue this final rule on an interim basis. In addition, with respect to the provisions regarding CO-OPs, we find good cause to waive the 30-day delay in the effective date for this interim final rule with comment. Finally, with respect to the provisions regarding CO-OPs, we also find alternate justification for waiving the 30-day delay in effective date. These provisions will be effective on May 11, 2016. The amendments regarding special enrollment periods will be effective on July 11, 2016. The delay in the effective date for these amendments will provide Exchanges with time to operationalize these amendments. We are providing a 60-day public comment period.

    V. Collection of Information Requirements

    This document does not impose information collection requirements, that is, reporting, recordkeeping or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

    VI. Response to Comments

    Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the “DATES” section of this preamble and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document.

    VII. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2).

    Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any one year).

    We do not anticipate that the amendments to the parameters of the special enrollment period for a permanent move in 45 CFR 155.420(d)(7), combined with the amendments to the special enrollment periods in paragraphs (d)(3) and (d)(6)(iv), will reduce the availability of a special enrollment period to those individuals who should qualify under the provision's original intent, and we believe that the effect of the amendments will result in closer alignment with earlier regulatory impact estimates. We seek comment and data on the impact of these amendments on the actual use of special enrollment period by individuals who would previously have qualified for the permanent move special enrollment period.

    Although most of the original $6 billion appropriated for the CO-OP program has been rescinded (as mentioned above), the program has issued significant sums to its borrowers. The total loan awards for currently operating CO-OPs is as follows:

    CO-OP Name State Current obligations HealthyCT, Inc. CT $127,980,768 Land of Lincoln Mutual Health Insurance Company IL 160,154,812 Minuteman Health, Inc. MA, NH 156,442,995 Evergreen Health Cooperative, Inc. MD 65,450,900 Maine Community Health Options ME 132,316,124 Montana Health Cooperative MT, ID 85,019,688 Freelancers Consumer Operated and Oriented Program of New Jersey, Inc. NJ 109,074,550 New Mexico Health Connections NM 77,317,782 Coordinated Health Mutual, Inc. OH 129,225,604 Community Care of Oregon, Inc. OR 56,656,900 Common Ground Healthcare Cooperative WI 107,739,354 Total 11 1,207,379,477

    With respect to the changes to the CO-OP program that we are implementing, we do not have any data available to estimate the likely number or magnitude of capital-raising transactions that may result from our changes. Directionally, we expect the changes to facilitate the raising of additional capital for some number of CO-OPs, and that the additional capital cushion will strengthen the financial base and allow those CO-OPs to better weather financial stress including both the types of market-wide and CO-OP specific issues that led to wind-downs in 2015. We seek comments and any supporting data that may shed light on that potential impact.

    We have concluded that this rule does not reach the economic threshold of $100 million or more in any one year, and therefore is not considered a major rule with economically significant effects.

    The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), requires agencies to prepare an initial regulatory flexibility analysis to describe the impact of this interim final rule with comment on small entities, unless the head of the agency can certify that the rule will not have a significant economic impact on a substantial number of small entities. For purposes of the Regulatory Flexibility Act, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the Regulatory Flexibility Act because we have determined, and the Secretary certifies, that this interim final rule with comment would not have a significant economic impact on a substantial number of small entities.

    In addition, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the Regulatory Flexibility Act. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this interim final rule with comment would not have a significant impact on the operations of a substantial number of small rural hospitals.

    Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits and take certain other actions before issuing any rule that includes any Federal mandate that may result in expenditures in any 1 year by State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2016, that threshold is approximately $146 million. This interim final rule with comment does not establish Federal mandates that would result in expenditures in any 1 year of more than $146 million by State, local, or Tribal government, in the aggregate, or by the private sector.

    Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates an interim final rule with comment that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. This interim final rule with comment does not impose substantial direct costs on State and local governments or preempt State law. However, we believe the rule has Federalism implications. In the amendments regarding the CO-OP program, we have amended a prohibition on participation on CO-OP board of directors that previously prevented any State employee from participating to allow certain State employees who are unlikely to have a potential conflict of interest to participate. In removing the January 1, 2017 implementation deadline for (1) offering advance availability of the special enrollment period for qualified individuals who gain access to new QHPs as a result of a permanent move and (2) for offering the special enrollment period for losing a dependent or no longer being considered a dependent due to divorce, legal separation, or death, we leave implementation at the option of Exchanges, including State Exchanges.

    This interim final rule with comment is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can take effect, the Federal agency promulgating the rule shall submit to each House of the Congress and to the Comptroller General a report containing a copy of the rule along with other specified information, and has been transmitted to Congress and the Comptroller General for review.

    List of Subjects 45 CFR Part 155

    Administrative practice and procedure, Advertising, Brokers, Conflict of interest, Consumer protection, Grant administration, Grant programs—health, Health care, Health insurance, Health maintenance organizations (HMO), Health records, Hospitals, Indians, Individuals with disabilities, Intergovernmental relations, Loan programs—health, Medicaid, Organization and functions (Government agencies), Public assistance programs, Reporting and recordkeeping requirements, Technical assistance, Women and youth.

    45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory Committees, Brokers, Conflict of interests, Consumer protection, Grant programs—health, Grants administration, Health care, Health insurance, Health maintenance organizations (HMO), Health records, Hospitals, Indians, Individuals with disabilities, Loan programs—health, Medicaid, Organization and functions (Government agencies), Public assistance programs, Reporting and recordkeeping requirements, State and local governments, Sunshine Act, Technical assistance, Women, Youth.

    For the reasons set forth in the preamble, the Department of Health and Human Services amends 45 CFR parts 155 and 156 as set forth below:

    PART 155—EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED STANDARDS UNDER THE AFFORDABLE CARE ACT 1. The authority citation for part 155 continues to read as follows: Authority:

    Title I of the Affordable Care Act, sections 1301, 1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334, 1402, 1411, 1412, 1413, Public Law 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 18081-18083).

    2. Section 155.420 is amended by revising paragraphs (b)(2)(iv), (c)(2), (d)(2)(ii), (d)(3), (d)(6)(iv), and (d)(7) to read as follows:
    § 155.420 Special enrollment periods.

    (b) * * *

    (2) * * *

    (iv) If a consumer loses coverage as described in paragraph (d)(1) or (d)(6)(iii) of this section, gains access to a new QHP as described in paragraph (d)(7) of this section, becomes newly eligible for enrollment in a QHP through the Exchange in accordance with § 155.305(a)(2) as described in paragraph (d)(3) of this section, or becomes newly eligible for advance payments of the premium tax credit in conjunction with a permanent move as described in paragraph (d)(6)(iv) of this section, if the plan selection is made on or before the day of the triggering event, the Exchange must ensure that the coverage effective date is on the first day of the month following the date of the triggering event. If the plan selection is made after the date of the triggering event, the Exchange must ensure that coverage is effective in accordance with paragraph (b)(1) of this section or on the first day of the following month, at the option of the Exchange.

    (c) * * *

    (2) Advanced availability. A qualified individual or his or her dependent who is described in paragraph (d)(1) or (d)(6)(iii) of this section has 60 days before or after the triggering event to select a QHP. At the option of the Exchange, a qualified individual or his or her dependent who is described in paragraph (d)(7) of this section; who is described in paragraph (d)(6)(iv) of this section and becomes newly eligible for advance payments of the premium tax credit as a result of a permanent move to a new State; or who is described in paragraph (d)(3) of this section and becomes newly eligible for enrollment in a QHP through the Exchange because he or she newly satisfies the requirements under § 155.305(a)(2), has 60 days before or after the triggering event to select a QHP.

    (d) * * *

    (2) * * *

    (ii) At the option of the Exchange, the enrollee loses a dependent or is no longer considered a dependent through divorce or legal separation as defined by State law in the State in which the divorce or legal separation occurs, or if the enrollee, or his or her dependent, dies.

    (3) The qualified individual, or his or her dependent, becomes newly eligible for enrollment in a QHP through the Exchange because he or she newly satisfies the requirements under § 155.305(a)(1) or (2);

    (6) * * *

    (iv) A qualified individual who was previously ineligible for advance payments of the premium tax credit solely because of a household income below 100 percent of the FPL and who, during the same timeframe, was ineligible for Medicaid because he or she was living in a non-Medicaid expansion State, who either experiences a change in household income or moves to a different State resulting in the qualified individual becoming newly eligible for advance payments of the premium tax credit;

    (7) The qualified individual or enrollee, or his or her dependent, gains access to new QHPs as a result of a permanent move and either—

    (i) Had minimum essential coverage as described in 26 CFR 1.5000A-1(b) for one or more days during the 60 days preceding the date of the permanent move, or

    (ii) Was living outside of the United States or in a United States territory at the time of the permanent move;

    PART 156—HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES 3. The authority citation for part 156 continues to read as follows: Authority:

    Title I of the Affordable Care Act, sections 1301-1304, 1311-1312, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, and 1412, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, 26 U.S.C. 36B, and 31 U.S.C. 9701).

    4. Section 156.505 is amended by revising the definitions of “pre-existing issuer” and “representative” to read as follows:
    § 156.505 Definitions.

    Pre-existing issuer means a health insurance issuer licensed by a State regulator that marketed individual or group health insurance benefit plans (other than Medicare or Medicaid Managed Care plans) on July 16, 2009.

    Representative means an officer, director, or trustee of an organization, or group of organizations; or a senior executive or high-level representative of the Federal government, or a State or local government or a sub-unit thereof.

    5. Section 156.515 is amended by: a. Revising paragraphs (b)(1)(i) through (v), (b)(2)(i), (ii), (iii), and (v); b. Removing paragraph (b)(1)(vi); and c. Removing and reserving paragraph (b)(2)(iv).

    The revisions read as follows:

    § 156.515 CO-OP standards.

    (b) * * *

    (1) * * *

    (i) The CO-OP must be governed by an operational board with a majority of directors elected by a majority vote of a quorum of the CO-OP's members that are age 18 or older;

    (ii) All members age 18 or older must be eligible to vote for each of the directors on the organization's operational board subject to a vote of the members under paragraph (b)(1)(i) of this section;

    (iii) Each member age 18 or older must have one vote in each election for each director subject to a vote of the members under paragraph (b)(1)(i) of this section in that election;

    (iv) The first elected directors of the organization's operational board must be elected no later than one year after the effective date on which the organization provides coverage to its first member; the entire operational board must be elected or in place, and in full compliance with paragraph (b)(1)(i) of this section, no later than two years after the same date;

    (v) Elections of the directors on the organization's operational board subject to a vote of the members under paragraph (b)(1)(i) of this section must be contested so that the total number of candidates for contested seats on the operational board exceeds the number of contested seats for such directors, except in cases where a seat is vacated mid-term due to death, resignation, or removal.

    (2) * * *

    (i) Each director must meet ethical, conflict-of-interest, and disclosure standards;

    (ii) Each director has one vote;

    (iii) Positions on the board of directors may be designated for individuals with specialized expertise, experience, or affiliation (for example, providers, employers, and unions); and

    (iv) [Reserved]

    (v) Limitation on government and issuer participation. No representative of any Federal, State or local government (or of any political subdivision or instrumentality thereof) and no representative of any organization described in § 156.510(b)(1)(i) (in the case of a representative of a State or local government or organization described in § 156.510(b)(1)(i), with respect to a State in which the CO-OP issues policies), may serve on the CO-OP's formation board or as a director on the organization's operational board.

    Dated: May 5, 2016. Andrew M. Slavitt, Acting Administrator, Centers for Medicare & Medicaid Services. Dated: May 5, 2016 Sylvia M. Burwell, Secretary, Department of Health and Human Services.
    [FR Doc. 2016-11017 Filed 5-6-16; 4:15 pm] BILLING CODE 4120-01-P
    DEPARTMENT OF HEALTH AND HUMAN SERVICES 45 CFR Part 1330 RIN 0985-AA12 National Institute on Disability, Independent Living, and Rehabilitation Research AGENCY:

    National Institute on Disability, Independent Living, and Rehabilitation Research; Administration for Community Living; HHS.

    ACTION:

    Final rule.

    SUMMARY:

    This rule implements the Workforce Innovation and Opportunity Act of 2014 and reflects the transfer of the National Institute on Disability, Independent Living, and Rehabilitation Research (NIDILRR) from the Department of Education to the Department of Health and Human Services (HHS). The previous regulations were issued by the Department of Education. The rulemaking consolidates the NIDILRR regulations into a single part, aligns the regulations with the current statute and HHS policies, and provides guidance to NIDILRR grantees.

    DATES:

    These final regulations are effective July 1, 2016.

    FOR FURTHER INFORMATION CONTACT:

    Greg Pugh, Administration for Community Living, telephone (202) 795-7422 (Voice). This is not a toll-free number. This document will be made available in alternative formats upon request.

    SUPPLEMENTARY INFORMATION:

    I. Discussion of Final Rule

    The Workforce Innovation and Opportunity Act of 2014 (“WIOA,” Pub. L. 113-128), signed into law on July 22, 2014, included significant changes to Title II of the Rehabilitation Act of 1973. The first of these is the insertion of a new name, the National Institute on Disability, Independent Living, and Rehabilitation Research (“NIDILRR,” which was previously the National Institute on Disability and Rehabilitation Research). WIOA also relocates NIDILRR from the Department of Education to the Administration for Community Living (“ACL”) of the Department of Health and Human Services. As part of the transfer, the Administrator of ACL (Administrator) drafted a Notice of Proposed Rulemaking that was published on December 21, 2015, to implement the Workforce Innovation and Opportunity Act of 2014 and reflect the transfer of the National Institute on Disability, Independent Living, and Rehabilitation Research from the Department of Education to the Department of Health and Human Services.

    ACL received 13 unduplicated comments during the public comment period from individuals, state agencies, and organizations representing disability, rehabilitation, and aging constituencies. ACL has read and considered each of the comments received. We respond here to the most-commonly-received comments and those that we believe require further discussion. Several comments raised issues that are specific to the commenter. Responding to such comments is beyond the scope of the final regulation. Nevertheless, we encourage commenters with individualized questions to contact NIDILRR directly at 202-401-4634—Option 5.

    Many of the comments expressed broad general support for the rule and the broader transfer of NIDILRR to the Administration for Community Living. Commenters expressed their support of the consolidation of existing NIDILRR regulations and alignment with HHS policies, a major goal of this rulemaking. Others expressed their approval of the elimination of unnecessary language from the regulatory text, while at the same time maintaining existing Department of Education language where it makes programmatic sense to do so. Finally, multiple commenters wrote in support of the inclusion of the stages of research, as well as the new stages of development.

    While no commenters expressed general opposition to the promulgation of the rule, several expressed their concerns about specific provisions of the proposed rule. We made changes to the regulatory text based on the comments as discussed below and we fixed a few non-substantive technical errors in the regulatory text. In addition, it has come to our attention that a selection criterion used at the Department of Education related to the quality of a proposed project's design was inadvertently omitted from this rule. This criterion is extremely valuable to the evaluation of applications for certain NIDILRR projects, and we have therefore included it verbatim at § 1330.24(p) as one of the criteria the Director may consider in evaluating an application. Other than the changes discussed below, we adopt our discussion of the rule in the Notice of Proposed Rulemaking published December 21, 2015 (80 FR 79283).

    A. Funding Out of Rank Order in Field-Initiated Competitions

    Comment: Six commenters (five organizations and one individual) raised concerns about a proposed change to § 1330.25. The proposed regulation gives the NIDILRR director authority to fund out of rank order in field-initiated competitions when there is an opportunity to fund a project of significant interest to the agency. Concerns ranged from the change giving too much authority to political appointees to the potential undermining of the scientific integrity of the research process. Suggestions ranged from dropping this proposed change in the regulation to increasing the scoring threshold for use of the provision or to creating a requirement for a formal explanation by the NIDILRR director justifying the proposed change.

    Response: NIDILRR appreciates the concerns expressed by these commenters especially the focus on impartial peer review and its role in maintaining the scientific integrity of NIDILRR's research portfolio. Our goal in suggesting this change was to provide an opportunity for the Director to select applications that address critical agency goals in circumstances where these applications have high scores but would not be funded in a strictly rank order framework. NIDILRR has long had the ability to fund out of rank order, and though it was rarely used, we added the 80 percent threshold in an effort to ensure the quality of NIDILRR-funded research. NIDILRR has expanded our field-initiated research opportunities in recent years, and we think that clarifying the requirements for funding out of rank order will ensure this quality, while also allowing for funding of compelling research opportunities. In such cases where an application may have otherwise gone unfunded in a strict rank-order process, we believe that the Director should have the ability to fund highly promising studies, while setting a minimum threshold for quality assurance and providing for public notification.

    After careful consideration of the concerns raised by the commenters, as well as a review of past applications, NIDILRR proposes to increase the threshold before funding out of rank order can be considered to a score of 85 points or above. We believe, based upon decades of staff experience with the grant review process, that this number strikes a reasonable balance between providing the Director the flexibility to fund applications which are uniquely promising and ensuring that all NIDILRR-funded research projects are of the quality and rigor for which NIDILRR is known. In addition, the regulation has been amended to require a public notification by the Director of any decision to fund out of rank order. Should it become advisable to raise this threshold further, we may revisit this threshold in the future. We take these steps to clarify our commitment to conducting rigorous peer review.

    B. Publication of Funding Opportunities and Application Instructions

    Comment: In light of the new regulation's elimination of specific funding application instructions, two commenters suggested that NIDILRR update its Web site to provide clear information to applicants on funding opportunities and on the process of submitting applications.

    Response: NIDILRR shares these commenters' commitment to ensuring that potential grantees have adequate access to information on NIDILRR's research priorities and application processes. To this end, we are publishing funding forecast documents with links to necessary application information on the ACL Web site, and will endeavor at all times to maximize the transparency and wide dissemination of funding opportunities and application instructions.

    C. Stages of Development

    Comment: One commenter, while supporting the stages of development in § 1330.5, expressed concern that the rule doesn't make clear that the technology transfer plan requirement does not sufficiently convey the complexity of supply and demand and the behaviors of consumers and other stakeholders in their decisions to adopt and use technology.

    Response: The stages of development provide an organizational framework to guide prospective applicants in preparing their technical proposals. The stages are not prescriptive. For this reason, we believe that identifying the relevant stage(s) of development will allow the peer review process to better determine the extent to which proposed activities to facilitate and measure product adoption are necessary and appropriate and to determine the extent to which applicants understand contextual factors that might impact product adoption.

    D. Disability Advisory Panels and Reviewer Training

    Comment: One organization made a number of suggestions related to NIDILRR's peer review process as described in § 1330.22. This commenter recommended that NIDILRR form advisory panels with members with diverse disabilities, including physical, sensory, intellectual, and mental disabilities, to be assigned to each peer review panel to ensure that disability perspectives are considered in the funding decision.

    In addition, the commenter suggested reviewer training related to consistent weighting of scores, minimizing personal biases of reviewers, and reviewing and scoring application attachments. The commenter also suggested that NIDILRR provide training to the disability advisory panels to ensure that personal likes and dislikes of the reviewers not enter into the scoring.

    Response: NIDILRR strongly supports a diversity of perspectives on peer review panels and makes every effort to include reviewers who have disabilities as well as subject-matter expertise relevant to the research or development topic. We are constantly seeking to recruit new, qualified individuals with disabilities for these purposes. We require our peer reviewers to attend an orientation session and, if they are new to our system, participate in training sessions to ensure that they understand the technical requirements of the process. NIDILRR staff monitors each panel to ensure that the review is carried out in a professional manner and further to ensure that each application is treated fairly.

    To support the importance of research and development focused on the needs of individuals with disabilities, NIDILRR has already added a requirement that applicants must obtain input from individuals with disabilities and other stakeholders in shaping proposed research or development activities. NIDILRR is also finalizing approval of its Disability, Independent Living, and Rehabilitation Research Advisory Council (DILRRAC) which adheres to a statutory requirement that more than 50% of its membership be comprised of individuals with disabilities. We believe that this committee will provide valuable guidance regarding ways that we can improve the relevance of NIDILRR's research to individuals with disabilities. We are confident that all of these steps will address the commenters concerns without adding significant administrative burden and expense to the peer review process.

    E. Collaboration

    Comment: Two commenters suggested additions to the peer review criterion on collaboration in § 1330.24(k). Both suggested more specific requirements for collaboration with local and national consumer organizations, and one also included a recommendation for requiring meaningful collaboration with other relevant agencies, organizations, or institutions. In addition, one of the commenters suggested weighting the collaboration criterion more heavily.

    Response: NIDILRR strongly agrees that it is important to seek appropriate collaboration where relevant to the specific research or development project being proposed. To this end, we have long had a collaboration review element which is required for many funding priorities. We believe that this requirement is adequate, and that to require it of all research or development projects would be misguided, as collaboration may not be relevant for the research topic or stage of research or development being proposed.

    Specific weighting of review criteria is not prescribed by regulation so as to allow weighting as appropriate to the purpose and goals of each funding priority. More specific regulatory language on weighting would significantly limit NIDILRR's ability to match individual criteria with the topic of the priority at hand.

    F. Notification of Review Scores and Comments

    Comment: Two commenters suggested the insertion into regulation a requirement that applicants will receive reviewer scores and comments within 30 days of NIDILRR decisions.

    Response: This is already a part of NIDILRR's grants management policy, and we make every effort to ensure that notification of scores and comments is provided within a 30 day timeframe. We believe that to specifically require this in regulation would be counter to the stated objectives of consolidating and simplifying the regulatory language, to which many commenters responded very favorably.

    G. Posting of Applicant Scores

    Comment: One commenter suggested that NIDILRR post a list of applicants and aggregate scores on its Web site at the conclusion of a competition.

    Response: NIDILRR's goal is to fund rigorous and relevant research, as determine by an independent panel of individuals with subject-specific expertise and with knowledge of and sensitivity to the needs of individuals with disabilities. We ask these reviewers to provide detailed and thoughtful comments on the proposals they review, and we send this feedback to applicants in an effort to help build capacity in disability and rehabilitation research. We do not believe that listing unsuccessful applicants and their scores would further this goal, and believe that doing so would be contrary to HHS grants policy with regard to applicant privacy.

    H. Meaning of “Product”

    Comment: One organization raised several questions about the meaning of the term “product” in our discussion of stages of development, specifically requesting that NIDILRR define the term and what it includes. A related comment recommended that NIDILRR provide clarification to the concept of “proof of product” to ensure that it includes functional requirements such as accessibility and usability or market viability requirements such as price or performance. This commenter also suggested that NIDILRR elaborate on its expectations of the attributes associated with the stages of development. Finally, there was one comment asking that there be consistent use of the term product in the document.

    Response: NIDILRR carefully considered these comments which helped us think about the extent to which we wanted to make the definition of “product” to be enumerative or non-enumerative and to allow for changes in conceptualization over time. Our conclusion is that flexibility is needed and beneficial. To this end, we are defining products as potentially encompassing but not necessarily limited to models, methods, tools, applications, and devices. Applicants can associate proposed products to these types or clarify and defend why proposed products lie outside of these types. Finally, we agree that it would contribute to clarity to use the term, “product” consistently in the document, and we have made this change accordingly.

    I. Removal of “Scientific” From Peer Review Panels

    Comment: A commenter suggested that NIDILRR remove the term “scientific” from the description of its peer review panels.

    Response: NIDILRR's authorizing statute specifically requires the NIDILRR Director to provide for scientific review of all applications over which the Director has authority. 29 U.S.C. 762(f)(1). Given the statutory requirement, NIDILRR feels that it must adhere to this standard which confirms Congressional intent to ensure that NIDILRR carry out its peer review so that scientific expertise supports rigorous review that help ensures that NIDILRR funds the research that is likely to generate findings that will help improve the lives of individuals with disabilities. However, NIDILRR also notes that this section of the statute references inclusion of expertise regarding needs of individuals with disabilities and their families. To this end, we make every effort to have peer review panels that balance scientific expertise with knowledge relevant to individuals with disabilities and their families.

    J. Role of the Director

    Comment: One organization asked for clarification of the role of the Director in conducting evaluation of applications for NIDILRR funding, specifically inquiring whether the Director has sole discretion over the review.

    Response: As stated in § 1330.21, the NIDILRR Director is required to refer each application to a peer review panel that reviews the application using the applicable peer review criteria as defined in § 1330.23. The ranking of the applications by the peer review panels determines which applicants are awarded funds, subject to special considerations in § 1330.25.

    K. Role of the Director, Consistency

    Comment: One commenter pointed out that, in § 1330.24(d), the reference to Secretary should refer to the NIDILRR Director for consistency with the rest of the section.

    Response: We concur, and have corrected the regulatory text accordingly.

    L. Applications Address the Needs of Individuals With Diverse Backgrounds

    Comment: One commenter suggested that the language in § 1330.11 be changed so that the Director must require that applicants demonstrate how they will address the needs of individuals with disabilities from minority backgrounds.

    Response: NIDILRR appreciates the concern behind this comment, and this language is often inserted into NIDILRR priorities. However, we feel that it is too prescriptive to require that the Director must do this in every instance, and that making this an absolute requirement will restrict the ability of the Director to establish criteria that support topics of research initiatives that may not benefit from such a requirement.

    M. Composition of Panels

    Comment: One commenter suggested that the language in § 1330.22 be changed so that the Director shall take into account factors including does the peer review panels include knowledgeable individuals with disabilities or disability advocates such as parents or family members and does the panel include individuals from diverse populations.

    Response: NIDILRR appreciates the concern behind this comment. However, we feel that it is too prescriptive to require that the Director shall do this in every instance and that making this an absolute requirement will restrict the ability of the Director to establish peer review panels that best match the topics of proposed research proposals.

    II. Impact Analysis A. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives, and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). The Department has determined that this rule is consistent with the priorities and principles set forth in Executive Order 12866. Executive Order 12866 encourages agencies, as appropriate, to provide the public with meaningful participation in the regulatory process. The rulemaking implements the Workforce Innovation and Opportunity Act of 2014. In developing the final rule, we considered input we received from the public including stakeholders. This final rule is not being treated as a “significant regulatory action” under section 3(f)(1) of Executive Order 12866. Accordingly, the final rule has not been reviewed by the Office of Management and Budget.

    B. Regulatory Flexibility Analysis

    The Secretary certifies under 5 U.S.C. 605(b), the Regulatory Flexibility Act (Pub. L. 96-354), that this regulation will not have a significant economic impact on a substantial number of small entities. The primary impact of this regulation is on entities applying for NIDILRR funding opportunities, specifically researchers, States, public or private agencies and organizations, institutions of higher education, and Indian tribes and tribal organizations. The regulation does not have a significant economic impact on these entities. This rule is in fact significantly shorter than, but with identical compliance requirements to, the regulations it replaces.

    C. Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in the Federal Register and solicit public comment before an information collection request is submitted to the Office of Management and Budget (OMB) for review and approval. We are not introducing any new information collections in this rule however, nor revising reporting requirements.

    D. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires that a covered agency prepare a budgetary impact statement before promulgating a rule that includes any Federal mandate that may result in expenditures by State, local, or Tribal governments, in the aggregate, or by the private sector, of $100 million, adjusted for inflation, or more in any one year.

    If a covered agency must prepare a budgetary impact statement, section 205 further requires that it select the most cost-effective and least burdensome alternatives that achieves the objectives of the rule and is consistent with the statutory requirements. In addition, section 203 requires a plan for informing and advising any small government that may be significantly or uniquely impacted by a rule.

    ACL has determined that this rule does not result in the expenditure by State, local, and Tribal governments in the aggregate, or by the private sector of more than $100 million in any one year.

    E. Congressional Review

    This rule is not a major rule as defined in 5 U.S.C. Section 804(2).

    F. Assessment of Federal Regulations and Policies on Families

    Section 654 of the Treasury and General Government Appropriations Act of 1999 requires Federal agencies to determine whether a policy or regulation may affect family well-being. If the agency's conclusion is affirmative, then the agency must prepare an impact assessment addressing seven criteria specified in the law. These regulations do not have an impact on family well-being as defined in the legislation.

    G. Executive Order 13132

    Executive Order 13132 on “federalism” was signed August 4, 1999. The purposes of the Order are: “. . . to guarantee the division of governmental responsibilities between the national government and the States that was intended by the Framers of the Constitution, to ensure that the principles of federalism established by the Framers guide the executive departments and agencies in the formulation and implementation of policies, and to further the policies of the Unfunded Mandates Reform Act . . .”

    The Department certifies that this rule does not have a substantial direct effect on States, on the relationship between the Federal government and the States, or on the distribution of power and responsibilities among the various levels of government.

    ACL is not aware of any specific State laws that would be preempted by the adoption of the regulation.

    List of Subjects in 45 CFR Part 1330

    Grant programs, Research, Scholarships and fellowships.

    Dated: April 20, 2016. Kathy Greenlee, Administrator, Administration for Community Living. Approved: May 2, 2016. Sylvia M. Burwell, Secretary, Department of Health and Human Services.

    For the reasons stated in the preamble, the U.S. Department of Health and Human Services amends 45 CFR subchapter C by adding part 1330 to read as follows:

    PART 1330—NATIONAL INSTITUTE FOR DISABILITY, INDEPENDENT LIVING, AND REHABILITATION RESEARCH Subpart A—Disability, Independent Living, and Rehabilitation Research Projects and Centers Program Sec. 1330.1 General. 1330.2 Eligibility for assistance and other regulations and guidance. 1330.3 Definitions. 1330.4 Stages of research. 1330.5 Stages of development. Subpart B—Requirements for Awardees 1330.10 General requirements for awardees. 1330.11 Individuals with disabilities from minority backgrounds. Subpart C—Selection of Awardees 1330.20 Peer review purpose. 1330.21 Peer review process. 1330.22 Composition of peer review panel. 1330.23 Evaluation process. 1330.24 Selection criteria. 1330.25 Additional considerations for field-initiated priorities. Subpart D—Disability, Independent Living, and Rehabilitation Research Fellowships 1330.30 Fellows program. Subpart E—Special Projects and Demonstrations for Spinal Cord Injuries 1330.40 Spinal cord injuries program. Authority:

    29 U.S.C. 709, 3343.

    Subpart A—Disability, Independent Living, and Rehabilitation Research Projects and Centers Program
    § 1330.1 General.

    (a) The Disability, Independent Living, and Rehabilitation Research Projects and Centers Program provides grants to establish and support:

    (1) The following Disability, Independent Living, and Rehabilitation Research and Related Projects:

    (i) Disability, Independent Living, and Rehabilitation Research Projects;

    (ii) Field-Initiated Projects;

    (iii) Advanced Rehabilitation Research Training Projects; and

    (2) The following Disability, Independent Living, and Rehabilitation Research Centers:

    (i) Rehabilitation Research and Training Centers;

    (ii) Rehabilitation Engineering Research Centers.

    (b) The purpose of the Disability, Independent Living, and Rehabilitation Research Projects and Centers Program is to plan and conduct research, development, demonstration projects, training, dissemination, and related activities, including international activities, to:

    (1) Develop methods, procedures, and rehabilitation technology, that maximize the full inclusion and integration into society, employment, education, independent living, family support, and economic and social self-sufficiency of individuals with disabilities, especially individuals with the most severe disabilities; and

    (2) Improve the effectiveness of services authorized under the Rehabilitation Act of 1973, 29 U.S.C. 701 et seq.

    § 1330.2 Eligibility for assistance and other regulations and guidance.

    (a) Unless otherwise stated in this part or in a determination by the NIDILRR Director, the following entities are eligible for an award under this program:

    (1) States.

    (2) Public or private agencies, including for-profit agencies.

    (3) Public or private organizations, including for-profit organizations.

    (4) Institutions of higher education.

    (5) Indian tribes and tribal organizations.

    (b) Other sources of regulation which may apply to awards under this part include but are not limited to:

    (1) 45 CFR part 16—Procedures of the Departmental Grant Appeals Board.

    (2) 45 CFR part 46—Protection of Human Subjects.

    (3) 45 CFR part 75—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards.

    (4) 2 CFR parts 376 and 382—Nonprocurement Debarment and Suspension and Requirements for Drug-Free Workplace (Financial Assistance).

    (5) 45 CFR part 80—Nondiscrimination under Programs Receiving Federal Assistance through the Department of Health and Human Services—Effectuation of title VI of the Civil Rights Act of 1964.

    (6) 45 CFR part 81—Practice and Procedure for Hearings under part 80 of this title.

    (7) 45 CFR part 84—Nondiscrimination on the Basis of Handicap in Programs or Activities Receiving Federal Financial Assistance.

    (8) 45 CFR part 86—Nondiscrimination on the Basis of Sex in Education Programs or Activities Receiving Federal Financial Assistance.

    (9) 45 CFR part 87—Equal Treatment of Faith-Based Organizations.

    (10) 45 CFR part 91—Nondiscrimination on the Basis of Age in Programs or Activities Receiving Federal Financial Assistance from HHS.

    (11) 45 CFR part 93—New Restrictions on Lobbying.

    § 1330.3 Definitions.

    As used in this part:

    (a) Secretary means the Secretary of the Department of Health and Human Services.

    (b) Administrator means the Administrator of the Administration for Community Living.

    (c) Director means the Director of the National Institute on Disability, Independent Living, and Rehabilitation Research.

    (d) Research is classified on a continuum from basic to applied:

    (1) Basic research is research in which the investigator is concerned primarily with gaining new knowledge or understanding of a subject without reference to any immediate application or utility.

    (2) Applied research is research in which the investigator is primarily interested in developing new knowledge, information, or understanding which can be applied to a predetermined rehabilitation problem or need.

    (e) Development activities use knowledge and understanding gained from research to create materials, devices, systems, or methods beneficial to the target population, including design and development of prototypes and processes.

    (f) Products encompass models, methods, tools, applications, and devices, but are not necessarily limited to these types.

    § 1330.4 Stages of research.

    For any Disability, Independent Living, and Rehabilitation Research Projects and Centers Program competition, the Department may require in the application materials for the competition that the applicant identify the stage(s) of research in which it will focus the work of its proposed project or center. The four stages of research are:

    (a) Exploration and discovery mean the stage of research that generates hypotheses or theories through new and refined analyses of data, producing observational findings and creating other sources of research-based information. This research stage may include identifying or describing the barriers to and facilitators of improved outcomes of individuals with disabilities, as well as identifying or describing existing practices, programs, or policies that are associated with important aspects of the lives of individuals with disabilities. Results achieved under this stage of research may inform the development of interventions or lead to evaluations of interventions or policies. The results of the exploration and discovery stage of research may also be used to inform decisions or priorities;

    (b) Intervention development means the stage of research that focuses on generating and testing interventions that have the potential to improve outcomes for individuals with disabilities. Intervention development involves determining the active components of possible interventions, developing measures that would be required to illustrate outcomes, specifying target populations, conducting field tests, and assessing the feasibility of conducting a well-designed intervention study. Results from this stage of research may be used to inform the design of a study to test the efficacy of an intervention;

    (c) Intervention efficacy means the stage of research during which a project evaluates and tests whether an intervention is feasible, practical, and has the potential to yield positive outcomes for individuals with disabilities. Efficacy research may assess the strength of the relationships between an intervention and outcomes, and may identify factors or individual characteristics that affect the relationship between the intervention and outcomes. Efficacy research can inform decisions about whether there is sufficient evidence to support “scaling-up” an intervention to other sites and contexts. This stage of research may include assessing the training needed for wide-scale implementation of the intervention, and approaches to evaluation of the intervention in real-world applications; and

    (d) Scale-up evaluation means the stage of research during which a project analyzes whether an intervention is effective in producing improved outcomes for individuals with disabilities when implemented in a real-world setting. During this stage of research, a project tests the outcomes of an evidence-based intervention in different settings. The project examines the challenges to successful replication of the intervention, and the circumstances and activities that contribute to successful adoption of the intervention in real-world settings. This stage of research may also include well-designed studies of an intervention that has been widely adopted in practice, but lacks a sufficient evidence base to demonstrate its effectiveness.

    § 1330.5 Stages of development.

    For any Disability, Independent Living, and Rehabilitation Research Projects and Centers Program competition, the Department may require in the notice inviting applications for the competition that the applicant identify the stage(s) of development in which it will focus the work of its proposed project or center. The three stages of development are:

    (a) Proof of concept means the stage of development where key technical challenges are resolved. Stage activities may include recruiting study participants, verifying product requirements; implementing and testing (typically in controlled contexts) key concepts, components, or systems, and resolving technical challenges. A technology transfer plan is typically developed and transfer partner(s) identified; and plan implementation may have started. Stage results establish that a product concept is feasible.

    (b) Proof of product means the stage of development where a fully-integrated and working prototype, meeting critical technical requirements is created. Stage activities may include recruiting study participants, implementing and iteratively refining the prototype, testing the prototype in natural or less-controlled contexts, and verifying that all technical requirements are met. A technology transfer plan is typically ongoing in collaboration with the transfer partner(s). Stage results establish that a product embodiment is realizable.

    (c) Proof of adoption means the stage of development where a product is substantially adopted by its target population and used for its intended purpose. Stage activities typically include completing product refinements; and continued implementation of the technology transfer plan in collaboration with the transfer partner(s). Other activities include measuring users' awareness of the product, opinion of the product, decisions to adopt, use, and retain products; and identifying barriers and facilitators impacting product adoption. Stage results establish that a product is beneficial.

    Subpart B—Requirements for Awardees
    § 1330.10 General requirements for awardees.

    (a) In carrying out a research activity under this program, an awardee must:

    (1) Identify one or more hypotheses or research questions;

    (2) Based on the hypotheses or research question identified, perform an intensive systematic study in accordance with its approved application directed toward:

    (i) New or full scientific knowledge; or

    (ii) Understanding of the subject or problem being studied.

    (b) In carrying out a development activity under this program, an awardee must create, using knowledge and understanding gained from research, models, methods, tools, systems, materials, devices, applications, or standards that are adopted by and beneficial to the target population. Development activities span one or more stages of development.

    (c) In carrying out a training activity under this program, an awardee shall conduct a planned and systematic sequence of supervised instruction that is designed to impart predetermined skills and knowledge.

    (d) In carrying out a demonstration activity under this program, an awardee shall apply results derived from previous research, testing, or practice to determine the effectiveness of a new strategy or approach.

    (e) In carrying out a utilization activity under this program, a grantee must relate research findings to practical applications in planning, policy making, program administration, and delivery of services to individuals with disabilities.

    (f) In carrying out a dissemination activity under this program, a grantee must systematically distribute information or knowledge through a variety of ways to potential users or beneficiaries.

    (g) In carrying out a technical assistance activity under this program, a grantee must provide expertise or information for use in problem-solving.

    § 1330.11 Individuals with disabilities from minority backgrounds.

    (a) If the director so indicates in the application materials or elsewhere, an applicant for assistance under this program must demonstrate in its application how it will address, in whole or in part, the needs of individuals with disabilities from minority backgrounds.

    (b) The approaches an applicant may take to meet this requirement may include one or more of the following:

    (1) Proposing project objectives addressing the needs of individuals with disabilities from minority backgrounds.

    (2) Demonstrating that the project will address a problem that is of particular significance to individuals with disabilities from minority backgrounds.

    (3) Demonstrating that individuals from minority backgrounds will be included in study samples in sufficient numbers to generate information pertinent to individuals with disabilities from minority backgrounds.

    (4) Drawing study samples and program participant rosters from populations or areas that include individuals from minority backgrounds.

    (5) Providing outreach to individuals with disabilities from minority backgrounds to ensure that they are aware of rehabilitation services, clinical care, or training offered by the project.

    (6) Disseminating materials to or otherwise increasing the access to disability information among minority populations.

    Subpart C—Selection of Awardees
    § 1330.20 Peer review purpose.

    The purpose of peer review is to insure that:

    (a) Those activities supported by the National Institute on Disability, Independent Living, and Rehabilitation Research (NIDILRR) are of the highest scientific, administrative, and technical quality; and

    (b) Activity results may be widely applied to appropriate target populations and rehabilitation problems.

    § 1330.21 Peer review process.

    (a) The Director refers each application for an award governed by these regulations in this part to a peer review panel established by the Director.

    (b) Peer review panels review applications on the basis of the applicable selection criteria in § 1330.23.

    § 1330.22 Composition of peer review panel.

    (a) The Director selects as members of a peer review panel scientists and other experts in disability, independent living, rehabilitation or related fields who are qualified, on the basis of training, knowledge, or experience, to give expert advice on the merit of the applications under review.

    (b) The scientific peer review process shall be conducted by individuals who are not Department of Health and Human Services employees.

    (c) In selecting members to serve on a peer review panel, the Director may take into account the following factors:

    (1) The level of formal scientific or technical education completed by potential panel members.

    (2) The extent to which potential panel members have engaged in scientific, technical, or administrative activities appropriate to the category of applications that the panel will consider; the roles of potential panel members in those activities; and the quality of those activities.

    (3) The recognition received by potential panel members as reflected by awards and other honors from scientific and professional agencies and organizations outside the Department.

    (4) Whether the panel includes knowledgeable individuals with disabilities, or parents, family members, guardians, advocates, or authorized representatives of individuals with disabilities.

    (5) Whether the panel includes individuals from diverse populations.

    § 1330.23 Evaluation process.

    (a) The Director selects one or more of the selection criteria to evaluate an application:

    (1) The Director establishes selection criteria based on statutory provisions that apply to the Program which may include, but are not limited to:

    (i) Specific statutory selection criteria;

    (ii) Allowable activities;

    (iii) Application content requirements; or

    (iv) Other pre-award and post-award conditions; or

    (2) The Director may use a combination of selection criteria established under paragraph (a)(1) of this section and selection criteria from § 1330.24 to evaluate a competition.

    (3) For Field-Initiated Projects, the Director does not consider § 1330.24(b) (Responsiveness to the Absolute or Competitive Priority) in evaluating an application.

    (b) In considering selection criteria in § 1330.24, the Director selects one or more of the factors listed in the criteria, but always considers the factor in § 1330.24(n) regarding members of groups that have traditionally been underrepresented based on race, color, national origin, gender, age, or disability.

    (c) The maximum possible score for an application is 100 points.

    (d) In the application package or a notice published in the Federal Register, the Director informs applicants of:

    (1) The selection criteria chosen and the maximum possible score for each of the selection criteria; and

    (2) The factors selected for considering the selection criteria and if points are assigned to each factor, the maximum possible score for each factor under each criterion. If no points are assigned to each factor, the Director evaluates each factor equally.

    (e) For all instances in which the Director chooses to allow field-initiated research and development, the selection criteria in § 1330.25 will apply, including the requirement that the applicant must achieve a score of 85 percent or more of maximum possible points.

    § 1330.24 Selection criteria.

    In addition to criteria established under § 1330.23(a)(1), the Director may select one or more of the following criteria in evaluating an application:

    (a) Importance of the problem. In determining the importance of the problem, the Director considers one or more of the following factors:

    (1) The extent to which the applicant clearly describes the need and target population.

    (2) The extent to which the proposed activities further the purposes of the Rehabilitation Act.

    (3) The extent to which the proposed activities address a significant need of individuals with disabilities.

    (4) The extent to which the proposed activities address a significant need of rehabilitation service providers.

    (5) The extent to which the proposed activities address a significant need of those who provide services to individuals with disabilities.

    (6) The extent to which the applicant proposes to provide training in a rehabilitation discipline or area of study in which there is a shortage of qualified researchers, or to a trainee population in which there is a need for more qualified researchers.

    (7) The extent to which the proposed project will have beneficial impact on the target population.

    (b) Responsiveness to an absolute or competitive priority. In determining the application's responsiveness to the application package or the absolute or competitive priority published in the Federal Register, the Director considers one or more of the following factors:

    (1) The extent to which the applicant addresses all requirements of the absolute or competitive priority.

    (2) The extent to which the applicant's proposed activities are likely to achieve the purposes of the absolute or competitive priority.

    (c) Design of research activities. In determining the extent to which the design is likely to be effective in accomplishing the objectives of the project, the Director considers one or more of the following factors:

    (1) The extent to which the research activities constitute a coherent, sustained approach to research in the field, including a substantial addition to the state-of-the-art.

    (2) The extent to which the methodology of each proposed research activity is meritorious, including consideration of the extent to which:

    (i) The proposed design includes a comprehensive and informed review of the current literature, demonstrating knowledge of the state-of-the-art;

    (ii) Each research hypothesis or research question, as appropriate, is theoretically sound and based on current knowledge;

    (iii) Each sample is drawn from an appropriate, specified population and is of sufficient size to address the proposed hypotheses or research questions, as appropriate, and to support the proposed data analysis methods;

    (iv) The source or sources of the data and the data collection methods are appropriate to address the proposed hypotheses or research questions and to support the proposed data analysis methods;

    (v) The data analysis methods are appropriate;

    (vi) Implementation of the proposed research design is feasible, given the current state of the science and the time and resources available;

    (vii) Input of individuals with disabilities and other key stakeholders is used to shape the proposed research activities; and

    (viii) The applicant identifies and justifies the stage of research being proposed and the research methods associated with the stage.

    (3) The extent to which anticipated research results are likely to satisfy the original hypotheses or answer the original research questions, as appropriate, and could be used for planning additional research, including generation of new hypotheses or research questions, where applicable.

    (4) The extent to which the stage of research is identified and justified in the description of the research project(s) being proposed.

    (d) Design of development activities. In determining the extent to which the project design is likely to be effective in accomplishing project objectives, the Director considers one or more of the following factors:

    (1) The extent to which the proposed project identifies a significant need and a well-defined target population for the new or improved product;

    (2) The extent to which the proposed project methodology is meritorious, including consideration of the extent to which:

    (i) The proposed project shows awareness of the state-of-the-art for current, related products;

    (ii) The proposed project employs appropriate concepts, components, or systems to develop the new or improved product;

    (iii) The proposed project employs appropriate samples in tests, trials, and other development activities;

    (iv) The proposed project conducts development activities in appropriate environment(s);

    (v) Input from individuals with disabilities and other key stakeholders is obtained to establish and guide proposed development activities; and

    (vi) The applicant identifies and justifies the stage(s) of development for the proposed project; and activities associated with each stage.

    (3) The new product will be developed and tested in an appropriate environment.

    (e) Design of demonstration activities. In determining the extent to which the design of demonstration activities is likely to be effective in accomplishing the objectives of the project, the Director considers one or more of the following factors:

    (1) The extent to which the proposed demonstration activities build on previous research, testing, or practices.

    (2) The extent to which the proposed demonstration activities include the use of proper methodological tools and theoretically sound procedures to determine the effectiveness of the strategy or approach.

    (3) The extent to which the proposed demonstration activities include innovative and effective strategies or approaches.

    (4) The extent to which the proposed demonstration activities are likely to contribute to current knowledge and practice and be a substantial addition to the state-of-the-art.

    (5) The extent to which the proposed demonstration activities can be applied and replicated in other settings.

    (f) Design of training activities. In determining the extent to which the design is likely to be effective in accomplishing the objectives of the project, the Director considers one or more of the following factors:

    (1) The extent to which the proposed training materials are likely to be effective, including consideration of their quality, clarity, and variety.

    (2) The extent to which the proposed training methods are of sufficient quality, intensity, and duration.

    (3) The extent to which the proposed training content:

    (i) Covers all of the relevant aspects of the subject matter; and

    (ii) If relevant, is based on new knowledge derived from research activities of the proposed project.

    (4) The extent to which the proposed training materials, methods, and content are appropriate to the trainees, including consideration of the skill level of the trainees and the subject matter of the materials.

    (5) The extent to which the proposed training materials and methods are accessible to individuals with disabilities.

    (6) The extent to which the applicant's proposed recruitment program is likely to be effective in recruiting highly qualified trainees, including those who are individuals with disabilities.

    (7) The extent to which the applicant is able to carry out the training activities, either directly or through another entity.

    (8) The extent to which the proposed didactic and classroom training programs emphasize scientific methodology and are likely to develop highly qualified researchers.

    (9) The extent to which the quality and extent of the academic mentorship, guidance, and supervision to be provided to each individual trainee are of a high level and are likely to develop highly qualified researchers.

    (10) The extent to which the type, extent, and quality of the proposed research experience, including the opportunity to participate in advanced-level research, are likely to develop highly qualified researchers.

    (11) The extent to which the opportunities for collegial and collaborative activities, exposure to outstanding scientists in the field, and opportunities to participate in the preparation of scholarly or scientific publications and presentations are extensive and appropriate.

    (g) Design of dissemination activities. In determining the extent to which the design is likely to be effective in accomplishing the objectives of the project, the Director considers one or more of the following factors:

    (1) The extent to which the content of the information to be disseminated:

    (i) Covers all of the relevant aspects of the subject matter; and

    (ii) If appropriate, is based on new knowledge derived from research activities of the project.

    (2) The extent to which the materials to be disseminated are likely to be effective and usable, including consideration of their quality, clarity, variety, and format.

    (3) The extent to which the methods for dissemination are of sufficient quality, intensity, and duration.

    (4) The extent to which the materials and information to be disseminated and the methods for dissemination are appropriate to the target population, including consideration of the familiarity of the target population with the subject matter, format of the information, and subject matter.

    (5) The extent to which the information to be disseminated will be accessible to individuals with disabilities.

    (h) Design of utilization activities. In determining the extent to which the design of utilization activities is likely to be effective in accomplishing the objectives of the project, the Director considers one or more of the following factors:

    (1) The extent to which the potential new users of the information or technology have a practical use for the information and are likely to adopt the practices or use the information or technology, including new devices.

    (2) The extent to which the utilization strategies are likely to be effective.

    (3) The extent to which the information or technology is likely to be of use in other settings.

    (i) Design of technical assistance activities. In determining the extent to which the design of technical assistance activities is likely to be effective in accomplishing the objectives of the project, the Director considers one or more of the following factors:

    (1) The extent to which the methods for providing technical assistance are of sufficient quality, intensity, and duration.

    (2) The extent to which the information to be provided through technical assistance covers all of the relevant aspects of the subject matter.

    (3) The extent to which the technical assistance is appropriate to the target population, including consideration of the knowledge level of the target population, needs of the target population, and format for providing information.

    (4) The extent to which the technical assistance is accessible to individuals with disabilities.

    (j) Plan of operation. In determining the quality of the plan of operation, the Director considers one or more of the following factors:

    (1) The adequacy of the plan of operation to achieve the objectives of the proposed project on time and within budget, including clearly defined responsibilities, and timelines for accomplishing project tasks.

    (2) The adequacy of the plan of operation to provide for using resources, equipment, and personnel to achieve each objective.

    (k) Collaboration. In determining the quality of collaboration, the Director considers one or more of the following factors:

    (1) The extent to which the applicant's proposed collaboration with one or more agencies, organizations, or institutions is likely to be effective in achieving the relevant proposed activities of the project.

    (2) The extent to which agencies, organizations, or institutions demonstrate a commitment to collaborate with the applicant.

    (3) The extent to which agencies, organizations, or institutions that commit to collaborate with the applicant have the capacity to carry out collaborative activities.

    (l) Adequacy and reasonableness of the budget. In determining the adequacy and the reasonableness of the proposed budget, the Director considers one or more of the following factors:

    (1) The extent to which the costs are reasonable in relation to the proposed project activities.

    (2) The extent to which the budget for the project, including any subcontracts, is adequately justified to support the proposed project activities.

    (3) The extent to which the applicant is of sufficient size, scope, and quality to effectively carry out the activities in an efficient manner.

    (m) Plan of evaluation. In determining the quality of the plan of evaluation, the Director considers one or more of the following factors:

    (1) The extent to which the plan of evaluation provides for periodic assessment of progress toward:

    (i) Implementing the plan of operation; and

    (ii) Achieving the project's intended outcomes and expected impacts.

    (2) The extent to which the plan of evaluation will be used to improve the performance of the project through the feedback generated by its periodic assessments.

    (3) The extent to which the plan of evaluation provides for periodic assessment of a project's progress that is based on identified performance measures that:

    (i) Are clearly related to the intended outcomes of the project and expected impacts on the target population; and

    (ii) Are objective, and quantifiable or qualitative, as appropriate.

    (n) Project staff. In determining the quality of the project staff, the Director considers the extent to which the applicant encourages applications for employment from persons who are members of groups that have traditionally been underrepresented based on race, color, national origin, gender, age, or disability. In addition, the Director considers one or more of the following:

    (1) The extent to which the key personnel and other key staff have appropriate training and experience in disciplines required to conduct all proposed activities.

    (2) The extent to which the commitment of staff time is adequate to accomplish all the proposed activities of the project.

    (3) The extent to which the key personnel are knowledgeable about the methodology and literature of pertinent subject areas.

    (4) The extent to which the project staff includes outstanding scientists in the field.

    (5) The extent to which key personnel have up-to-date knowledge from research or effective practice in the subject area covered in the priority.

    (o) Adequacy and accessibility of resources. In determining the adequacy and accessibility of the applicant's resources to implement the proposed project, the Director considers one or more of the following factors:

    (1) The extent to which the applicant is committed to provide adequate facilities, equipment, other resources, including administrative support, and laboratories, if appropriate.

    (2) The quality of an applicant's past performance in carrying out a grant.

    (3) The extent to which the applicant has appropriate access to populations and organizations representing individuals with disabilities to support advanced disability, independent living and clinical rehabilitation research.

    (4) The extent to which the facilities, equipment, and other resources are appropriately accessible to individuals with disabilities who may use the facilities, equipment, and other resources of the project.

    (p) Quality of the project design. In determining the quality of the design of the proposed project, the Director considers one or more of the following factors:

    (1) The extent to which the goals, objectives, and outcomes to be achieved by the proposed project are clearly specified and measurable.

    (2) The quality of the methodology to be employed in the proposed project.

    (3) The extent to which the design of the proposed project includes a thorough, high-quality review of the relevant literature, a high-quality plan for project implementation, and the use of appropriate methodological tools to ensure successful achievement of project objectives.

    (4) The extent to which the design of the proposed project is appropriate to, and will successfully address, the needs of the target population or other identified needs.

    (5) The extent to which the proposed development efforts include adequate quality controls and, as appropriate, repeated testing of products.

    (6) The extent to which the proposed project will be coordinated with similar or related efforts, and with other appropriate community, State, and Federal resources.

    (7) The extent to which the design of the proposed project reflects up-to-date knowledge from research and effective practice.

    (8) The extent to which the proposed project represents an exceptional approach to the priority or priorities established for the competition.

    § 1330.25 Additional considerations for field-initiated priorities.

    (a) The Director reserves funds to support field-initiated applications funded under this part when those applications have been awarded points totaling 85 percent or more of the maximum possible points under the procedures described in § 1330.23.

    (b) In making a final selection from applications received when NIDILRR uses field-initiated priorities, the Director may consider whether one of the following conditions is met and, if so, use this information to fund an application out of rank order:

    (1) The proposed project represents a unique opportunity to advance rehabilitation and other knowledge to improve the lives of individual with disabilities.

    (2) The proposed project complements or balances research activity already planned or funded by NIDILRR through its annual priorities or addresses the research in a new and promising way.

    (c) If the Director funds an application out of rank order under paragraph (b) of this section, the public will be notified through a notice on the NIDILRR Web site or through other means deemed appropriate by the Director.

    Subpart D—Disability, Independent Living, and Rehabilitation Research Fellowships
    § 1330.30 Fellows program.

    (a) The purpose of this program is to build research capacity by providing support to highly qualified individuals, including those who are individuals with disabilities, to perform research on rehabilitation, independent living, and other experiences and outcomes of individuals with disabilities.

    (b) The eligibility requirements for the Fellows program are as follows:

    (1) Only individuals are eligible to be recipients of Fellowships.

    (2) Any individual is eligible for assistance under this program who has training and experience that indicate a potential for engaging in scientific research related to rehabilitation and independent living for individuals with disabilities.

    (3) This program provides two categories of Fellowships: Merit Fellowships and Distinguished Fellowships.

    (i) To be eligible for a Distinguished Fellowship, an individual must have seven or more years of research experience in subject areas, methods, or techniques relevant to disability and rehabilitation research and must have a doctorate, other terminal degree, or comparable academic qualifications.

    (ii) The Director awards Merit Fellowships to individuals in earlier stages of their careers in research. To be eligible for a Merit Fellowship, an individual must have either advanced professional training or experience in independent study in an area which is directly pertinent to disability and rehabilitation.

    (c) Fellowships will be awarded in the form of a grant to eligible individuals.

    (d) In making a final selection of applicants to support under this program, the Director considers the extent to which applicants present a unique opportunity to effect a major advance in knowledge, address critical problems in innovative ways, present proposals which are consistent with the Institute's Long-Range Plan, build research capacity within the field, or complement and significantly increases the potential value of already planned research and related activities.

    Subpart E—Special Projects and Demonstrations for Spinal Cord Injuries
    § 1330.40 Spinal cord injuries program.

    (a) This program provides assistance to establish innovative projects for the delivery, demonstration, and evaluation of comprehensive medical, vocational, independent living, and rehabilitation services to meet the wide range of needs of individuals with spinal cord injuries.

    (b) The agencies and organizations eligible to apply under this program are described in § 1330.2.

    [FR Doc. 2016-10853 Filed 5-10-16; 8:45 am] BILLING CODE P
    DEPARTMENT OF THE INTERIOR Fish and Wildlife Service 50 CFR Part 17 [Docket No. FWS-R1-ES-2016-0006; FXES11130900000C6-167-FF09E42000] RIN 1018-BA89 Endangered and Threatened Wildlife; Technical Corrections for Eight Wildlife Species on the List of Endangered and Threatened Wildlife AGENCY:

    Fish and Wildlife Service, Interior.

    ACTION:

    Partial withdrawal of direct final rule.

    SUMMARY:

    We, the U.S. Fish and Wildlife Service (Service), are withdrawing, in part, a February 17, 2016, direct final rule that revises the taxonomy of eight wildlife species under the Endangered Species Act of 1973, as amended (Act). For the Newell's Townsend's shearwater (Puffinus auricularis newelli), we received significant adverse comments relating to additional scientific research relevant to its taxonomic classification; therefore, we are withdrawing the amendments in the direct final rule for this species only. The amendments in the direct final rule for the other seven species (Oahu elepaio (Chasiempis ibidis), Kauai akialoa (Akialoa stejnegeri), akiapolaau (Hemignathus wilsoni), Kauai nukupuu (Hemignathus hanapepe), Maui nukupuu (Hemignathus affinis), Hawaii akepa (Loxops coccineus), and Maui akepa (Loxops ochraceus)) will be effective on May 17, 2016.

    DATES:

    Effective May 11, 2016, the Service withdraws amendatory instructions 2.f and 2.g published at 81 FR 8007 on February 17, 2016.

    ADDRESSES:

    The direct final rule may be found online at http://www.regulations.gov under Docket No. FWS-R1-ES-2016-0006.

    FOR FURTHER INFORMATION CONTACT:

    Marilet Zablan, Program Manager for Restoration and Endangered Species Classification, U.S. Fish and Wildlife Service, Pacific Regional Office, Ecological Services, 911 NE 11th Avenue, Portland, OR 97232; telephone 503-231-6131. Individuals who are hearing impaired or speech impaired may call the Federal Relay Service at 800-877-8337 for TTY (telephone typewriter or teletypewriter) assistance 24 hours a day, 7 days a week.

    SUPPLEMENTARY INFORMATION:

    Background

    Our regulations at 50 CFR 17.11(b) direct us to use the most recently accepted scientific names for species on the List of Endangered and Threatened Wildlife (50 CFR 17.11(h)). Accordingly, on February 17, 2016, we published in the Federal Register a direct final rule (81 FR 8004) to revise the taxonomy and nomenclature of eight Hawaiian bird species listed under section 4 of the Act (16 U.S.C. 1531 et seq.). All of these changes are supported by peer-reviewed scientific studies and reflect the taxonomy that has been accepted by the American Ornithologists' Union (AOU) in the most recent supplements to the Check-list of North American Birds. Specific references relevant to each species are cited in the text of the February 17, 2016, direct final rule, and are posted as supporting documents at http://www.regulations.gov under Docket No. FWS-R1-ES-2016-0006.

    Consequently, we published the direct final rule without a prior proposal because we considered it a noncontroversial action that was in the best interest of the public and should be undertaken in as timely a manner as possible. We stated that if we received significant adverse comments regarding the taxonomic changes for any of these species, we would publish a document in the Federal Register withdrawing this rule for the appropriate species before the effective date. Significant adverse comments are comments that provide strong justifications as to why the rule should not be adopted or why it should be changed.

    Comments on the Direct Final Rule

    We received three comments on the direct final rule. One of these comments called our attention to recently published genetic research on shearwaters (Martínez-Gómez et al. 2015) that recommends maintaining the Hawaiian taxon newelli (Newell's Townsend's shearwater, or Newell's shearwater) as a subspecies of the Townsend's shearwater, under the scientific name Puffinus auricularis newelli. This recommendation is contrary to the determination of the direct final rule and the AOU Checklist Committee (Chesser et al. 2015) that Newell's shearwater is a distinct species (Puffinus newelli). The commenter requested that this discrepancy be further considered before we adopt the taxonomic change set forth in the direct final rule. Another commenter discussed behavioral differences between Newell's shearwater and Townsend's shearwater, while also providing a link to an article summarizing the Martínez-Gómez research results. We concur that these comments are significant and that the taxonomic status of Newell's shearwater merits further consideration. Therefore, we are withdrawing that portion of the direct final rule concerning the listed entity Newell's Townsend's shearwater (Puffinus auricularis newelli). In the future, we may propose changes in the taxonomy of Newell's Townsend's shearwater with opportunity for further public comment.

    Other topics discussed in the comments were not specific to the taxonomic issues raised in the direct final rule. We did not receive significant adverse comments concerning the taxonomy of the Oahu elepaio, Kauai akialoa, akiapolaau, Kauai nukupuu, Maui nukupuu, Hawaii akepa, or Maui akepa.

    Partial Withdrawal of the Direct Final Rule

    For the reasons stated above, we withdraw amendatory instructions 2.f and 2.g of the direct final rule published on February 17, 2016, at 81 FR 8004-8007.

    List of Subjects in 50 CFR Part 17

    Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.

    Dated: April 28, 2016. Stephen Guertin, Acting Director, U.S. Fish and Wildlife Service.
    [FR Doc. 2016-11039 Filed 5-10-16; 8:45 am] BILLING CODE 4333-15-P
    DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 622 [Docket No. 150623546-6395-02] RIN 0648-BF18 Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; Amendments to the Reef Fish, Spiny Lobster, Queen Conch, and Corals and Reef Associated Plants and Invertebrates Fishery Management Plans of Puerto Rico and the U.S. Virgin Islands AGENCY:

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

    ACTION:

    Final rule.

    SUMMARY:

    NMFS issues this final rule to implement measures described in Amendment 7 to the Fishery Management Plan (FMP) for the Reef Fish Fishery of Puerto Rico and the U.S. Virgin Islands (USVI) (Reef Fish FMP), Amendment 6 to the FMP for the Spiny Lobster Fishery of Puerto Rico and the USVI (Spiny Lobster FMP), Amendment 5 to the FMP for Corals and Reef Associated Plants and Invertebrates of Puerto Rico and the USVI (Coral FMP), and Amendment 4 to the FMP for the Queen Conch Resources of Puerto Rico and the USVI (Queen Conch FMP), as prepared by the Caribbean Fishery Management Council (Council). In combination, these amendments represent the Application of Accountability Measures (AM) Amendment (AM Application Amendment). The AM Application Amendment resolves an existing inconsistency between language in the FMPs and the regulations implementing the application of AMs in the U.S. Caribbean exclusive economic zone (EEZ). The purpose of the AM Application Amendment is to ensure the authorizing FMPs are consistent with the regulations governing AMs in the Caribbean EEZ. Additionally, this final rule clarifies the AM closure provisions, the application of the spiny lobster ACL in the Puerto Rico management area of the Caribbean EEZ, and the minimum size limit for queen conch in the Caribbean EEZ.

    DATES:

    This final rule is effective June 10, 2016.

    ADDRESSES:

    Electronic copies of the AM Application Amendment, which includes an environmental assessment, a Regulatory Flexibility Act (RFA) analysis, and a regulatory impact review may be obtained from the Southeast Regional Office Web site at http://sero.nmfs.noaa.gov/sustainable_fisheries/caribbean/index.html.

    FOR FURTHER INFORMATION CONTACT:

    María del Mar López, telephone: 727-824-5305; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    In the Caribbean EEZ, the reef fish, spiny lobster, queen conch, and corals and reef associated plants and invertebrates fisheries are managed under their respective FMPs. The FMPs were prepared by the Council and are implemented through regulations at 50 CFR part 622 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).

    On February 4, 2016, NMFS published a notice of availability for the AM Application Amendment and requested public comment (81 FR 5978). On February 26, 2016, NMFS published a proposed rule for the AM Application Amendment and regulatory clarifications not contained in the amendment and requested public comment (81 FR 9800). The proposed rule and the AM Application Amendment outline the rationale for the actions contained in this final rule. A summary of the actions implemented by the AM Application Amendment and this final rule is provided below.

    The final rule implementing Amendment 2 to the Queen Conch FMP and Amendment 5 to the Reef Fish FMP (2010 Caribbean Annual Catch Limit (ACL) Amendment) established ACLs and AMs for species/species groups that were at the time experiencing overfishing (i.e., parrotfish, snapper, grouper, queen conch) (76 FR 82404, December 30, 2011). The final rule implementing Amendment 3 to the Queen Conch FMP, Amendment 6 to the Reef Fish FMP, Amendment 5 to the Spiny Lobster FMP, and Amendment 3 to the Coral FMP (2011 Caribbean ACL Amendment) established ACLs and AMs for the remaining Council-managed species/species groups which were not undergoing overfishing at the time or for which the overfishing status was unknown (e.g., grunts, squirrelfish, jacks, spiny lobster) (76 FR 82414, December 30, 2011). As described at § 622.12(a) for reef fish, spiny lobster, and corals and at § 622.491(b) for queen conch, the current AM regulations in the Caribbean EEZ require NMFS to shorten the length of the fishing season for a species/species group in the year following a determination that the applicable 3-year landings average exceeded the respective ACL, unless NMFS determines that the exceedance is due to enhanced data collection and monitoring efforts. The extent to which fishing seasons are shortened in the year following an ACL overage equates to the number of days necessary to account for the overage and to constrain landings to the ACL. Pursuant to regulations at §§ 622.12(a) and 622.491(b), any such AM-based closures apply only during the fishing year for which they are implemented. However, the AM closure language in the four FMPs states that any AM-based closure “will remain in effect until modified by the Council,” thereby carrying these closures over from year to year, unless or until the closures are revised by subsequent Council action.

    The AM Application Amendment corrects this inconsistency, between the language in the FMPs and the regulatory language at §§ 622.12(a) and 622.491(b), by revising the language within the four FMPs to be consistent with the language in the regulations. Specifically, the phrase in the four FMPs that states “The needed changes will remain in effect until modified by the Council,” which describes the duration of AMs, will be removed from the four FMPs. The result of this change is that under both the FMPs and the AM-based closure regulatory language, any AM-based closure would only apply for the fishing year for which it was implemented. The Council determined that this approach is consistent with their intent and is consistent with the regulations used by NMFS to apply AMs in the Caribbean EEZ. As this change only revises the language in the respective FMPs, no changes to the codified text are necessary.

    Additional Changes to Codified Text Not Part of the AM Application Amendment

    This final rule also revises items in the codified text that are not part of the AM Application Amendment. Specifically, NMFS clarifies the closure provisions when an ACL has been exceeded and an AM is implemented, based on the Council's intent as expressed in the 2010 and 2011 Caribbean ACL Amendments (76 FR 82404, December 30, 2011, and 76 FR 82414, December 30, 2011). NMFS also clarifies the application of the spiny lobster ACL for the Puerto Rico management area of the EEZ to be consistent with the Council's intent expressed in the 2011 Caribbean ACL Amendment and clarifies the minimum size requirements for queen conch.

    The 2010 and 2011 Caribbean ACL Amendments established AMs and ACLs and allocated those ACLs among three Caribbean island management areas, i.e., the Puerto Rico, St. Croix, and St. Thomas/St. John management areas of the EEZ, as specified in Appendix E to part 622, except for the ACLs for tilefish and aquarium trade species, which are specified for the Caribbean EEZ as a whole. The ACLs for species/species groups in the Puerto Rico management area, except for spiny lobster, are further allocated between the commercial and recreational sectors, and AMs apply to each of these sectors separately. Through this final rule, NMFS clarifies that the spiny lobster ACL for the Puerto Rico management area is applied as a single ACL for both the commercial and recreational sectors, consistent with the intent of the Council in the 2011 Caribbean ACL Amendment (76 FR 82414, December 30, 2011). The current regulations, as described in § 622.12(a)(1)(i)(R), specify only a commercial ACL for spiny lobster in the Puerto Rico management area and do not specify a recreational ACL. The intent of the Council in the 2011 Caribbean ACL Amendment was to manage the spiny lobster commercial and recreational sectors for the Puerto Rico management area under the same ACL, derived from commercial landings. The Council intended that this single ACL would be the trigger to apply the AM to both sectors for spiny lobster in the Puerto Rico management area. NMFS proposes to add paragraph § 622.12(a)(1)(iii) to the regulatory text to specify that the spiny lobster ACL applies to both sectors in the Puerto Rico management area. The actual ACL value will not change through this final rule.

    The ACLs for species/species groups in the St. Croix and St. Thomas/St. John management areas are not allocated between sectors, and if AMs are triggered, they are applied to both the commercial and recreational sector.

    The current Caribbean AM and closure regulations do not specifically state what restrictions on fishing occur during an AM-based closure. Through this final rule, NMFS adds to the regulatory text at § 622.12(b) that, if AMs are triggered as a result of an ACL overage and NMFS reduces the length of the fishing season for a species or species group, certain closure provisions will apply to species with Caribbean-wide ACLs, Caribbean reef fish species, and Caribbean spiny lobster.

    For Caribbean reef fish species in the Puerto Rico management area, § 622.12(b)(1)(i) through (iii) are added to specify what restrictions apply during a commercial closure, recreational closure, or a closure of both sectors. In the event that the commercial fishing season is reduced for a species or species group due to a Puerto Rico commercial ACL overage, all harvest or possession of the indicated species or species group in or from the Puerto Rico management area would be limited to the bag and possession limits specified in § 622.437, and the sale or purchase of the indicated species or species group in or from the Puerto Rico management area would be prohibited during the closure. If the recreational fishing season is reduced for a species or species group due to a Puerto Rico recreational ACL overage, the bag and possession limits for the indicated species or species group would be zero during the closure. If both the commercial and recreational sectors for a species or species group in the Puerto Rico management area are closed, such species or species groups in or from the Puerto Rico management area may not be harvested, possessed, purchased, or sold and the bag and possession limits for such species or species groups would be zero.

    For Caribbean reef fish species and spiny lobster in the St. Croix and St. Thomas/St. John island management areas, and species or species groups with Caribbean-wide ACLs, § 622.12(b)(2) is added to specify that, if AMs are triggered as a result of an ACL overage and the fishing season is reduced for a species or species group, such species or species groups in or from the applicable management area of the Caribbean EEZ may not be harvested, possessed, purchased, or sold, and the bag and possession limits for such species in or from the applicable management area of the Caribbean EEZ would be zero.

    For Caribbean spiny lobster in the Puerto Rico management area, § 622.12(b)(1)(iv) is added to clarify that, if the AM is triggered due to a Puerto Rico spiny lobster ACL overage, the commercial and recreational fishing seasons are reduced. During such a closure, spiny lobster in or from the Puerto Rico management area may not be harvested, possessed, purchased, or sold, and the bag and possession limits for spiny lobster in or from the Puerto Rico management area would be zero.

    Additionally, through this final rule, NMFS revises § 622.492(a) to clarify the minimum size limit for a Caribbean queen conch. Currently, § 622.492(a) states that the minimum size limit is “9 inches (22.9 cm) in length, that is, from the tip of the spire to the distal end of the shell, and 3/8 inch (9.5 cm) in lip width at its widest point.” However, this provision goes on to state that “A queen conch with a length of at least 9 inches (22.9 cm) or a lip width of at least 3/8 inch (9.5 mm) is not undersized.” The use of “and” in the first sentence and “or” in the second sentence of this provision has caused confusion among the public about whether both of these measurements are required to meet the minimum size limit for queen conch. Therefore, NMFS changes the “and” to “or” in the first sentence and removes the second sentence in paragraph (a) of § 622.492. The purpose of this change is to clarify that only one of the measurement descriptions must be met to fulfill the minimum size limit for Caribbean queen conch, consistent with the original intent of the Council in the Queen Conch FMP.

    Comments and Responses

    NMFS received three total comments on the AM Application Amendment and the proposed rule. One comment expressed overall support for the actions in the amendment and the rule. A Federal agency stated that they had no comment on the amendment or the proposed rule. One comment was not related to the actions in the amendment or the proposed rule. Therefore, no changes were made to this final rule based on public comment.

    Classification

    The Regional Administrator, Southeast Region, NMFS has determined that this final rule is consistent with the AM Application Amendment, the FMPs, the Magnuson-Stevens Act, and other applicable law.

    This final rule has been determined to be not significant for purposes of Executive Order 12866.

    The Magnuson-Stevens Act provides the statutory basis for this rule. No duplicative, overlapping, or conflicting Federal rules have been identified. In addition, no new reporting, record-keeping, or other compliance requirements are introduced by this final rule.

    The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination was published in the proposed rule and is not repeated here. No comments were received regarding this certification or on the economic impacts of the rule more generally, and NMFS has not received any new information that would affect its determination. As a result, a final regulatory flexibility analysis is not required and none was prepared.

    List of Subjects in 50 CFR Part 622

    Accountability measures, Caribbean, Fisheries, Fishing, Queen conch.

    Dated: May 5, 2016. Samuel D. Rauch III, Deputy Assistant Administrator for Regulatory Programs,National Marine Fisheries Service.

    For the reasons set out in the preamble, 50 CFR part 622 is amended as follows:

    PART 622—FISHERIES OF THE CARIBBEAN, GULF OF MEXICO, AND SOUTH ATLANTIC 1. The authority citation for part 622 continues to read as follows: Authority:

    16 U.S.C. 1801 et seq.

    2. In § 622.12, remove paragraph (a)(1)(i)(R) and add paragraphs (a)(1)(iii) and (b).

    The additions read as follows:

    § 622.12 Annual catch limits (ACLs) and accountability measures (AMs) for Caribbean island management areas/Caribbean EEZ.

    (a) * * *

    (1) * * *

    (iii) Spiny lobster. The following ACL applies to landings of spiny lobster throughout the Puerto Rico management area—327,920 lb (148,742 kg).

    (b) Closure provisions—(1) Restrictions applicable after a Puerto Rico closure. (i) Restrictions applicable after a Puerto Rico commercial closure, except for spiny lobster. During the closure period announced in the notification filed pursuant to paragraph (a)(1)(i) of this section, the commercial sector for species or species groups included in the notification is closed and such species or species groups in or from the Puerto Rico management area may not be purchased or sold. Harvest or possession of such species or species groups in or from the Puerto Rico management area is limited to the recreational bag and possession limits unless the recreational sector for the species or species group is closed and the restrictions specified in paragraph (b)(1)(iii) of this section apply.

    (ii) Restrictions applicable after a Puerto Rico recreational closure, except for spiny lobster. During the closure period announced in the notification filed pursuant to paragraph (a)(1)(ii) of this section, the recreational sector for species or species groups included in the notification is closed and the recreational bag and possession limits for such species or species groups in or from the Puerto Rico management area are zero. If the seasons for both the commercial and recreational sectors for such species or species groups are closed, the restrictions specified in paragraph (b)(1)(iii) of this section apply.

    (iii) Restrictions applicable when both Puerto Rico commercial and Puerto Rico recreational sectors are closed, except for spiny lobster. If the seasons for both the commercial and recreational sectors for a species or species group are closed, such species or species groups in or from the Puerto Rico management area may not be harvested, possessed, purchased, or sold, and the bag and possession limits for such species or species groups in or from the Puerto Rico management area are zero.

    (iv) Restrictions applicable after a spiny lobster closure in Puerto Rico. During the closure period announced in the notification filed pursuant to paragraph (a)(1)(iii) of this section, both the commercial and recreational sectors are closed. Spiny lobster in or from the Puerto Rico management area may not be harvested, possessed, purchased, or sold, and the bag and possession limits for spiny lobster in or from the Puerto Rico management area are zero.

    (2) Restrictions applicable after a St. Croix, St. Thomas/St. John, or Caribbean EEZ closure. During the closure period announced in the notification filed pursuant to paragraph (a)(2), (3), or (4) of this section, such species or species groups in or from the applicable management area of the Caribbean EEZ may not be harvested, possessed, purchased, or sold, and the bag and possession limits for such species or species groups in or from the applicable management area of the Caribbean EEZ are zero.

    3. In § 622.492, paragraph (a) is revised to read as follows:
    § 622.492 Minimum size limit.

    (a) The minimum size limit for Caribbean queen conch is either 9 inches (22.9 cm) in length, that is, from the tip of the spire to the distal end of the shell, or 3/8 inch (9.5 mm) in lip width at its widest point.

    [FR Doc. 2016-11064 Filed 5-10-16; 8:45 am] BILLING CODE 3510-22-P
    81 91 Wednesday, May 11, 2016 Proposed Rules FEDERAL RESERVE SYSTEM 12 CFR Parts 217, 249, and 252 [Regulations Q, WW, and YY; Docket No. R-1538] RIN 7100 AE-52 Restrictions on Qualified Financial Contracts of Systemically Important U.S. Banking Organizations and the U.S. Operations of Systemically Important Foreign Banking Organizations; Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions AGENCY:

    Board of Governors of the Federal Reserve System (Board).

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    The Board is inviting comment on a proposed rule to promote U.S. financial stability by improving the resolvability and resilience of systemically important U.S. banking organizations and systemically important foreign banking organizations pursuant to section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Under the proposed rule, any U.S. top-tier bank holding company identified by the Board as a global systemically important banking organization (GSIB), the subsidiaries of any U.S. GSIB (other than national banks and federal savings associations), and the U.S. operations of any foreign GSIB (other than national banks and federal savings associations) would be subjected to restrictions regarding the terms of their non-cleared qualified financial contracts (QFCs). First, a covered entity would generally be required to ensure that QFCs to which it is party, including QFCs entered into outside the United States, provide that any default rights and restrictions on the transfer of the QFCs are limited to the same extent as they would be under the Dodd-Frank Act and the Federal Deposit Insurance Act. Second, a covered entity would generally be prohibited from being party to QFCs that would allow a QFC counterparty to exercise default rights against the covered entity based on the entry into a resolution proceeding under the Dodd-Frank Act, Federal Deposit Insurance Act, or any other resolution proceeding of an affiliate of the covered entity. The proposal would also amend certain definitions in the Board's capital and liquidity rules; these amendments are intended to ensure that the regulatory capital and liquidity treatment of QFCs to which a covered entity is party is not affected by the proposed restrictions on such QFCs. The Office of the Comptroller of the Currency is expected to issue a proposed rule that would subject national banks and federal savings associations that are GSIB subsidiaries to requirements substantively identical to those proposed here.

    DATES:

    Comments should be received by August 5, 2016.

    ADDRESSES:

    You may submit comments, identified by Docket No. R-1538 and RIN No. 7100 AE-52, by any of the following methods:

    Agency Web site: http://www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

    Email: [email protected] Include the docket number in the subject line of the message.

    Fax: (202) 452-3819 or (202) 452-3102.

    Mail: Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551.

    All public comments will be made available on the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons. Accordingly, your comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper form in Room 3515, 1801 K Street (between 18th and 19th Streets NW.) Washington, DC 20006, between 9:00 a.m. and 5:00 p.m. on weekdays.

    FOR FURTHER INFORMATION CONTACT:

    Felton Booker, Senior Supervisory Financial Analyst, (202) 912-4651, or Mark Savignac, Supervisory Financial Analyst, (202) 475-7606, Division of Banking Supervision and Regulation; or Will Giles, Counsel, (202) 452-3351, or Lucy Chang, Attorney, (202) 475-6331, Legal Division, Board of Governors of the Federal Reserve System, 20th and C Streets NW., Washington, DC 20551. For the hearing impaired only, Telecommunications Device for the Deaf (TDD) users may contact (202) 263-4869.

    SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction A. Background B. Overview of the Proposal C. Consultation With U.S. Financial Regulators, the Council, and Foreign Authorities D. Overview of Statutory Authority II. Proposed Restrictions on QFCs of GSIBs A. Covered Entities B. Covered QFCs C. Definition of “Default Right” D. Required Contractual Provisions Related to the U.S. Special Resolution Regimes E. Prohibited Cross-Default Rights F. Process for Approval of Enhanced Creditor Protections III. Transition Periods IV. Costs and Benefits V. Revisions to Certain Definitions in the Board's Capital and Liquidity Rules VI. Regulatory Analysis A. Paperwork Reduction Act B. Regulatory Flexibility Act: Initial Regulatory Flexibility Analysis C. Riegle Community Development and Regulatory Improvement Act of 1994 D. Solicitation of Comments on the Use of Plain Language I. Introduction A. Background

    This proposed rule, which is part of a set of actions by the Board to address the “too-big-to-fail” problem, addresses one of the ways in which the failure of a major financial firm can destabilize the financial system. The failure of a large, interconnected financial company could cause severe damage to the U.S. financial system and, ultimately, to the economy as a whole, as illustrated by the failure of Lehman Brothers in September 2008. Protecting the financial stability of the United States by helping to address this too-big-to-fail problem is a core objective of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),1 which Congress passed in response to the 2007-2009 financial crisis and the ensuing recession. The Dodd-Frank Act and the actions that U.S. financial regulators have taken to implement it and to otherwise protect U.S. financial stability help to address the too-big-to-fail problem in two ways: by reducing the probability that a systemically important financial company will fail, and by reducing the damage that such a company's failure would do if it were to occur. The second of these strategies centers on measures designed to help ensure that a failed company's passage through a resolution proceeding—such as bankruptcy or the special resolution process created by the Dodd-Frank Act—would be more orderly, thereby helping to mitigate destabilizing effects on the rest of the financial system.2

    1 The Dodd-Frank Act was enacted on July 21, 2010 (Pub. L. 111-203). According to its preamble, the Dodd-Frank Act is intended “[t]o promote the financial stability of the United States by improving accountability and transparency in the financial system, to end `too big to fail', [and] to protect the American taxpayer by ending bailouts.”

    2 The Dodd-Frank Act itself pursues this goal through numerous provisions, including by requiring systemically important financial companies to develop resolution plans (also known as “living wills”) that lay out how they could be resolved in an orderly manner if they were to fail and by creating a new resolution regime, the Orderly Liquidation Authority, applicable to systemically important financial companies. 12 U.S.C. 5365(d), 5381-5394. Moreover, section 165 of the Dodd-Frank Act directs the Board to promote financial stability through regulation by subjecting large bank holding companies and nonbank financial companies designated for Board supervision to enhanced prudential standards “[i]n order to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected financial institutions.” 12 U.S.C. 5365(a)(1).

    This proposed rule is intended as a further step to increase the resolvability of U.S. global systemically important banking organizations (GSIBs) and foreign GSIBs that operate in the United States. The proposal complements the Board's recent notice of proposed rulemaking on total loss-absorbing capacity, long-term debt, and clean holding company requirements for GSIBs (TLAC proposal) 3 and the ongoing work of the Board and the FDIC on resolution planning requirements for GSIBs. The current proposal focuses on improving the orderly resolution of a GSIB by limiting disruptions to a failed GSIB through its financial contracts with other companies.

    3 80 FR 74926 (Nov. 30, 2015). For further high-level background on post-crisis regulatory reforms aimed at addressing the too-big-to-fail problem, see the preamble to the TLAC proposal. Id. at 74926-74928.

    The largest financial firms are interconnected with other financial firms through large volumes of financial contracts of various types, including derivatives transactions. The failure of one entity within a large financial firm can trigger disruptive terminations of these contracts, as the counterparties of both the failed entity and other entities within the same firm exercise their contractual rights to terminate the contracts and liquidate collateral. These terminations, especially if counterparties lose confidence in the GSIB quickly and in large numbers, can destabilize the financial system and potentially spark a financial crisis through several channels. They can destabilize the failed entity's otherwise solvent affiliates, causing them to fail and thereby potentially causing their counterparties to fail in a chain reaction that can ripple through the system. They also may result in firesales of large volumes of financial assets, such as the collateral that secures the contracts, which can in turn weaken and cause stress for other firms by lowering the value of similar assets that they hold.

    For example, the triggering of default rights by counterparties of Lehman Brothers in 2008 was a key driver of its destabilization that resulted from its failure.4 At the time of its failure, Lehman was party to very large volumes of financial contracts, including over-the-counter derivatives contracts.5 When its holding company declared bankruptcy, Lehman's counterparties exercised their default rights.6 Lehman's default “caused disruptions in the swaps and derivatives markets and a rapid, market-wide unwinding of trading positions.” 7 Meanwhile, “out-of-the-money counterparties, which owed Lehman money, typically chose not to terminate their contracts” and instead suspended payment, reducing the liquidity available to the bankruptcy estate.8 The complexity and disruption associated with Lehman's portfolios of financial contracts led to a disorderly resolution of Lehman.9 This proposal is meant to help avoid a repeat of the systemic disruptions caused by the Lehman failure by preventing the exercise of default rights in financial contracts from leading to such disorderly and destabilizing failures in the future.

    4See “The Orderly Liquidation of Lehman Brothers Holdings Inc. under the Dodd-Frank Act” 3, FDIC Quarterly (2011) (“The Lehman bankruptcy had an immediate and negative effect on U.S. financial stability and has proven to be a disorderly, time-consuming, and expensive process.”), available at https://www.fdic.gov/bank/analytical/quarterly/2011_vol5_2/lehman.pdf.

    5See Michael J. Fleming and Asani Sarkar, “The Failure Resolution of Lehman Brothers,” FRBNY Economic Policy Review 185 (December 2014), available at https://www.newyorkfed.org/medialibrary/media/research/epr/2014/1412flem.pdf.

    6See id.

    7 “The Orderly Liquidation of Lehman Brothers Holdings Inc. under the Dodd-Frank Act” 3, FDIC Quarterly (2011), available at https://www.fdic.gov/bank/analytical/quarterly/2011_vol5_2/lehman.pdf.

    8 Michael J. Fleming and Asani Sarkar, “The Failure Resolution of Lehman Brothers,” FRBNY Economic Policy Review 185 (December 2014), available at https://www.newyorkfed.org/medialibrary/media/research/epr/2014/1412flem.pdf.

    9See Mark J. Roe and Stephen D. Adams, “Restructuring Failed Financial Firms in Bankruptcy: Selling Lehman's Derivatives Portfolio,” Yale Journal on Regulation (2015) (“Lehman's failure exacerbated the financial crisis, especially after AIG's collapse in the days afterwards prompted counterparties to close out positions, sell collateral, and thereby depress and freeze markets. Many financial players stopped trading for fear that their counterparty would be the next Lehman or that their counterparty had large unseen exposures to Lehman that would make the counterparty itself fail. Such was the case with the Reserve Primary Fund, a money market fund that held too many defaulting obligations of Lehman. That reaction led to a further panic, a threat of a run on money market funds, and a government guarantee of all money market funds to stem the ongoing financial degradation throughout the economy.”).

    This proposal is intended to respond to the threat to financial stability posed by such default rights in two ways. First, the proposal reduces the risk that courts in foreign jurisdictions would disregard statutory provisions that would stay the rights of a failed firm's counterparties to terminate their contracts when the firm enters a resolution proceeding under one of the special resolution frameworks for failed financial firms created by Congress under the Federal Deposit Insurance Act (FDI Act) and the Dodd-Frank Act. Second, the proposal would facilitate the resolution of a large financial entity under the U.S. Bankruptcy Code and other resolution frameworks by ensuring that the counterparties of solvent affiliates of the failed entity could not unravel their contracts with the solvent affiliate based solely on the failed entity's resolution.

    Qualified financial contracts, default rights, and financial stability. In particular, this proposal pertains to several important classes of financial transactions that are collectively known as “qualified financial contracts” (QFCs).10 QFCs include derivatives, repurchase agreements (also known as “repos”) and reverse repos, and securities lending and borrowing agreements.11 GSIBs enter into QFCs for a variety of purposes, including to borrow money to finance their investments, to lend money, to manage risk, and to enable their clients and counterparties to hedge risks, make markets in securities and derivatives, and take positions in financial investments.

    10 The proposal would adopt the definition of “qualified financial contract” set out in section 210(c)(8)(D) of the Dodd-Frank Act, 12 U.S.C. 5390(c)(8)(D). See proposed rule § 252.81.

    11 The definition of “qualified financial contract” is broader than this list of examples, and the default rights discussed are not common to all types of QFC.

    QFCs play a role in economically valuable financial intermediation when markets are functioning normally. But they are also a major source of financial interconnectedness, which can pose a threat to financial stability in times of market stress. This proposal focuses on a context in which that threat is especially great: the failure of a GSIB that is party to large volumes of QFCs, likely including QFCs with counterparties that are themselves systemically important.

    By contract, a party to a QFC generally has the right to take certain actions if its counterparty defaults on the QFC (that is, if it fails to meet certain contractual obligations). Common default rights include the right to suspend performance of the non-defaulting party's obligations, the right to terminate or accelerate the contract, the right to set off amounts owed between the parties, and the right to seize and liquidate the defaulting party's collateral. In general, default rights allow a party to a QFC to reduce the credit risk associated with the QFC by granting it the right to exit the QFC and thereby reduce its exposure to its counterparty upon the occurrence of a specified condition, such as its counterparty's entry into a resolution proceeding.

    Where the defaulting party is a GSIB entity, the private benefit of allowing counterparties of GSIBs to take certain actions must be weighed against the harm that these actions cause by encouraging the disorderly failure of a GSIB and increasing the threat to the stability of the U.S. financial system as a whole. For example, if a significant number of QFC counterparties exercise their default rights precipitously and in a manner that would impede an orderly resolution of a GSIB, all QFC counterparties and the financial system may potentially be worse off and less stable.

    This may occur through several channels. First, the exits may drain liquidity from a troubled GSIB, forcing the GSIB to rapidly sell off assets at depressed prices, both because the sales must be done within a short timeframe and because the elevated supply may push prices down. These asset firesales may cause or deepen balance-sheet insolvency at the GSIB, causing a GSIB to fail more suddenly and reducing the amount that its other creditors can recover, thereby imposing losses on those creditors and threatening their solvency. The GSIB may also respond to a QFC run by withdrawing liquidity that it had offered to other firms, forcing them to engage in firesales. Alternatively, if the GSIB's QFC counterparty itself liquidates the QFC collateral at firesale prices, the effect will again be to weaken the GSIB's balance sheet.12 The counterparty's rights to set off amounts owed, terminate the contract, and suspend payments may allow it to further drain the GSIB's capital and liquidity by withholding payments that it would otherwise owe to the GSIB. The GSIB may also have rehypothecated collateral that it received from QFC counterparties, for instance in repo or securities lending transactions that fund other client arrangements, in which case demands from those counterparties for the early return of their rehypothecated collateral could be especially disruptive.13

    12See “The Orderly Liquidation of Lehman Brothers Holdings Inc. under the Dodd-Frank Act” 8, FDIC Quarterly (2011), available at https://www.fdic.gov/bank/analytical/quarterly/2011_vol5_2/lehman.pdf (“A disorderly unwinding of [qualified financial contracts] triggered by an event of insolvency, as each counterparty races to unwind and cover unhedged positions, can cause a tremendous loss of value, especially if lightly traded collateral covering a trade is sold into an artificially depressed, unstable market. Such disorderly unwinding can have severe negative consequences for the financial company, its creditors, its counterparties, and the financial stability of the United States.”).

    13See generally Adam Kirk, James McAndrews, Parinitha Sastry, and Phillip Weed, “Matching Collateral Supply and Financing Demands in Dealer Banks,” FRBNY Economic Policy Review 127 (December 2014), available at http://www.newyorkfed.org/medialibrary/media/research/epr/2014/1412kirk.pdf.

    The asset firesales discussed above can also spread contagion throughout the financial system by increasing volatility and by lowering the value of similar assets held by other firms, potentially causing these firms to suffer mark-to-market losses, diminished market confidence in their own solvency, margin calls, and creditor runs (which could lead to further firesales, worsening the contagion). Finally, the early terminations of derivatives that the surviving entities of the failed GSIB relied on to hedge their risks could leave those entities with major risks unhedged, increasing the entities' potential losses going forward.

    Where there are significant simultaneous terminations and these effects occur contemporaneously, such as upon the failure of a GSIB that is party to a large volume of QFCs, they may pose a substantial risk to financial stability. In short, QFC continuity is important for the orderly resolution of a GSIB because it helps to ensure that the GSIB entities remain viable and to avoid instability caused by asset firesales.

    Consequently, the Board and the Federal Deposit Insurance Corporation (FDIC) have identified the exercise of certain default rights in financial contracts as a potential obstacle to orderly resolution in the context of resolution plans filed pursuant to section 165(d) of the Dodd-Frank Act,14 and have instructed the most systemically important firms to demonstrate that they are “amending, on an industry-wide and firm-specific basis, financial contracts to provide for a stay of certain early termination rights of external counterparties triggered by insolvency proceedings.” 15

    14 12 U.S.C. 5365(d).

    15 Board and FDIC, “Agencies Provide Feedback on Second Round Resolution Plans of `First-Wave' Filers” (August 5, 2014), available at http://www.federalreserve.gov/newsevents/press/bcreg/20140805a.htm. See also Board and FDIC, “Agencies Provide Feedback on Resolution Plans of Three Foreign Banking Organizations” (March 23, 2015), available at http://www.federalreserve.gov/newsevents/press/bcreg/20150323a.htm; Board and FDIC, “Guidance for 2013 165(d) Annual Resolution Plan Submissions by Domestic Covered Companies that Submitted Initial Resolution Plans in 2012” 5-6 (April 15, 2013), available at http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20130415c2.pdf.

    Direct defaults and cross-defaults. This proposal focuses on two distinct scenarios in which a non-defaulting party to a QFC is commonly able to exercise the rights described above. These two scenarios involve a default that occurs when either the GSIB legal entity that is a direct party 16 to the QFC or an affiliate of that legal entity enters a resolution proceeding.17 The first scenario occurs when a GSIB entity that is itself a direct party to the QFC enters a resolution proceeding; this preamble refers to such a scenario as a “direct default” and refers to the default rights that arise from a direct default as “direct default rights.” The second scenario occurs when an affiliate of the GSIB entity that is a direct party to the QFC (such as the direct party's parent holding company) enters a resolution proceeding; this preamble refers to such a scenario as a “cross-default” and refers to default rights that arise from a cross-default as “cross-default rights.” For example, a GSIB parent entity might guarantee the derivatives transactions of its subsidiaries and those derivatives contracts could contain cross-default rights against a subsidiary of the GSIB that would be triggered by the bankruptcy filing of the GSIB parent entity even though the subsidiary continues to meet all of its financial obligations.18

    16 In general, a “direct party” refers to a party to a financial contract other than a credit enhancement (such as a guarantee). The definition of “direct party” and related definitions are discussed in more detail below on page 38.

    17 This preamble uses phrases such as “entering a resolution proceeding” and “going into resolution” to encompass the concept of “becoming subject to a receivership, insolvency, liquidation, resolution, or similar proceeding.” These phrases refer to proceedings established by law to deal with a failed legal entity. In the context of the failure of a systemically important banking organization, the most relevant types of resolution proceeding include the following: for most U.S.-based legal entities, the bankruptcy process established by the U.S. Bankruptcy Code (Title 11, United States Code); for U.S. insured depository institutions, a receivership administered by the Federal Deposit Insurance Corporation (FDIC) under the Federal Deposit Insurance Act (12 U.S.C. 1821); for companies whose “resolution under otherwise applicable Federal or State law would have serious adverse effects on the financial stability of the United States,” the Dodd-Frank Act's Orderly Liquidation Authority (12 U.S.C. 5383(b)(2)); and, for entities based outside the United States, resolution proceedings created by foreign law.

    18See Michael J. Fleming and Asani Sarkar, “The Failure Resolution of Lehman Brothers,” FRBNY Economic Policy Review 185 (December 2014), available at https://www.newyorkfed.org/medialibrary/media/research/epr/2014/1412flem.pdf.

    Importantly, this proposal does not affect all types of default rights, and, where it affects a default right, the proposal does so only temporarily for the purpose of allowing the relevant resolution authority to take action to continue to provide for continued performance on the QFC. Moreover, the proposal is concerned only with default rights that run against a GSIB—that is, direct default rights and cross-default rights that arise from the entry into resolution of a GSIB entity. The proposal would not affect default rights that a GSIB entity (or any other entity) may have against a counterparty that is not a GSIB entity. This limited scope is appropriate because, as described above, the risk posed to financial stability by the exercise of QFC default rights is greatest when the defaulting counterparty is a GSIB entity.

    Single-point-of-entry resolution. Cross-default rights are especially significant in the context of a GSIB failure because GSIBs typically enter into large volumes of QFCs through different entities controlled by the GSIB. For example, a U.S. GSIB is made up of a U.S. bank holding company and numerous operating subsidiaries that are owned, directly or indirectly, by the bank holding company. From the standpoint of financial stability, the most important of these operating subsidiaries are generally a U.S. insured depository institution, a U.S. broker-dealer, and similar entities organized in other countries.

    Many complex GSIB have developed resolution strategies that rely on the single-point-of-entry (SPOE) resolution strategy. In an SPOE resolution of a GSIB, only a single legal entity—the GSIB's top-tier bank holding company—would enter a resolution proceeding. The losses that led to the GSIB's failure would be passed up from the operating subsidiaries that incurred the losses to the holding company and would then be imposed on the equity holders and unsecured creditors of the holding company through the resolution process.19 This strategy is designed to help ensure that the GSIB subsidiaries remain adequately capitalized, and that operating subsidiaries of the GSIB are able to continue to meet their financial obligations without defaulting or entering resolution themselves. The expectation that the holding company's equity holders and unsecured creditors would absorb the GSIB's losses in the event of failure would help to maintain the confidence of the operating subsidiaries' creditors and counterparties (including their QFC counterparties), reducing their incentive to engage in potentially destabilizing funding runs or margin calls and thus lowering the risk of asset firesales. A successful SPOE resolution would also avoid the need for separate resolution proceedings for separate legal entities run by separate authorities across multiple jurisdictions, which would be more complex and could therefore destabilize the resolution.

    19 The Board's TLAC proposal would address the need for adequate external loss-absorbing capacity at the holding company level by requiring the top-tier holding companies of the U.S. GSIBs and the U.S. intermediate holding companies of foreign GSIBs to maintain outstanding required levels of unsecured long-term debt and TLAC, which is defined to include both tier 1 capital and eligible long-term debt. See 80 FR 74926, 74931-74944. The TLAC proposal also discussed, but did not propose, a potential framework for internal loss-absorbing capacity that could be used to transfer losses from the operating subsidiaries that incur them to the top-tier holding company. See 80 FR 74926, 74948-74949.

    The Board's TLAC proposal is intended to help, though not exclusively, to lay the foundation necessary for the SPOE resolution of a GSIB by requiring the top-tier holding companies of U.S. GSIBs and the U.S. intermediate holding companies of foreign GSIBs to maintain loss-absorbing capacity that could be used for resolution and to adopt a “clean holding company” structure, under which certain financial activities that could pose obstacles to orderly resolution would be off-limits to the holding company and could only be conducted by its operating subsidiaries.20

    20See 80 FR 74926, 74944-74948.

    Other orderly resolution strategies. This proposal would also yield benefits for other approaches to resolution. For example, preventing early terminations of QFCs would increase the prospects for an orderly resolution under a multiple-point-of-entry (MPOE) strategy involving a foreign GSIB's U.S. intermediate holding company going into resolution or a resolution plan that calls for a GSIB's U.S. insured depository institution to enter resolution under the Federal Deposit Insurance Act. As discussed above, this proposal would help support the continued operation of affiliates of an entity experiencing resolution to the extent the affiliate continues to perform on its QFCs.

    U.S. Bankruptcy Code. When an entity goes into resolution under the Bankruptcy Code, attempts by the debtor entity's creditors to enforce their debts through any means other than participation in the bankruptcy proceeding (for instance, by suing in another court, seeking enforcement of a preexisting judgment, or seizing and liquidating collateral) are generally blocked by the imposition of an automatic stay.21 A key purpose of the automatic stay, and of bankruptcy law in general, is to maximize the value of the bankruptcy estate and the creditors' ultimate recoveries by facilitating an orderly liquidation or restructuring of the debtor. The automatic stay thus solves a collective action problem in which the creditors' individual incentives to become the first to recover as much from the debtor as possible, before other creditors can do so, collectively cause a value-destroying disorderly liquidation of the debtor.22

    21See 11 U.S.C. 362.

    22See, e.g., Aiello v. Providian Financial Corp., 239 F.3d 876, 879 (7th Cir. 2001).

    However, the Bankruptcy Code largely exempts QFC 23 counterparties from the automatic stay through special “safe harbor” provisions.24 Under these provisions, any rights that a QFC counterparty has to terminate the contract, set off obligations, and liquidate collateral in response to a direct default are not subject to the stay and may be exercised against the debtor immediately upon default. (The Bankruptcy Code does not itself confer default rights upon QFC counterparties; it merely permits QFC counterparties to exercise certain rights created by other sources, such as contractual rights created by the terms of the QFC.)

    23 The Bankruptcy Code does not use the term “qualified financial contract,” but the set of transactions covered by its safe harbor provisions closely tracks the set of transactions that fall within the definition of “qualified financial contract” used in Title II of the Dodd-Frank Act and in this proposal.

    24 11 U.S.C. 362(b)(6), (7), (17), (27), 362(o), 555, 556, 559, 560, 561. The Bankruptcy Code specifies the types of parties to which the safe harbor provisions apply, such as financial institutions and financial participants. Id.

    The Bankruptcy Code's automatic stay also does not prevent the exercise of cross-default rights against an affiliate of the party entering resolution. The stay generally applies only to actions taken against the party entering resolution or the bankruptcy estate,25 whereas a QFC counterparty exercising a cross-default right is instead acting against a distinct legal entity that is not itself in resolution: The debtor's affiliate.

    25See 11 U.S.C. 362(a).

    Title II of the Dodd-Frank Act and the Orderly Liquidation Authority. Title II of the Dodd-Frank Act imposes somewhat broader stay requirements on QFCs that enter resolution under that Title. In general, no financial firm (regardless of size) is too-big-to-fail and a U.S. bank holding company (such as the top-tier holding company of a U.S. GSIB) that fails would be resolved under the Bankruptcy Code. Congress recognized, however, that a financial company might fail under extraordinary circumstances in which an attempt to resolve it through the bankruptcy process would have serious adverse effects on financial stability in the United States. Title II of the Dodd-Frank Act establishes the Orderly Liquidation Authority (OLA), an alternative resolution framework intended to be used rarely to manage the failure of a firm that poses a significant risk to the financial stability of the United States in a manner that mitigates such risk and minimizes moral hazard.26 Title II authorizes the Secretary of the Treasury, upon the recommendation of other government agencies and a determination that several preconditions are met, to place a financial company into a receivership conducted by the FDIC as an alternative to bankruptcy.27

    26 Section 204(a) of the Dodd-Frank Act, 12 U.S.C. 5384(a).

    27See section 203 of the Dodd-Frank Act, 12 U.S.C. 5383.

    Title II empowers the FDIC to transfer the QFCs to a bridge financial company or some other financial company that is not in a resolution proceeding and should therefore be capable of performing under the QFCs.28 To give the FDIC time to effect this transfer, Title II temporarily stays QFC counterparties of the failed entity from exercising termination, netting, and collateral liquidation rights “solely by reason of or incidental to” the failed entity's entry into OLA resolution, its insolvency, or its financial condition.29 Once the QFCs are transferred in accordance with the statute, Title II permanently stays the exercise of default rights for those reasons.30

    28See 12 U.S.C. 5390(c)(9).

    29 12 U.S.C. 5390(c)(10)(B)(i)(I). This temporary stay generally lasts until 5:00 p.m. eastern time on the business day following the appointment of the FDIC as receiver.

    30 12 U.S.C. 5390(c)(10)(B)(i)(II).

    Title II addresses cross-default rights through a similar procedure. It empowers the FDIC to enforce contracts of subsidiaries or affiliates of the failed covered financial company that are “guaranteed or otherwise supported by or linked to the covered financial company, notwithstanding any contractual right to cause the termination, liquidation, or acceleration of such contracts based solely on the insolvency, financial condition, or receivership of” the failed company, so long as the FDIC takes certain steps to protect the QFC counterparties' interests by the end of the business day following the company's entry into OLA resolution.31

    31 12 U.S.C. 5390(c)(16).

    These stay-and-transfer provisions of the Dodd-Frank Act are intended to mitigate the threat posed by QFC default rights. At the same time, the provisions allow for appropriate protections for QFC counterparties of the failed financial company. The provisions stay only the exercise of default rights based on the failed company's entry into resolution, the fact of its insolvency, or its financial condition. And the stay period is brief, unless the FDIC transfers the QFCs to another financial company that is not in resolution (and should therefore be capable of performing under the QFCs) or, if applicable, provides adequate protection that the QFCs will be performed.

    The Federal Deposit Insurance Act. Under the FDI Act, a failing insured depository institution would generally enter a receivership administered by the FDIC.32 The FDI Act addresses direct default rights in the failed bank's QFCs with stay-and-transfer provisions that are substantially similar to the provisions of Title II of the Dodd-Frank Act discussed above.33 However, the FDI Act does not address cross-default rights, leaving the QFC counterparties of the failed depository institution's affiliates free to exercise any contractual rights they may have to terminate, net, and liquidate collateral based on the depository institution's entry into resolution. Moreover, as with Title II of the Dodd-Frank Act, there is a possibility that a court of a foreign jurisdiction might decline to enforce the FDI Act's stay-and-transfer provisions under certain circumstances.

    32 12 U.S.C. 1821(c).

    33See 12 U.S.C. 1821(e)(8)-(10).

    B. Overview of the Proposal

    The Board invites comment on all aspects of this proposed rulemaking, which is intended to increase GSIB resolvability by addressing two QFC-related issues. First, the proposal seeks to address the risk that a court in a foreign jurisdiction may decline to enforce the QFC stay-and-transfer provisions of Title II and the FDI Act discussed above. Second, the proposal seeks to address the potential disruption that may occur if a counterparty to a QFC with an affiliate of a GSIB entity that goes into resolution under the Bankruptcy Code or the FDI Act is provided cross-default rights.

    Scope of application. The proposal's requirements would apply to all “covered entities.” “Covered entity” would include: Any U.S. top-tier bank holding company identified as a GSIB under the Board's rule establishing risk-based capital surcharges for GSIBs (GSIB surcharge rule); 34 any subsidiary of such a bank holding company; and any U.S. subsidiary, U.S. branch, or U.S. agency of a foreign GSIB. Covered entity would not include certain entities that are supervised by the Office of the Comptroller of the Currency (OCC) (covered bank). The OCC is expected to issue a proposed rule that would subject covered banks to requirements substantively identical to those proposed here for covered entities.

    34 12 CFR 217.402; 80 FR 49106 (August 14, 2015). See proposed rule § 252.81.

    “Qualified financial contract” or “QFC” would be defined to have the same meaning as in section 210(c)(8)(D) of the Dodd-Frank Act,35 and would include, among other things, derivatives, repos, and securities lending agreements. Subject to the exceptions discussed below, the proposal's requirements would apply to any QFC to which a covered entity is party (covered QFC).

    35 12 U.S.C. 5390(c)(8)(D). See proposed rule § 252.81.

    Required contractual provisions related to the U.S. special resolution regimes. Covered entities would be required to ensure that covered QFCs include contractual terms explicitly providing that any default rights or restrictions on the transfer of the QFC are limited to the same extent as they would be pursuant to the U.S. special resolution regimes—that is, the OLA and the FDI Act.36 The proposed requirements are not intended to imply that the statutory stay-and-transfer provisions would not in fact apply to a given QFC, but rather to help ensure that all covered QFCs—including QFCs that are governed by foreign law, entered into with a foreign party, or for which collateral is held outside the United States—would be treated the same way in the context of an FDIC receivership under the Dodd-Frank Act or the FDI Act. This provision would address the first issue listed above and would decrease the QFC-related threat to financial stability posed by the failure and resolution of an internationally active GSIB. This section of the proposal is also consistent with analogous legal requirements that have been imposed in other national jurisdictions 37 and with the Financial Stability Board's “Principles for Cross-border Effectiveness of Resolution Actions.” 38

    36See proposed rule § 252.83.

    37See, e.g., Bank of England Prudential Regulation Authority, Policy Statement, “Contractual stays in financial contracts governed by third-country law” (November 2015), available at http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps2515.pdf.

    38 Financial Stability Board, “Principles for Cross-border Effectiveness of Resolution Actions” (November 3, 2015), available at http://www.fsb.org/wp-content/uploads/Principles-for-Cross-border-Effectiveness-of-Resolution-Actions.pdf.

    The Financial Stability Board (FSB) was established in 2009 to coordinate the work of national financial authorities and international standard-setting bodies and to develop and promote the implementation of effective regulatory, supervisory, and other financial sector policies to advance financial stability. The FSB brings together national authorities responsible for financial stability in 24 countries and jurisdictions, as well as international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. See generally Financial Stability Board, available at http://www.fsb.org.

    Prohibited cross-default rights. A covered entity would be prohibited from entering into covered QFCs that would allow the exercise of cross-default rights—that is, default rights related, directly or indirectly, to the entry into resolution of an affiliate of the direct party—against it.39 Covered entities would similarly be prohibited from entering into covered QFCs that would provide for a restriction on the transfer of a credit enhancement supporting the QFC from the covered entity's affiliate to a transferee upon the entry into resolution of the affiliate.

    39See proposed rule § 252.83(b).

    The Board does not propose to prohibit covered entities from entering into QFCs that contain direct default rights. Under the proposal, a counterparty to a direct QFC with a covered entity also could, to the extent not inconsistent with Title II or the FDI Act, be granted and could exercise the right to terminate the QFC if the covered entity fails to perform its obligations under the QFC.

    As an alternative to bringing their covered QFCs into compliance with the requirements set out in this section of the proposed rule, covered entities would be permitted to comply by adhering to the ISDA 2015 Resolution Stay Protocol.40 The Board views the ISDA 2015 Resolution Stay Protocol as consistent with the requirements of the proposed rule.

    40See proposed rule § 252.85(a).

    The purpose of this section of the proposal is to help ensure that, when a GSIB entity enters resolution under the Bankruptcy Code or the FDI Act,41 its affiliates' covered QFCs will be protected from disruption to a similar extent as if the failed entity had entered resolution under the OLA. In particular, this section would facilitate resolution under the Bankruptcy Code by preventing the QFC counterparties of a GSIB's operating subsidiary from exercising default rights on the basis of the entry into bankruptcy by the GSIB's top-tier holding company or any other affiliate of the operating subsidiary. This section generally would not prevent covered QFCs from allowing the exercise of default rights upon a failure by the direct party to satisfy a payment or delivery obligation under the QFC, the direct party's entry into resolution, or the occurrence of any other default event that is not related to the entry into a resolution proceeding or the financial condition of an affiliate of the direct party.

    41 The FDI Act does not stay cross-default rights against affiliates of an insured depository institution based on the entry of the insured depository institution into resolution proceedings under the FDI Act.

    Process for approval of enhanced creditor protection conditions. The proposal would allow the Board, at the request of a covered entity, to approve as compliant with the proposal covered QFCs with creditor protections other than those that would otherwise be permitted under section 252.84 of the proposal.42 The Board could approve such a request if, in light of several enumerated considerations,43 the alternative approach would mitigate risks to the financial stability of the United States presented by a GSIB's failure to at least the same extent as the proposed requirements.

    42See proposed rule § 252.85.

    43See proposed rule § 252.85(c).

    Amendments to certain definitions in the Board's capital and liquidity rules. The proposal would also amend certain definitions in the Board's capital and liquidity rules to help ensure that the regulatory capital and liquidity treatment of QFCs to which a covered entity is party is not affected by the proposed restrictions on such QFCs. Specifically, the proposal would amend the definition of “qualifying master netting agreement” in the Board's regulatory capital and liquidity rules and would similarly amend the definitions of the terms “collateral agreement,” “eligible margin loan,” and “repo-style transaction” in the Board's regulatory capital rules.

    C. Consultation With U.S Financial Regulators, the Council, and Foreign Authorities

    In developing this proposal, the Board consulted with the FDIC, the OCC, the Financial Stability Oversight Council (Council), and other U.S. financial regulators. The proposal reflects input that the Board received during this consultation process. The Board also intends to consult with the Council and other U.S. financial regulators after it reviews comments on the proposal. Furthermore, the Board has consulted with, and expects to continue to consult with, foreign financial regulatory authorities regarding this proposal and the establishment of other standards that would maximize the prospects for the cooperative and orderly cross-border resolution of a failed GSIB on an international basis.

    The OCC is expected to issue for public comment a notice of proposed rulemaking that would subject covered banks, including the national bank subsidiaries of GSIBs, to requirements substantively identical to those proposed here for covered entities. The Board and the OCC coordinated the development of their respective proposals in order to avoid redundancy.

    D. Overview of Statutory Authority

    The Board is issuing this proposal under the authority provided by section 165 of the Dodd-Frank Act.44 Section 165 instructs the Board to impose enhanced prudential standards on bank holding companies with total consolidated assets of $50 billion or more “[i]n order to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected financial institutions.” 45 These enhanced prudential standards must increase in stringency based on the systemic footprint and risk characteristics of covered firms.46 Section 165 requires the Board to impose enhanced prudential standards of several specified types and also authorizes the Board to establish “such other prudential standards as the Board of Governors, on its own or pursuant to a recommendation made by the Council, determines are appropriate.” 47

    44 12 U.S.C. 5365.

    45 12 U.S.C. 5365(a)(1).

    46 12 U.S.C. 5365(a)(1)(B), (b)(3)(A)-(D).

    47 12 U.S.C. 5365(b)(1)(B)(iv).

    Enhanced prudential standards in the proposal are intended to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure of a GSIB. In particular, the proposed requirements would improve the resolvability of U.S. GSIBs under the Bankruptcy Code, Title II of the Dodd-Frank Act, or, with reference to insured depository institutions that are GSIB subsidiaries, the FDI Act, and reduce the potential that resolution of the firm will be disorderly and lead to disruptive asset sales and liquidations.

    The proposal would also improve the resilience of the U.S. operations of foreign GSIBs, and thereby increase the likelihood that a failed foreign GSIB with U.S. operations would be successfully resolved by its home jurisdiction authorities without the failure of the foreign GSIB's U.S. operating entities and with limited effect on the financial stability of the United States.

    The Board has tailored this proposal to apply only to those banking organizations whose disorderly failure would likely pose the greatest risk to U.S. financial stability: The U.S. GSIBs and the U.S. operations of foreign GSIBs.

    Question 1: The Board invites comment on all aspects of this section.

    II. Proposed Restrictions on QFCs of GSIBs A. Covered Entities (Section 252.82(a) of the Proposed Rule)

    The proposed rule would apply to “covered entities,” which include (a) any U.S. GSIB top-tier bank holding company, (b) any subsidiary of such a bank holding company that is not a “covered bank,” and (c) the U.S. operations of any foreign GSIB with the exception of any “covered bank.” The term “covered bank” would be defined to include certain entities, such as certain national banks, that are supervised by the OCC. While covered banks would be exempt from the requirements of this proposal, the OCC is expected to issue a proposed rule that would impose substantively identical requirements for covered banks in the near future.48

    48 Section 252.88 of the Board's proposal also clarifies that covered entities are not required to conform covered QFCs with respect to a part of a covered QFC that a covered bank also would be required to conform under the proposed rule that the OCC is expected to issue. Such overlap could occur, for example, where a bank holding company that is a covered entity guarantees a swap between a subsidiary that is a covered bank and the covered bank's counterparty.

    U.S. GSIB bank holding companies. Covered entities would include the entities identified as U.S. GSIB top-tier holding companies under the Board's GSIB surcharge rule.49 Under the GSIB surcharge rule, a U.S. top-tier bank holding company subject to the advanced approaches rule must determine whether it is a GSIB by applying a multifactor methodology established by the Board.50 The methodology evaluates a banking organization's systemic importance on the basis of its attributes in five broad categories: Size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity.

    49 12 CFR 217.402; 80 FR 49106 (August 14, 2015). See proposed rule § 252.82(a)(1).

    50Id.; 12 CFR part 217, subpart E.

    Accordingly, the methodology provides a tool for identifying those banking organizations whose failure or material distress would pose especially large risks to the financial stability of the United States. Improving the orderly resolution and resolvability of such firms, including by reducing risks associated with their QFCs, would be an important step toward achieving the goals of the Dodd-Frank Act. The proposal's focus on GSIBs is also in keeping with the Dodd-Frank Act's mandate that more stringent prudential standards be applied to the most systemically important bank holding companies.51 Moreover, several of the attributes that feed into the determination of whether a given firm is a GSIB incorporate aspects of the firm's QFC activity. These attributes include the firm's total exposures, its intra-financial system assets and liabilities, its notional amount of over-the-counter derivatives, and its cross-jurisdictional claims and liabilities.

    51 12 U.S.C. 5365(a)(1)(B).

    Under the GSIB surcharge rule's methodology, there are currently eight U.S. GSIBs: Bank of America Corporation, The Bank of New York Mellon Corporation, Citigroup Inc., Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley Inc., State Street Corporation, and Wells Fargo & Company. This list may change in the future in light of changes to the relevant attributes of the current U.S. GSIBs and of other large U.S. bank holding companies.

    U.S. GSIB subsidiaries. Covered entities would also include all subsidiaries of the U.S. GSIBs (other than covered banks).52 U.S. GSIBs generally enter into QFCs through subsidiary legal entities rather than through the top-tier holding company.53 Therefore, in order to increase GSIB resolvability by addressing the potential obstacles to orderly resolution posed by QFCs, it is necessary to apply the proposed restrictions to the U.S. GSIBs' subsidiaries.

    52See proposed rule § 252.82(a).

    53 Under the clean holding company component of the Board's recent TLAC proposal, the top-tier holding companies of U.S. GSIBs would be prohibited from entering into direct QFCs with third parties. See 80 FR 74926, 74945.

    In particular, to facilitate the resolution of a GSIB under an SPOE strategy, in which only the top-tier holding company would enter a resolution proceeding while its subsidiaries would continue to meet their financial obligations, or an MPOE strategy where an affiliate of an entity that is otherwise performing under a QFC enters resolution, it is necessary to ensure that those subsidiaries or affiliates do not enter into QFCs that contain cross-default rights that the counterparty could exercise based on the holding company's or affiliate's entry into resolution (or that any such cross-default rights are stayed when the holding company enters resolution). Moreover, including U.S. and non-U.S. entities of a U.S. GSIB as covered entities should help ensure that such cross-default rights do not affect the ability of performing and solvent entities of a GSIB—regardless of jurisdiction—to remain outside of resolution proceedings.

    U.S. operations of foreign GSIBs. Finally, covered entities would include all U.S. operations of foreign GSIBs that are not covered banks, including U.S. subsidiaries, U.S. branches, and U.S. agencies. Under the proposal, the term “global systemically important foreign banking organization” (which this preamble will shorten to “foreign GSIB”) would be defined to include any foreign banking organization that (a) would be designated as a GSIB under the Board's GSIB surcharge rule if it were subject to that rule on a consolidated basis or (b) would be designated as a GSIB under the methodology for identifying GSIBs adopted by the Basel Committee on Banking Supervision (global methodology).54

    54See proposed rule § 252.87. The Basel Committee on Banking Supervision (BCBS) is a committee of bank supervisory authorities established by the central bank governors of the Group of Ten countries in 1975. The committee's membership consists of senior representatives of bank supervisory authorities and central banks from Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. In 2011, the BCBS adopted the global methodology to identify global systemically important banking organizations and assess their systemic importance. See “Global systemically important banks: Assessment methodology and the additional loss absorbency requirement,” available at http://www.bis.org/publ/bcbs207.htm. In 2013, the BCBS published a revised document, which provides certain revisions and clarifications to the global methodology. See “Global systemically important banks: Updated assessment methodology and the higher loss absorbency requirement,” available at http://www.bis.org/publ/bcbs255.htm.

    In November 2015, the FSB and the BCBS published an updated list of banking organizations that are GSIBs under the assessment methodology. The list includes the eight U.S. GSIBs and the following 22 foreign banking organizations: Agricultural Bank of China, Bank of China, Barclays, BNP Paribas, China Construction Bank, Credit Suisse, Deutsche Bank, Groupe BPCE, Groupe Crédit Agricole, Industrial and Commercial Bank of China Limited, HSBC, ING Bank, Mitsubishi UFJ FG, Mizuho FG, Nordea, Royal Bank of Scotland, Santander, Société Générale, Standard Chartered, Sumitomo Mitsui FG, UBS, and Unicredit Group. See FSB, “2015 update of list of global systemically important banks” (November 3, 2015), available at http://www.fsb.org/wp-content/uploads/2015-update-of-list-of-global-systemically-important-banks-G-SIBs.pdf.

    As discussed above, the Board's GSIB surcharge rule identifies the most systemically important banking organizations on the basis of their attributes in the categories of size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity. While the GSIB surcharge rule applies only to U.S. bank holding companies, its methodology is equally well-suited to evaluating the systemic importance of foreign banking organizations. The global methodology generally evaluates the same attributes and would identify the same set of GSIBs as the Board's methodology.

    As with U.S. GSIBs, the proposal's focus on those foreign banking organizations that qualify as GSIBs is in keeping with the Dodd-Frank Act's mandate that more stringent prudential standards be applied to the most systemically important banking organizations.55 Moreover, the use of the GSIB surcharge rule to identify foreign GSIBs as well as U.S. GSIBs promotes a level playing field between U.S. and foreign banking organizations.

    55 12 U.S.C. 5365(a)(1)(B).

    The proposal would cover only the U.S. operations of foreign GSIBs. As with the coverage of subsidiaries of U.S. GSIBs, coverage of the U.S. operations of foreign banks will enhance the orderly resolution of the foreign bank and its U.S. operations. In particular, covering QFCs that involve any U.S. subsidiary, U.S. branch, or U.S. agency of a foreign GSIB will reduce the potentially disruptive cancellation of those QFCs if the foreign bank or any of its subsidiaries enters resolution.56

    56 Under the clean holding company component of the Board's recent TLAC proposal, the U.S. intermediate holding companies of foreign GSIBs would be prohibited from entering into QFCs with third parties. See 80 FR 74926, 74945.

    Question 2: The Board invites comment on the proposed definition of the term “covered entity.”

    Question 3: The Board invites comment on alternative approaches for determining the scope of application of the proposed restrictions.

    Question 4: The Board invites comment on whether the proposal should be expanded to cover banking organizations that are not GSIBs but that engage in especially high levels of QFC activity. If so, what specific metrics should be used to identify such banking organizations?

    B. Covered QFCs

    General definition. The proposal would apply to any “covered QFC,” generally defined as any QFC that a covered entity enters into, executes, or otherwise becomes party to.57 “Qualified financial contract” or “QFC” would be defined as in section 210(c)(8)(D) of Title II of the Dodd-Frank Act and would include swaps, repo and reverse repo transactions, securities lending and borrowing transactions, commodity contracts, and forward agreements.58

    57See proposed rule § 252.83(a). For convenience, this preamble generally refers to “a covered entity's QFCs” or “QFCs to which a covered entity is party” as shorthand to encompass this definition.

    58See proposed rule § 252.81; 12 U.S.C. 5390(c)(8)(D).

    The proposed definition of “covered QFC” is intended to limit the proposed restrictions to those financial transactions whose disorderly unwind has substantial potential to frustrate the orderly resolution of a GSIB, as discussed above. By adopting the Dodd-Frank Act's definition, the proposed rule would extend the benefits of the stay and transfer protections to the same types of transactions in the event the covered entity enters bankruptcy. In this way, the proposal enhances the prospects for an orderly resolution in bankruptcy (as opposed to resolution under Title II of the Dodd-Frank Act) of a covered entity.

    Question 5: The Board invites comment on the proposed definitions of “QFC” and “covered QFC.” Are there financial transactions that could pose a similar risk to U.S. financial stability if a GSIB were to fail but that would not be included within the proposed definitions of QFC and covered QFC? Are there transactions that would be included within the proposed definitions but that would not present risks justifying the application of this proposal? Please explain.

    Exclusion of cleared QFCs. The proposal would exclude from the definition of “covered QFC” all QFCs that are cleared through a central counterparty.59 The issues that the proposal is intended to address with respect to non-cleared QFCs may also exist in the context of centrally cleared QFCs. However, clearing through a central counterparty also provides unique benefits to the financial system as well as unique issues related to the cancellation of cleared contracts. Accordingly, the Board continues to consider the appropriate treatment of centrally cleared QFCs, in light of differences between cleared and non-cleared QFCs with respect to contractual arrangements, counterparty credit risk, default management, and supervision. The Board is also considering whether to propose a regulatory regime that would address the continuity of cleared QFCs during the resolution of a GSIB within the broader context of safeguarding GSIB access to financial market utilities, including central counterparties, during the orderly resolution of the GSIB.

    59See proposed rule § 252.82(b).

    Question 6: The Board invites comment on the proposed exclusion of cleared QFCs, including the potential effects on the financial stability of the United States of excluding cleared QFCs as well as the potential effects on U.S. financial stability of subjecting covered entities' relationships with central counterparties to restrictions analogous to this proposal's restrictions on covered entities' non-cleared QFCs.

    Exclusion of certain QFCs under multi-branch master agreements of foreign banking organizations. To avoid imposing unnecessary restrictions on QFCs that are not closely connected to the United States, the proposal would exclude from the definition of “covered QFC” certain QFCs of foreign GSIBs that lack a close connection to the foreign GSIB's U.S. operations.60 The proposed definition of “QFC” includes master agreements that apply to QFCs.61 Master agreements are contracts that contain general terms that the parties wish to apply to multiple transactions between them; having executed the master agreement, the parties can then include those terms in future contracts through reference to the master agreement. Moreover, the Dodd-Frank Act's definition of “qualified financial contract,” which the proposal would adopt, treats master agreements for QFCs together with all supplements to the master agreement (including underlying transactions) as a single QFC.62

    60See proposed rule § 252.86.

    61See proposed rule § 252.81.

    62 12 U.S.C. 5390(c)(8)(D)(viii); see also 12 U.S.C. 1821(e)(8)(D)(vii); 109 H. Rpt. 31, Prt. 1 (April 8, 2005) (explaining that a “master agreement for one or more securities contracts, commodity contracts, forward contracts, repurchase agreements or swap agreements will be treated as a single QFC under the FDIA or the FCUA (but only with respect to the underlying agreements are themselves QFCs)”).

    Foreign banks have master agreements that permit transactions to be entered into both at a U.S. branch or U.S. agency of the foreign bank and at a non-U.S. location of the foreign bank (such as a foreign branch). Notwithstanding the proposal's general treatment of a master agreement and all QFCs thereunder as a single QFC, the proposal would exclude QFCs under such a “multi-branch master agreement” that are not booked at a covered entity and for which no payment or delivery may be made at a covered entity.63 The multi-branch master agreement would still be a covered QFC with respect to QFC transactions that are booked at a covered entity or for which payment or delivery may be made at a covered entity.

    63See proposed rule § 252.86(a). With respect to a U.S. branch or U.S. agency of a foreign GSIB, a multi-branch master agreement that is a covered QFC solely because the master agreement permits agreements or transactions that are QFCs to be entered into at one or more U.S. branches or U.S. agencies of the foreign GSIB will be considered a covered QFC for purposes of this proposal only with respect to such agreements or transactions booked at such U.S. branches and U.S. agencies or for which a payment or delivery may be made at such U.S. branches or U.S. agencies.

    The purpose of this exclusion is to help ensure that, where a foreign GSIB has a multi-branch master agreement, the foreign GSIB will only have to conform those QFCs entered into under the multi-branch master agreement that could directly affect the obligations of the covered U.S. branch or U.S. agency of the foreign GSIB and that could therefore have the most direct effect on the financial stability of the United States.

    Question 7: The Board invites comment on the proposed exclusion, including the potential benefits and detriments to U.S. financial stability of eliminating the proposed exclusion, the reduction in compliance burden that would be produced by the proposed exclusion, and the proposed exclusion's effect on netting under multi-branch master agreements.

    C. Definition of “Default Right”

    As discussed above, a party to a QFC generally has a number of rights that it can exercise if its counterparty defaults on the QFC by failing to meet certain contractual obligations. These rights are generally, but not always, contractual in nature. One common default right is a setoff right: the right to reduce the total amount that the non-defaulting party must pay by the amount that its defaulting counterparty owes. A second common default right is the right to liquidate pledged collateral and use the proceeds to pay the defaulting party's net obligation to the non-defaulting party. Other common rights include the ability to suspend or delay the non-defaulting party's performance under the contract or to accelerate the obligations of the defaulting party. Finally, the non-defaulting party typically has the right to terminate the QFC, meaning that the parties would not make payments that would have been required under the QFC in the future. The phrase “default right” in the proposed rule is broadly defined to include these common rights as well as “any similar rights.” 64 Additionally, the definition includes all such rights regardless of source, including rights existing under contract, statute, or common law.

    64See proposed rule § 252.81.

    However, the proposed definition excludes two rights that are typically associated with the business-as-usual functioning of a QFC. First, same-day netting that occurs during the life of the QFC in order to reduce the number and amount of payments each party owes the other is excluded from the definition of “default right.” 65 Second, contractual margin requirements that arise solely from the change in the value of the collateral or the amount of an economic exposure are also excluded from the definition.66 The function of these exclusions is to leave such rights unaffected by the proposed rule. The exclusions are appropriate because the proposal is intended to improve resolvability by addressing default rights that could disrupt an orderly resolution, not to interrupt the parties' business-as-usual interactions under a QFC.

    65See id.

    66See id.

    However, certain QFCs are also commonly subject to rights that would increase the amount of collateral or margin that the defaulting party (or a guarantor) must provide upon an event of default. The financial impact of such default rights on a covered entity could be similar to the impact of the liquidation and acceleration rights discussed above. Therefore, the proposed definition of “default right” includes such rights (with the exception discussed in the previous paragraph for margin requirements that depend solely on the value of collateral or the amount of an economic exposure).67

    67See id.

    Finally, contractual rights to terminate without the need to show cause, including rights to terminate on demand and rights to terminate at contractually specified intervals, are excluded from the definition of “default right” for purposes the proposed rule's restrictions on cross-default rights (section 252.84 of the proposed rule).68 This is consistent with the proposal's objective of restricting only default rights that are related, directly or indirectly, to the entry into resolution of an affiliate of the covered entity, while leaving other default rights unrestricted.

    68See proposed rule §§ 252.81, 252.84.

    Question 8: The Board invites comment on all aspects of the proposed definition of “default right.” In particular, are the proposed exclusions appropriate in light of the objectives of the proposal? To what extent does the exclusion of rights that allow a party to terminate the contract “on demand or at its option at a specified time, or from time to time, without the need to show cause” create an incentive for firms to include these rights in future contracts to evade the proposed restrictions? To what extent should other regulatory requirements (e.g., liquidity coverage ratio or the short-term wholesale funding components of the GSIB surcharge rule) be revised to create a counterincentive? Would additional exclusions be appropriate? To what extent should it be clarified that the “need to show cause” includes the need to negotiate alternative terms with the other party prior to termination or similar requirements (e.g., Master Securities Loan Agreement, Annex III—Term Loans)?

    D. Required Contractual Provisions Related to the U.S. Special Resolution Regimes (Section 252.83 of the Proposed Rule)

    Under the proposal, a covered QFC would be required to explicitly provide both (a) that the transfer of the QFC (and any interest or obligation in or under it and any property securing it) from the covered entity to a transferee would be effective to the same extent as it would be under the U.S. special resolution regimes if the covered QFC were governed by the laws of the United States or of a state of the United States and (b) that default rights with respect to the covered QFC that could be exercised against a covered entity could be exercised to no greater extent than they could be exercised under the U.S. special resolution regimes if the covered QFC were governed by the laws of the United States or of a state of the United States.69 The proposal would define the term “U.S. special resolution regimes” to mean the FDI Act 70 and Title II of the Dodd-Frank Act,71 along with regulations issued under those statutes.72

    69See proposed rule § 252.83.

    70 12 U.S.C. 1811-1835a.

    71 12 U.S.C. 5381-5394.

    72See proposed rule § 252.81.

    The proposed requirements are not intended to imply that a given covered QFC is not governed by the laws of the United States or of a state of the United States, or that the statutory stay-and-transfer provisions would not in fact apply to a given covered QFC. Rather, the requirements are intended to provide certainty that all covered QFCs would be treated the same way in the context of a receivership of a covered entity under the Dodd-Frank Act or the FDI Act. The stay-and-transfer provisions of the U.S. special resolution regimes should be enforced with respect to all contracts of any U.S. GSIB entity that enters resolution under a U.S. special resolution regime as well as all transactions of the subsidiaries of such an entity. Nonetheless, it is possible that a court in a foreign jurisdiction would decline to enforce those provisions in cases brought before it (such as a case regarding a covered QFC between a covered entity and a non-U.S. entity that is governed by non-U.S. law and secured by collateral located outside the United States). By requiring that the effect of the statutory stay-and-transfer provisions be incorporated directly into the QFC contractually, the proposed requirement would help ensure that a court in a foreign jurisdiction would enforce the effect of those provisions, regardless of whether the court would otherwise have decided to enforce the U.S. statutory provisions themselves.73 For example, the proposed provisions should prevent a U.K. counterparty of a U.S. GSIB from persuading a U.K. court that it should be permitted to seize and liquidate collateral located in the United Kingdom in response to the U.S. GSIB's entry into OLA resolution. And the knowledge that a court in a foreign jurisdiction would reject the purported exercise of default rights in violation of the required provisions would deter covered entities' counterparties from attempting to exercise such rights.

    73See generally Financial Stability Board, “Principles for Cross-border Effectiveness of Resolution Actions” (November 3, 2015), available at http://www.fsb.org/wp-content/uploads/Principles-for-Cross-border-Effectiveness-of-Resolution-Actions.pdf.

    This requirement would advance the proposal's goal of removing QFC-related obstacles to the orderly resolution of a GSIB. As discussed above, restrictions on the exercise of QFC default rights are an important prerequisite for an orderly GSIB resolution. Congress recognized the importance of such restrictions when it enacted the stay-and-transfer provisions of the U.S. special resolution regimes. As demonstrated by the 2007-2009 financial crisis, the modern financial system is global in scope, and covered entities are party to large volumes of QFCs with connections to foreign jurisdictions. The stay-and-transfer provisions of the U.S. special resolution regimes would not achieve their purpose of facilitating orderly resolution in the context of the failure of a GSIB with large volumes of such QFCs if QFCs could escape the effect of those provisions. To remove any doubt about the scope of coverage of these provisions, the proposed requirement would ensure that the stay-and-transfer provisions apply as a matter of contract to all covered QFCs, wherever the transaction. This will advance the resolvability goals of the Dodd-Frank Act and the FDI Act.

    This section of the proposal is consistent with efforts by regulators in other jurisdictions to address similar risks by requiring that financial firms within their jurisdictions ensure that the effect of the similar provisions under these foreign jurisdictions' respective special resolution regimes would be enforced by courts in other jurisdictions, including the United States. For example, the United Kingdom's Prudential Regulation Authority (PRA) recently required certain financial firms to ensure that their counterparties to newly created obligations agree to be subject to stays on early termination that are similar to those that would apply upon a U.K. firm's entry into resolution if the financial arrangements were governed by U.K. law.74 Similarly, the German parliament passed a law in November 2015 requiring German financial institutions to have provisions in financial contracts that are subject to the law of a country outside of the European Union that acknowledge the provisions regarding the temporary suspension of termination rights and accept the exercise of the powers regarding such temporary suspension under the German special resolution regime.75 Additionally, the Swiss Federal Council requires that banks “ensure at both the individual institution and group level that new agreements or amendments to existing agreements which are subject to foreign law or envisage a foreign jurisdiction are agreed only if the counterparty recognises a postponement of the termination of agreements in accordance with” the Swiss special resolution regime.76

    74See PRA Rulebook: CRR Firms and Non-Authorised Persons: Stay in Resolution Instrument 2015, available at http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps2515app1.pdf; see also Bank of England, Prudential Regulation Authority, “Contractual stays in financial contracts governed by third-country law” (PS25/15) (November 2015), available at http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps2515.pdf. These PRA rules apply to PRA-authorized banks, building societies, PRA-designated investment firms, and their qualifying parent undertakings, including U.K. financial holding companies and U.K. mixed financial holding companies.

    75See Gesetz zur Sanierung und Abwicklung von Instituten und Finanzgruppen, Sanierungs-und Abwicklungsgesetz [SAG] [German Act on the Reorganisation and Liquidation of Credit Institutions], Dec. 10, 2014, § 60a, https://www.gesetze-im-internet.de/bundesrecht/sag/gesamt.pdf.

    76See Verordnung über die Finanzmarktinfrastrukturen und das Marktverhalten im Effekten- und Derivatehandel [FinfraV] [Ordinance on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading] Nov. 25, 2015, amending Bankenverordnung vom 30. April 2014 [BankV] [Banking Ordinance of 30 April 2014] Apr. 30, 2014, SR 952.02, art. 12 paragraph 2bis, translation at http://www.news.admin.ch/NSBSubscriber/message/attachments/42659.pdf; see also Erläuterungsbericht zur Verordnung über die Finanzmarktinfrastrukturen und das Marktverhalten im Effekten- und Derivatehandel (Nov. 25, 2015) (providing commentary).

    Question 9: The Board invites comment on all aspects of this section of the proposal.

    E. Prohibited Cross-Default Rights (Section 252.84 of the Proposed Rule)

    Definitions. Section 252.84 of the proposal pertains to cross-default rights in QFCs between covered entities and their counterparties, many of which are subject to credit enhancements (such as a guarantee) provided by an affiliate of the covered entity. Because credit enhancements on QFCs are themselves “qualified financial contracts” under the Dodd-Frank Act's definition of that term (which this proposal would adopt), the proposal includes the following additional definitions in order to facilitate a precise description of the relationships to which it would apply.

    First, the proposal distinguishes between a credit enhancement and a “direct QFC,” defined as any QFC that is not a credit enhancement.77 The proposal also defines “direct party” to mean a covered entity that is itself a party to the direct QFC, as distinct from an entity that provides a credit enhancement.78 In addition, the proposal defines “affiliate credit enhancement” to mean “a credit enhancement that is provided by an affiliate of the party to the direct QFC that the credit enhancement supports,” as distinct from a credit enhancement provided by either the direct party itself or by an unaffiliated party.79 Moreover, the proposal defines “covered affiliate credit enhancement” to mean an affiliate credit enhancement provided by a covered entity and defines “covered affiliate support provider” to mean the covered entity that provides the covered affiliate credit enhancement.80 Finally, the proposal defines the term “supported party” to mean any party that is the beneficiary of a covered affiliate credit enhancement (that is, the QFC counterparty of a direct party, assuming that the direct QFC is subject to a covered affiliate credit enhancement).81

    77See proposed rule § 252.84(c)(2).

    78See proposed rule § 252.84(c)(1).

    79See proposed rule § 252.84(c)(3).

    80See proposed rule § 252.84(f)(2).

    81See proposed rule § 252.84(f)(4).

    General prohibitions. Subject to the substantial exceptions discussed below, the proposal would prohibit a covered entity from being party to a covered QFC that allows for the exercise of any default right that is related, directly or indirectly, to the entry into resolution of an affiliate of the covered entity.82 The proposal also would generally prohibit a covered entity from being party to a covered QFC that would prohibit the transfer of any credit enhancement applicable to the QFC (such as another entity's guarantee of the covered entity's obligations under the QFC), along with associated obligations or collateral, upon the entry into resolution of an affiliate of the covered entity.83

    82See proposed rule § 252.84(b)(1).

    83See proposed rule § 252.84(b)(2). This prohibition would be subject to an exception that would allow supported parties to exercise default rights with respect to a QFC if the supported party would be prohibited from being the beneficiary of a credit enhancement provided by the transferee under any applicable law, including the Employee Retirement Income Security Act of 1974 and the Investment Company Act of 1940. This exception is substantially similar to an exception to the transfer restrictions in section 2(f) of the ISDA 2014 Resolution Stay Protocol (2014 Protocol) and the ISDA 2015 Universal Resolution Stay Protocol, which was added to address concerns expressed by asset managers during the drafting of the 2014 Protocol.

    A primary purpose of the proposed restrictions is to facilitate the resolution of a GSIB outside of Title II, including under the Bankruptcy Code. As discussed above, the potential for mass exercises of QFC default rights is one reason why a GSIB's failure could do severe damage to financial stability. In the context of an SPOE resolution, if the GSIB parent's entry into resolution led to the mass exercise of cross-default rights by the subsidiaries' QFC counterparties, then the subsidiaries could themselves fail or experience financial distress. Moreover, the mass exercise of QFC default rights could entail asset firesales, which likely would affect other financial companies and undermine financial stability. Similar disruptive results can occur with an MPOE resolution of an affiliate of an otherwise performing entity triggers default rights on QFCs involving the performing entity.

    In an SPOE resolution, this damage can be avoided if actions of the following two types are prevented: The exercise of direct default rights against the top-tier holding company that has entered resolution, and the exercise of cross-default rights against the operating subsidiaries based on their parent's entry into resolution. (Direct default rights against the subsidiaries would not be exercisable, because the subsidiaries would not enter resolution.) In an MPOE resolution, this damage occurs from exercise of default rights against a performing entity based on the failure of an affiliate.

    Under the OLA, the Dodd-Frank Act's stay-and-transfer provisions would address both direct default rights and cross-default rights. But, as explained above, no similar statutory provisions would apply to a resolution under the Bankruptcy Code. This proposal attempts to address these obstacles to orderly resolution under the Bankruptcy Code by extending the stay-and-transfer provisions to any type of resolution of a covered entity. Similarly, the proposal would facilitate a transfer of the GSIB parent's interests in its subsidiaries, along with any credit enhancements it provides for those subsidiaries, to a solvent financial company by prohibiting covered entities from having QFCs that would allow the QFC counterparty to prevent such a transfer or to use it as a ground for exercising default rights.84

    84See proposed rule § 252.84(b).

    The proposal also is intended to facilitate other approaches to GSIB resolution. For example, it would facilitate a similar resolution strategy in which a U.S. depository institution subsidiary of a GSIB enters resolution under the FDI Act while its subsidiaries continue to meet their financial obligations outside of resolution.85 Similarly, the proposal would facilitate the orderly resolution of a foreign GSIB under its home jurisdiction resolution regime by preventing the exercise of cross-default rights against the foreign GSIB's U.S. operations. The proposal would also facilitate the resolution of the U.S. intermediate holding company of a foreign GSIB, and the recapitalization of its U.S. operating subsidiaries, as part of a broader MPOE resolution strategy under which the foreign GSIB's operations in other regions would enter separate resolution proceedings. Finally, the proposal would broadly prevent the unanticipated failure of any one GSIB entity from bringing about the disorderly failures of its affiliates by preventing the affiliates' QFC counterparties from using the first entity's failure as a ground for exercising default rights against those affiliates that continue meet to their obligations.

    85 As discussed above, the FDI Act would prevent the exercise of direct default rights against the depository institution, but it does not address the threat posed to orderly resolution by cross-default rights in the QFCs of the depository institution's subsidiaries. This proposal would facilitate orderly resolution under the FDI Act by filling that gap.

    The proposal is intended to enhance the potential for orderly resolution of a GSIB under the Bankruptcy Code, the FDI Act, or a similar resolution regime. By doing so, the proposal would advance the Dodd-Frank Act's goal of making orderly GSIB resolution workable under the Bankruptcy Code.86

    86See 12 U.S.C. 5365(d).

    The proposal could also benefit the counterparties of a subsidiary of a failed GSIB, by preventing the disorderly failure of the subsidiary and allowing it to continue to meet its obligations. While it may be in the individual interest of any given counterparty to exercise any available rights to run on a subsidiary of a failed GSIB, the mass exercise of such rights could harm the counterparties' collective interest by causing an otherwise-solvent subsidiary to fail. Therefore, like the automatic stay in bankruptcy, which serves to maximize creditors' ultimate recoveries by preventing a disorderly liquidation of the debtor, the proposal would mitigate this collective action problem to the benefit of the failed firm's creditors and counterparties by preventing a disorderly resolution. And because many creditors and counterparties of GSIBs are themselves systemically important financial firms, improving outcomes for those creditors and counterparties would further protect the financial stability of the United States.

    General creditor protections. While the proposed restrictions would facilitate orderly resolution, they would also diminish the ability of covered entities' QFC counterparties to include certain protections for themselves in covered QFCs. In order to reduce this effect, the proposal includes several substantial exceptions to the proposed restrictions.87 These permitted creditor protections are intended to allow creditors to exercise cross-default rights outside of an orderly resolution of a GSIB (as described above) and therefore would not be expected to undermine such a resolution.

    87See proposed rule § 252.84(e).

    First, in order to ensure that the proposed prohibitions would apply only to cross-default rights (and not direct default rights), the proposal would provide that a covered QFC may permit the exercise of default rights based on the direct party's entry into a resolution proceeding, other than a proceeding under a U.S. or foreign special resolution regime.88 This provision would help ensure that, if the direct party to a QFC were to enter bankruptcy, its QFC counterparties could exercise any relevant direct default rights. Thus, a covered entity's direct QFC counterparties would not risk the delay and expense associated with becoming involved in a bankruptcy proceeding, and would be able to take advantage of default rights that would fall within the Bankruptcy Code's safe harbor provisions.

    88See proposed rule § 252.84(e)(1). Special resolution regimes typically stay direct default rights, but may not stay cross-default rights. For example, as discussed above, the FDI Act stays direct default rights, see 12 U.S.C. 1821(e)(10)(B), but does not stay cross-default rights, whereas the Dodd-Frank Act's OLA stays direct default rights and cross-defaults arising from a parent's receivership, see 12 U.S.C. 5390(c)(10)(B), 5390(c)(16).

    The proposal would also allow covered QFCs to permit the exercise of default rights based on the failure of the direct party, a covered affiliate support provider, or a transferee that assumes a credit enhancement to satisfy its payment or delivery obligations under the direct QFC or credit enhancement.89 Moreover, the proposal would allow covered QFCs to permit the exercise of a default right in one QFC that is triggered by the direct party's failure to satisfy its payment or delivery obligations under another contract between the same parties. This exception takes appropriate account of the interdependence that exists among the contracts in effect between the same counterparties.

    89See proposed rule § 252.84(e)(2)-(3).

    The proposed exceptions for the creditor protections described above are intended to help ensure that the proposal permits a covered entity's QFC counterparties to protect themselves from imminent financial loss and does not create a risk of delivery gridlocks or daisy-chain effects, in which a covered entity's failure to make a payment or delivery when due leaves its counterparty unable to meet its own payment and delivery obligations (the daisy-chain effect would be prevented because the covered entity's counterparty would be permitted to exercise its default rights, such as by liquidating collateral). These exceptions are generally consistent with the treatment of payment and delivery obligations under the U.S. special resolution regimes.90

    90See 12 U.S.C. 1821(e)(8)(G)(ii), 5390(c)(8)(F)(ii) (suspending payment and delivery obligations for one business day or less).

    These exceptions also help to ensure that a covered entity's QFC counterparty would not risk the delay and expense associated with becoming involved in a bankruptcy proceeding, since, unlike a typical creditor of an entity that enters bankruptcy, the QFC counterparty would retain its ability under the Bankruptcy Code's safe harbors to exercise direct default rights. This should further reduce the counterparty's incentive to run. Reducing incentives to run in the lead up to resolution promotes orderly resolution, since a QFC creditor run (such as a mass withdrawal of repo funding) could lead to a disorderly resolution and pose a threat to financial stability.

    Additional creditor protections for supported QFCs. The proposal would allow additional creditor protections for a non-defaulting counterparty that is the beneficiary of a credit enhancement from an affiliate of the covered entity that is also a covered entity under the proposal.91 The proposal would allow these creditor protections in recognition of the supported party's interest in receiving the benefit of its credit enhancement. These creditor protections would not undermine an SPOE resolution of a GSIB.

    91See proposed rule § 252.84(g).

    Where a covered QFC is supported by a covered affiliate credit enhancement,92 the covered QFC and the credit enhancement would be permitted to allow the exercise of default rights under the circumstances discussed below after the expiration of a stay period. Under the proposal, the applicable stay period would begin when the credit support provider enters resolution and would end at the later of 5:00 p.m. (eastern time) on the next business day and 48 hours after the entry into resolution.93 This portion of the proposal is similar to the stay treatment provided in a resolution under the OLA or the FDI Act.94

    92 Note that the exception in § 252.84(g) of the proposed rule would not apply with respect to credit enhancements that are not covered affiliate credit enhancements. In particular, it would not apply with respect to a credit enhancement provided by a non-U.S. entity of a foreign GSIB, which would not be a covered entity under the proposal. Such credit enhancements would be excluded in order to help ensure that the resolution of a non-U.S. entity would not negatively affect the financial stability of the United States by allowing for the exercise of default rights against a covered entity.

    93See proposed rule § 252.84(h)(1).

    94See 12 U.S.C. 1821(e)(10)(B)(I), 5390(c)(10)(B)(i), 5390(c)(16)(A). While the proposed stay period is similar to the stay periods that would be imposed by the U.S. special resolution regimes, it could run longer than those stay periods under some circumstances.

    Under the proposal, default rights could be exercised at the end of the stay period if the covered affiliate credit enhancement has not been transferred away from the covered affiliate support provider and that support provider becomes subject to a resolution proceeding other than a proceeding under Chapter 11 of the Bankruptcy Code.95 Default rights could also be exercised at the end of the stay period if the transferee (if any) of the credit enhancement enters a resolution proceeding, protecting the supported party from a transfer of the credit enhancement to a transferee that is unable to meet its financial obligations.

    95See proposed rule § 252.84(g)(1). Chapter 11 (11 U.S.C. 1101-1174) is the portion of the Bankruptcy Code that provides for the reorganization of the failed company, as opposed to its liquidation, and, relative to special resolution regimes, is generally well-understood by market participants.

    Default rights could also be exercised at the end of the stay period if the original credit support provider does not remain, and no transferee becomes, obligated to the same (or substantially similar) extent as the original credit support provider was obligated immediately prior to entering a resolution proceeding (including a Chapter 11 proceeding) with respect to (a) the credit enhancement applicable to the covered QFC, (b) all other credit enhancements provided by the credit support provider on any other QFCs between the same parties, and (c) all credit enhancements provided by the credit support provider between the direct party and affiliates of the direct party's QFC counterparty.96 Such creditor protections would be permitted in order to prevent the support provider or the transferee from “cherry picking” by assuming only those QFCs of a given counterparty that are favorable to the support provider or transferee. Title II and the FDI Act contain similar provisions to prevent cherry picking.

    96See proposed rule § 252.84(g)(3).

    Finally, if the covered affiliate credit enhancement is transferred to a transferee, then the non-defaulting counterparty could exercise default rights at the end of the stay period unless either (a) all of the support provider's ownership interests in the direct party are also transferred to the transferee or (b) reasonable assurance is provided that substantially all of the support provider's assets (or the net proceeds from the sale of those assets) will be transferred to the transferee in a timely manner. These conditions would help to assure the supported party that the transferee would be at least roughly as financially capable of providing the credit enhancement as the covered affiliate support provider. Title II contains a similar provision regarding affiliate credit enhancements.97

    97 12 U.S.C. 5390(c)(16)(A).

    Creditor protections related to FDI Act proceedings. Moreover, in the case of a covered QFC that is supported by a covered affiliate credit enhancement, both the covered QFC and the credit enhancement would be permitted to allow the exercise of default rights related to the credit support provider's entry into resolution proceedings under the FDI Act 98 under the following circumstances: (a) After the FDI Act stay period,99 if the credit enhancement is not transferred under the relevant provisions of the FDI Act 100 and associated regulations, and (b) during the FDI Act stay period, to the extent that the default right permits the supported party to suspend performance under the covered QFC to the same extent as that party would be entitled to do if the covered QFC were with the credit support provider itself and were treated in the same manner as the credit enhancement.101 This provision is intended to ensure that a QFC counterparty of a subsidiary of a bank that goes into FDI Act receivership can receive the same level of protection that the FDI Act provides to QFC counterparties of the bank itself.

    98 As discussed above, the FDI Act stays direct default rights against the failed depository institution but does not stay the exercise of cross-default rights against its affiliates.

    99 Under the FDI Act, the relevant stay period runs until 5:00 p.m. (eastern time) on the business day following the appointment of the FDIC as receiver. 12 U.S.C. 1821(e)(10)(B)(I).

    100 12 U.S.C. 1821(e)(9)-(10).

    101See proposed rule § 252.84(i).

    Prohibited terminations. In case of a legal dispute as to a party's right to exercise a default right under a covered QFC, the proposal would require that a covered QFC must provide that, after an affiliate of the direct party has entered a resolution proceeding, (a) the party seeking to exercise the default right bears the burden of proof that the exercise of that right is indeed permitted by the covered QFC and (b) the party seeking to exercise the default right must meet a “clear and convincing evidence” standard, a similar standard,102 or a more demanding standard.

    102 The reference to a “similar” burden of proof is intended to allow covered QFCs to provide for the application of a standard that is analogous to clear and convincing evidence in jurisdictions that do not recognize that particular standard. A covered QFC would not be permitted to provide for a lower standard.

    The purpose of this proposed requirement is to deter the QFC counterparty of a covered entity from thwarting the purpose of this proposal by exercising a default right because of an affiliate's entry into resolution under the guise of other default rights that are unrelated to the affiliate's entry into resolution.

    Agency transactions. In addition to entering into QFCs as principals, GSIBs may engage in QFCs as agent for other principals. For example, a GSIB subsidiary may enter into a master securities lending arrangement with a foreign bank as agent for a U.S.-based pension fund. The GSIB would document its role as agent for the pension fund, often through an annex to the master agreement, and would generally provide to its customer (the principal party) a securities replacement guarantee or indemnification for any shortfall in collateral in the event of the default of the foreign bank.103 A covered entity may also enter into a QFC as principal where there is an agent acting on its behalf or on behalf of its counterparty.

    103 The definition of QFC under Title II of the Dodd-Frank Act includes security agreements and other credit enhancements as well as master agreements (including supplements). 12 U.S.C. 5390(c)(8)(D).

    This proposal would apply to a covered QFC regardless of whether the covered entity or the covered entity's direct counterparty is acting as a principal or as an agent. Section 252.83 and section 252.84 do not distinguish between agents and principals with respect to default rights or transfer restrictions applicable to covered QFCs. Section 252.83 would limit default rights and transfer restrictions that the principal and its agent may have against a covered entity consistent with the U.S. special resolution regimes.104 Section 252.84 would ensure that, subject to the enumerated creditor protections, neither the agent nor the principal could exercise cross-default rights under the covered QFC against the covered entity based on the resolution of an affiliate of the covered entity.105

    104See proposed rule § 252.83(a)(3).

    105See proposed rule § 252.84(d). If a covered entity (acting as agent) is a direct party to a covered QFC, then the general prohibitions of section 252.84(d) would only affect the substantive rights of the agent's principal(s) to the extent that the covered QFC provides default rights based directly or indirectly on the entry into resolution of an affiliate of the covered entity (acting as agent). See also proposed rule § 252.84(a)(3).

    Compliance with the ISDA 2015 Resolution Stay Protocol. As an alternative to compliance with the requirements of section 252.84 that are described above, a covered entity would comply with the proposed rule to the extent its QFCs are amended by to the current ISDA 2015 Universal Resolution Stay Protocol, including the Securities Financing Transaction Annex and the Other Agreements Annex, as well as subsequent, immaterial amendments to the Protocol.106 The Protocol “enables parties to amend the terms of their [contracts] to contractually recognize the cross-border application of special resolution regimes applicable to certain financial companies and support the resolution of certain financial companies under the United States Bankruptcy Code.” 107 The Protocol amends ISDA Master Agreements, which are used for derivatives transactions. Market participants that adhere to the Protocol would amend their master agreements for securities financing transactions pursuant to the Securities Financing Transaction Annex to the Protocol and would amend all other QFCs pursuant to the Other Agreements Annex. Thus, a covered entity would comply with the proposed rule with respect to all of its covered QFCs through adherence to the Protocol and the annexes.

    106 International Swaps and Derivatives Association, Inc., “ISDA 2015 Universal Resolution Stay Protocol” (November 4, 2015), available at http://assets.isda.org/media/ac6b533f-3/5a7c32f8-pdf/. The Protocol was developed by a working group of member institutions of the International Swaps and Derivatives Association, Inc. (ISDA), in coordination with the Board, the FDIC, the OCC, and foreign regulatory agencies. The Securities Financing Transaction Annex was developed by the International Capital Markets Association, the International Securities Lending Association, and the Securities Industry and Financial Markets Association, in coordination with ISDA. ISDA is expected to supplement the Protocol with ISDA Resolution Stay Jurisdictional Modular Protocols for the United States and other jurisdictions. A jurisdictional module for the United States that is substantively identical to the Protocol in all respects aside from exempting QFCs between adherents that are not covered entities or covered banks would be consistent with the current proposal.

    107 Protocol Press Release at http://www2.isda.org/functional-areas/protocol-management/protocol/22.

    The Protocol has the same general objective as the proposed rule: To make GSIBs more resolvable by amending their contracts to, in effect, contractually recognize the applicability of U.S. special resolution regimes 108 and to restrict cross-default provisions to facilitate orderly resolution under the U.S. Bankruptcy Code. Moreover, the provisions of the Protocol largely track the requirements of the proposed rule.109

    108 The Protocol also includes other special resolution regimes. Currently, the Protocol includes special resolution regimes in place in France, Germany, Japan, Switzerland, and the United Kingdom. Other special resolution regimes that meet the definition of “Protocol-eligible Regime” may be added to the Protocol.

    109 Sections 2(a) and (b) of the Protocol provide the stays required under paragraph (b)(1) of proposed rule § 252.84 for the most common U.S. insolvency regimes. Section 2(f) of the Protocol overrides transfer restrictions as required under paragraph (b)(2) of proposed rule § 252.84 for transfers that are consistent with the Protocol. The Protocol's exemptions from the stay for “Performance Default Rights” and the “Unrelated Default Rights” described in paragraph (a) of the definition are consistent with the proposal's general creditor protections permitted under paragraph (b) of proposed rule § 252.84. The Protocol's burden of proof provisions (see section 2(i) of the Protocol and the definition of Unrelated Default Rights) and creditor protections for credit enhancement providers in FDI Act proceedings (see Section 2(d) of the Protocol) are also consistent with the paragraphs (j) and (i), respectively, of proposed rule § 252.84. Note also that, although exercise of Performance Default Rights under the Protocol does not require a showing of clear and convincing evidence while these same rights under the proposal (proposed rule § 225.84(e)) would require such a showing, this difference between the Protocol and the proposal does not appear to be meaningful because clearly documented evidence for such default rights (i.e., payment and performance failures, entry into resolution proceedings) should exist.

    The scope of the stay and transfer provisions in the Protocol are narrower than the stay and transfer provisions required under the proposal.110 The Protocol also allows any non-defaulting counterparty to exercise its related default rights 111 under the agreement if an affiliate of its direct party enters resolution proceedings (other than U.S. Federal insolvency proceedings) while the top-tier U.S. parent of the counterparty's direct party remains outside of resolution proceedings.

    110 The Protocol only stays default rights arising from proceedings under Chapters 7 and 11 of the Bankruptcy Code, the FDI Act, and the Securities Investor Protection Act (U.S. Federal insolvency proceedings). The stay required under proposed rule § 252.84 is broader; it requires a stay to apply under any receivership, insolvency, liquidation, resolution, or similar proceeding, and therefore includes applicable state and foreign insolvency proceedings.

    111 Related default rights refer to default rights based solely on such insolvency or receivership of the affiliate. See paragraph (b) of the definition of Unrelated Default Rights in the Protocol.

    The Protocol also provides a number of protections to supported parties that are additional to, or stronger versions of, the creditor protections the proposal otherwise permits for supported parties.112 Specifically, the Protocol's protections require that the covered affiliate support provider or transferee to remain obligated to the “same extent” for its stay to remain effective,113 and that the direct party remain duly registered and licensed by relevant regulatory bodies.114 In addition, the Protocol is more specific than the proposal as to the form and timing of the assurance that the covered affiliate support provider's assets (or net proceeds therefrom) would be transferred to the transferee.115

    112 The Protocol is consistent with the creditor protections of paragraphs (e)(1) and (e)(2) of § 252.84. Section 2(b) of the Protocol requires the support provider to have entered only a Chapter 11 resolution proceeding. Section 2(b)(ii)(A)(II) requires the transferee to remain outside of resolution proceedings.

    113 See paragraph (a) of the definition of DIP Stay Conditions and paragraphs (b) and (c) of the definition of Transfer Stay Conditions in the Protocol. In contrast, the proposal would not permit a covered QFC to exempt the non-defaulting party from the stay and transfer requirements of proposed rule § 252.84 if the covered affiliate support provider or transferee remains obligated to the same or substantially similar extent as the covered affiliate support provider was immediately prior to entering the resolution proceeding. See proposed rule § 252.84(g)(3).

    114See section 2(b)(ii)(C)(I) and 2(b)(iii)(C) of the Protocol.

    115 The proposal would not otherwise permit a QFC to be relieved from § 252.84's general prohibitions as long as the non-defaulting counterparty to receives “reasonable assurance” that the covered affiliate support provider's assets (or net proceeds therefrom) would be transferred to the transferee, as described above. See proposed rule § 252.84(g)(4). The Protocol requires that the bankruptcy court issue order to that effect at the end of the stay period. Section 2(b)(ii) of the Protocol.

    A number of the additional creditor protections of the Protocol depend on whether credit enhancements have been transferred to another entity. Additional protections for situations in which the credit enhancements are transferred include the transferee satisfying all material payment and delivery obligations to each of its creditors during the stay period; 116 the transferee continuing to satisfy all financial covenants and other terms applicable to the credit enhancement provider under the agreement after the stay period; 117 and the transferee continuing to satisfy all provisions and covenants regarding the attachment, enforceability, perfection, or priority of property securing the obligations of the credit enhancement after the stay period.118 Additional protections for situations in which the affiliate credit support provider remains obligated after the resolution proceeding include the bankruptcy court's issuance of an order by the end of the stay period providing supported parties with increased creditor priority in bankruptcy.119

    116 Section 2(b)(ii)(A)(II) of the Protocol.

    117 Section 2(b)(ii)(C)(II) of the Protocol. This requirement only applies with respect to transfers to transferees that are not affiliated with the credit support provider. See id.; definition of Bankruptcy Bridge Company of the Protocol.

    118 Section 2(b)(ii)(C)(III) of the Protocol.

    119 Section 2(b)(iii)(B) and the definition of DIP Stay Conditions of the Protocol. The Protocol permits such closeout pursuant to section 2(c). The order would (1) include the grant of administrative expense status to the non-defaulting counterparty's claims against the credit enhancements the affiliate support provider has provided the counterparty; (2) allow the non-defaulting counterparty to exercise its default rights with respect to a direct QFCs supported by the affiliate support provider without further involvement from the bankruptcy court if the direct party or affiliate support provider fail to meet any material obligations to the counterparty under the agreement; and (3) allow the counterparty to exercise its default rights against the direct party and affiliate support provider without further involvement from the bankruptcy court if the direct party failed to pay or deliver to another party any close-out amount when due and the affiliate support provider does not satisfy its obligations under a credit enhancement that supports the direct QFC with the other party. Paragraphs (a)-(c) of the definition of Creditor Protection Order of the Protocol.

    As compared to the creditor protections provided in the proposal, the Protocol's additional creditor protections appear to meaningfully increase a supported party's assurance that material payment and delivery obligations under its covered QFCs will continue to be performed and should meaningfully decrease the supported party's credit risk to its direct parties.120

    120See proposed rule § 252.85(d)(7), (9).

    Moreover, the additional creditor protections do not appear to materially diminish the prospects for the orderly resolution of a GSIB entity because the Protocol includes a number of desirable features that the proposal lacks. First, when an entity (whether or not it is a covered entity) adheres to the Protocol, it necessarily adheres to the Protocol with respect to all covered entities that have also adhered to the Protocol rather than one or a subset of covered entities (as the proposal may otherwise permit).121 Since many covered entities have already adhered to the Protocol, any other entity that chooses to adhere will simultaneously adhere with respect to all covered entities.122 This feature appears to allow the Protocol to address impediments to resolution on an industry-wide basis and increase market certainty, transparency, and equitable treatment with respect to default rights of non-defaulting parties.123 Other features of the Protocol that the proposal otherwise lacks also reflect positively toward other proposed factors relevant to proposals for enhanced creditor protections: The Protocol amends all existing transactions of adhering parties; 124 does not provide the counterparty with default rights in addition to those provided under the underlying QFC,125 and, as noted, applies to all QFCs.126 These features also increase the chances that all or most of the QFC counterparties to a GSIB will be stayed to the same extent in the resolution of the GSIB and improve the chances that a GSIB could be resolved in an orderly manner. Finally, the Protocol is not limited to resolution under the U.S. Bankruptcy Code but also includes U.S. special resolution regimes and certain non-U.S. special resolution regimes, which should help facilitate the resolution of a GSIB across a broader range of scenarios.

    121 Under section 4(a) of the Protocol, the Protocol is generally effective as between any two adhering parties, once the relevant effective date has arrived. Under section 4(b)(ii), an adhering party that is not a covered entity may choose to opt out of section 2 of the Protocol with respect to its contracts with any other adhering party that is also not a covered entity. However, the Protocol will apply to relationships between any covered entity that adheres and any other adhering party.

    122See proposed rule § 252.85(d)(3), (6).

    123See proposed rule § 252.85(d)(3).

    124See proposed rule § 252.85(d)(4). If a covered entity intends to continue to comply with the requirements of the proposal through the Protocol alternative after its initial adherence, the covered entity should ensure that future master agreements and credit enhancements also become subject to the terms of the Protocol.

    125See proposed rule § 252.85(d)(10). Moreover, the Protocol overrides unexercised default rights in certain circumstances. Section 2(e) of the Protocol.

    126See proposed rule § 252.85(d)(5).

    The features, considered together, appear to advance the proposal's objective of increasing the likelihood that a resolution of a GSIB under a range of scenarios could be carried out in an orderly manner.127 For these reasons, and consistent with the Board's objective of increasing GSIB resolvability, the proposed rule would allow a covered entity to bring its covered QFCs into compliance by amending them through adherence to the Protocol.

    127See proposed rule § 252.85(d)(1)-(2).

    Question 10: The Board invites comment on the proposed restrictions on cross-default rights in covered entities' QFCs. Is the proposal sufficiently clear, such that parties to a conforming QFC will understand what default rights are and are not exercisable in the context of a GSIB resolution? How could the proposed restrictions be made clearer?

    Question 11: Are the proposed restrictions on cross-default rights under-inclusive, such that the proposed restrictions would permit default rights that would have the same or similar potential to undermine an orderly GSIB resolution and should therefore be subjected to similar restrictions?

    Question 12: In particular, would it be appropriate for the prohibition to explicitly cover default rights that are based on or related to the “financial condition” of an affiliate of the direct party (for example, rights based on an affiliate's credit rating, stock price, or regulatory capital level)?128

    128Cf. 12 U.S.C. 5390(c)(16) (staying “any contractual right to cause the termination, liquidation, or acceleration of such contracts based solely on the insolvency, financial condition, or receivership of the covered financial company”).

    Question 13: The Board invites comment on whether the proposed restrictions should be expanded to cover contractual rights that a QFC counterparty may have to terminate the QFC at will or without cause, including rights that arise on a periodic basis. Could such rights be used to circumvent the proposed restrictions on cross-default rights? If so, how, if at all, should the proposed rule regulate such contractual rights?

    Question 14: The Board invites comment on the proposed provisions permitting specific creditor protections in covered entities' QFCs. Does the proposal draw an appropriate balance between protecting financial stability from risks associated with QFC unwinds and maintaining important creditor protections? Should the proposed set of permitted creditor protections be expanded to allow for other creditor protections that would fall within the proposed restrictions? Is the proposed set of permitted creditor protections sufficiently clear?

    Question 15: The Board invites comment on its proposal to treat as compliant with section 252.84 of the proposal any covered QFC that has been amended by the Protocol. Does adherence to the Protocol suffice to meet the goals of this proposal and appropriately safeguard U.S. financial stability?

    Question 16: The Board invites comment on the proposed requirement for burden-of-proof provisions in covered QFCs. Is the proposed requirement drafted appropriately to advance the goals of this proposal? Would those goals be better advanced by alternative or complementary provisions?

    Question 17: The Board invites comment on all aspects of the proposed treatment of agency transactions, including whether creditor protections should apply to QFCs where the direct party is acting as agent under the QFC.

    F. Process for Approval of Enhanced Creditor Protections (Section 252.85 of the Proposed Rule)

    As discussed above, the proposed restrictions would leave many creditor protections that are commonly included in QFCs unaffected. The proposal would also allow any covered entity to submit to the Board a request to approve as compliant with the rule one or more QFCs that contain additional creditor protections—that is, creditor protections that would be impermissible under the restrictions set forth above. A covered entity making such a request would be required to provide an analysis of the contractual terms for which approval is requested in light of a range of factors that are set forth in the proposed rule and intended to facilitate the Board's consideration of whether permitting the contractual terms would be consistent with the proposed restrictions.129 The Board also expects to consult with the FDIC and OCC during its consideration of such a request.

    129 Proposed rule § 252.85(d)(1)-(10).

    The first two factors concern the potential impact of the requested creditor protections on GSIB resilience and resolvability. The next four concern the potential scope of the proposal: Adoption on an industry-wide basis, coverage of existing and future transactions, coverage of one or multiple QFCs, and coverage of some or all covered entities. Creditor protections that may be applied on an industry-wide basis may help to ensure that impediments to resolution are addressed on a uniform basis, which could increase market certainty, transparency, and equitable treatment. Creditor protections that apply broadly to a range of QFCs and covered entities would increase the chance that all of a GSIB's QFC counterparties would be treated the same way during a resolution of that GSIB and may improve the prospects for an orderly resolution of that GSIB. By contrast, proposals that would expand counterparties' rights beyond those afforded under existing QFCs would conflict with the proposal's goal of reducing the risk of mass unwinds of GSIB QFCs. The proposal also includes three factors that focus on the creditor protections specific to supported parties. The Board may weigh the appropriateness of additional protections for supported QFCs against the potential impact of such provisions on the orderly resolution of a GSIB.

    In addition to analyzing the request under the enumerated factors, a covered entity requesting that the Board approve enhanced creditor protections would be required to submit a legal opinion stating that the requested terms would be valid and enforceable under the applicable law of the relevant jurisdictions, along with any additional relevant information requested by the Board.

    Under the proposal, the Board could approve a request for an alternative set of creditor protections if the terms of the QFC, as compared to a covered QFC containing only the limited exceptions permitted by the proposed rule, would prevent or mitigate risks to the financial stability of the United States that could arise from the failure of a GSIB and would protect the safety and soundness of bank holding companies and state member banks to at least the same extent. Once approved by the Board, enhanced creditor protections could be used by other covered entities (in addition to the covered entity that submitted the request for Board approval) as appropriate. The proposed request-and-approval process would improve flexibility by allowing for an industry-proposed alternative to the set of creditor protections permitted by the proposed rule while ensuring that any approved alternative would serve the proposal's policy goals to at least the same extent as a covered QFC that complies fully with the proposed rule.

    Question 18: The Board invites comment on all aspects of the proposed process for approval of enhanced creditor protections. Are the proposed considerations the appropriate factors for the Board to take into account in deciding whether to grant a request for approval? What other considerations are potentially relevant to such a decision?

    III. Transition Periods

    Under the proposal, the rule would take effect on the first day of the first calendar quarter that begins at least one year after the issuance of the final rule (effective date).130 Entities that are covered entities when the final rule is issued would be required to comply with the proposed requirements beginning on the effective date. Thus, a covered entity would be required to ensure that covered QFCs entered into on or after the effective date comply with the rule's requirements.131 Moreover, a covered entity would be required to bring a preexisting covered QFC entered into prior to the effective date into compliance with the rule no later than the first date on or after the effective date on which the covered entity or an affiliate (that is also a covered entity or covered bank) enters into a new covered QFC with the counterparty to the preexisting covered QFC or an affiliate of the counterparty.132 (Thus, a covered entity would not be required to conform a preexisting QFC if that covered entity and its affiliates do not enter into any new QFCs with the same counterparty or its affiliates on or after the effective date.) Finally, an entity that becomes a covered entity after the final rule is issued would be required to comply by the first day of the first calendar quarter that begins at least one year after the entity becomes a covered entity.133

    130 Under section 302(b) of the Riegle Community Development and Regulatory Improvement Act of 1994, new Board regulations that impose requirements on insured depository institutions generally must “take effect on the first day of a calendar quarter which begins on or after the date on which the regulations are published in final form.” 12 U.S.C. 4802(b).

    131See proposed rule §§ 252.83(a)(2)(i); 252.84(a)(2)(i).

    132See proposed rule §§ 252.83(a)(2)(ii), 252.84(a)(2)(ii).

    133See proposed rule § 252.82(c)(1).

    By permitting a covered entity to remain party to noncompliant QFCs entered into before the effective date unless the covered entity or any affiliate (that is also a covered entity or covered bank) enters into new QFCs with the same counterparty or its affiliates, the proposal strikes a balance between ensuring QFC continuity if the GSIB were to fail and ensuring that covered entities and their existing counterparties can avoid any compliance costs and disruptions associated with conforming existing QFCs by refraining from entering into new QFCs. The requirement that a covered entity ensure that all existing QFCs with a particular counterparty and its affiliates are compliant before it or any affiliate of the covered entity (that is also a covered entity or covered bank) enters into a new QFC with the same counterparty or its affiliates after the effective date will provide covered entities with an incentive to seek the modifications necessary to ensure that their QFCs with their most important counterparties are compliant. Moreover, the volume of preexisting, noncompliant covered QFCs outstanding can be expected to decrease over time and eventually to reach zero. In light of these considerations, and to avoid creating potentially inappropriate compliance costs with respect to existing QFCs with counterparties that, together with their affiliates, do not enter new covered QFCs with the GSIB on or after the effective date, it would be appropriate to permit a limited number of noncompliant QFCs to remain outstanding, in keeping with the terms described above. That said, the Board will monitor covered entities' levels of noncompliant QFCs and evaluate the risk, if any, that they pose to the safety and soundness of the GSIBs or to U.S. financial stability.

    Question 19: The Board invites comment on the proposed transition periods and the proposed treatment of preexisting QFCs.

    Question 20: Would it be appropriate to impose different compliance deadlines with respect to different classes of QFCs? If so, how should those classes be distinguished, and which should be required to be brought into compliance first?

    IV. Costs and Benefits

    The proposed rule is intended to yield substantial net benefits for the financial stability of the United States by reducing the potential that resolution of a GSIB, particularly a resolution in bankruptcy, will be disorderly and disruptive to financial stability. These benefits are expected to substantially outweigh the costs associated with the proposal.

    The primary costs to covered entities associated with the proposed requirements for covered entities' QFCs would be costs associated with drafting and negotiating compliant contracts with potential QFC counterparties. These costs would be small relative to the revenue of covered entities and to the costs of doing business in the financial sector generally.

    The proposal could also impose costs on covered entities to the extent that they may need to provide their QFC counterparties with better contractual terms in order to compensate those parties for the loss of their ability to exercise default rights that would be restricted by the proposal. These costs may be higher than the drafting and negotiating costs. However, they are also expected to be relatively small because of the limited nature of the rights counterparties are required to reduce, the unlikelihood that the counterparty will have to exercise these rights and the availability of other forms of protection for counterparties.

    The proposal could also create economic costs by causing a marginal reduction in QFC-related economic activity. This could mean that a QFC that would have been entered into in the absence of the proposed rule would not be entered into, and it could also mean that economic activity that would have been associated with that QFC would not occur (such as economic activity that would have otherwise been hedged with a derivatives contract or funded through a repo transaction).

    While uncertainty surrounding the future negotiations of economic actors makes a reliable quantification of any such costs difficult, costs from reduced QFC activity are expected to be very low. The proposed restrictions on default rights in covered QFCs are relatively narrow and would not affect a counterparty's rights in the event a GSIB fails to make payment on a QFC, or in response to its direct counterparty's entry into a bankruptcy proceeding (that is, the default rights covered by the Bankruptcy Code's “safe harbor” provisions). Counterparties are also able to prudently manage risk through other means, including entering into QFCs with entities that are not GSIB entities and therefore would not be subject to the proposed rule.

    Additionally, the stay-and-transfer provisions of the Dodd-Frank Act and the FDI Act are already in force, and the ISDA Protocol is already partially effective. To staff's knowledge, no material economic costs have arisen as a result. This observation provides further support for the view that any marginal costs created by the proposal—which is intended to extend the effects of the stay-and-transfer provisions and the ISDA Protocol—are unlikely to be material.

    Thus, the costs of the proposal are likely to be relatively small. These relatively small costs appear to be significantly outweighed by the substantial benefits that the rule would produce for the U.S. economy. Financial crises impose enormous costs on the real economy, so even small reductions in the probability or severity future financial crises create substantial economic benefits. The proposal would materially reduce the risk to the financial stability of the United States that could arise from the failure of a GSIB by enhancing the prospects for the orderly resolution of such a firm and would thereby materially reduce the probability and severity of financial crises in the future.

    Moreover, the proposal would likely benefit the counterparties of a subsidiary of a failed GSIB by preventing the disorderly failure of the subsidiary and allowing it to continue to meet its obligations. Preventing the mass exercise of QFC default rights at the time the parent or other affiliate enters resolution proceedings makes it more likely that the subsidiaries or other affiliates will be able to meet their obligations to QFC counterparties. Moreover, the creditor protections permitted under the proposal would allow any counterparty that does not continue to receive payment under the QFC to exercise its default rights.

    As discussed in detail above, this proposed rule would materially reduce the risk to the financial stability of the United States that could arise from the failure of a GSIB by enhancing the prospects for the orderly resolution of such a firm. By further safeguarding U.S. financial stability, the proposed rule would materially reduce the probability and severity of financial crises in the future. The proposed rule would therefore advance a key objective of the Dodd-Frank Act and help protect the American economy from the substantial costs associated with more frequent and severe financial crises.

    Question 21: The Board invites comment on all aspects of this evaluation of costs and benefits.

    V. Revisions to Certain Definitions in the Board's Capital and Liquidity Rules

    The proposal would also amend several definitions in the Board's capital and liquidity rules to help ensure that the proposal would not have unintended effects for the treatment of covered entities' netting sets under those rules. The proposed amendments are similar to revisions that the Board and the OCC made in a 2014 interim final rule to prevent similar effects from foreign jurisdictions' special resolution regimes and firms' adherence to the 2014 ISDA Protocol.134

    134See 12 CFR part 217.

    The Board's regulatory capital rules permit a banking organization to measure exposure from certain types of financial contracts on a net basis and recognize the risk-mitigating effect of financial collateral for other types of exposures, provided that the contracts are subject to a “qualifying master netting agreement” or agreement that provides for certain rights upon the default of a counterparty.135 The Board has defined “qualifying master netting agreement” to mean a netting agreement that permits a banking organization to terminate, apply close-out netting, and promptly liquidate or set-off collateral upon an event of default of the counterparty, thereby reducing its counterparty exposure and market risks.136 On the whole, measuring the amount of exposure of these contracts on a net basis, rather than on a gross basis, results in a lower measure of exposure and thus a lower capital requirement.

    135See 12 CFR part 217.

    136See section 2 of the regulatory capital rules.

    The current definition of “qualifying master netting agreement” recognizes that default rights may be stayed if the financial company is in resolution under the Dodd-Frank Act, the FDI Act, a substantially similar law applicable to government-sponsored enterprises, or a substantially similar foreign law, or where the agreement is subject by its terms to any of those laws. Accordingly, transactions conducted under netting agreements where default rights may be stayed in those circumstances may qualify for the favorable capital treatment described above. However, the current definition of “qualifying master netting agreement” does not recognize the restrictions that the proposal would impose on the QFCs of covered entities. Thus, a master netting agreement that is compliant with this proposal would not qualify as a qualifying master netting agreement. This would result in considerably higher capital and liquidity requirements for QFC counterparties of covered entities, which is not an intended effect of this proposal.

    Accordingly, the proposal would amend the definition of “qualifying master netting agreement” so that a master netting agreement could qualify where the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty is consistent with the requirements of this proposal. This revision would maintain the existing treatment for these contracts under the Board's capital and liquidity rules by accounting for the restrictions that the proposal would place on default rights related to covered entities' QFCs. The Board does not believe that the disqualification of master netting agreements that would result in the absence of the proposed amendment would accurately reflect the risk posed by the affected QFCs. As discussed above, the implementation of consistent restrictions on default rights in GSIB QFCs would increase the prospects for the orderly resolution of a failed GSIB and thereby protect the financial stability of the United States.

    The proposal would similarly revise certain other definitions in the regulatory capital rules to make analogous conforming changes designed to account for this proposal's restrictions and ensure that a banking organization may continue to recognize the risk-mitigating effects of financial collateral received in a secured lending transaction, repo-style transaction, or eligible margin loan for purposes of the Board's rules. Specifically, the proposal would revise the definitions of “collateral agreement,” “eligible margin loan,” and “repo-style transaction” to provide that a counterparty's default rights may be limited as required by this proposal without unintended effects.

    The rule establishing margin and capital requirements for covered swap entities (swap margin rule) defines the term “eligible master netting agreement” in a manner similar to the definition of “qualifying master netting agreement.” 137 Thus, it may also be appropriate to amend the definition of “eligible master netting agreement” to account for the proposed restrictions on covered entities' QFCs. Because the Board issued the swap margin rule jointly with other U.S. regulatory agencies, however, the Board would consult with the other agencies before amending that rule's definition of “eligible master netting agreement.”

    137 80 FR 74840, 74861-74862 (November 30, 2015).

    Question 22: The Board invites comment on all aspects of the proposed amendments to the definitions of “qualifying master netting agreement,” “collateral agreement,” “eligible margin loan,” and “repo-style transaction.” Would the proposed amendments have the intended effect?

    Question 23: Would it be appropriate to incorporate state law resolution regimes into these definitions (for example, state insurance law that provides similar stays of QFC default rights)?

    VI. Regulatory Analysis A. Paperwork Reduction Act

    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 through 3521). The Board reviewed the proposed rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The reporting requirements are found in sections 252.85(b) and 252.87(b). These information collection requirements would implement section 165 of the Dodd Frank Act, as described in the Abstract below. In accordance with the requirements of the PRA, the Board may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid OMB control number.

    The proposed rule would revise the Reporting, Recordkeeping, and Disclosure Requirements Associated with Enhanced Prudential Standards (Regulation YY) (Reg YY; OMB No. 7100-0350). In addition, as permitted by the PRA, the Board proposes to extend for three years, with revision, the Reporting, Recordkeeping, and Disclosure Requirements Associated with Enhanced Prudential Standards (Regulation YY) (Reg YY; OMB No. 7100-0350).

    Comments are invited on:

    (a) Whether the collections of information are necessary for the proper performance of the Board's functions, including whether the information has practical utility;

    (b) The accuracy of the Board's 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;

    (d) Ways to minimize the burden of information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and

    (e) 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. A copy of the comments may also be submitted to the OMB desk officer: By mail to U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503, or by facsimile to 202-395-5806, Attention, Federal Reserve Desk Officer.

    Proposed Revision, With Extension, of the Following Information Collection

    Title of Information Collection: Reporting, Recordkeeping, and Disclosure Requirements Associated with Enhanced Prudential Standards (Regulation YY).

    Agency Form Number: Reg YY.

    OMB Control Number: 7100-0350.

    Frequency of Response: Annual, semiannual, quarterly, one-time, and on occasion.

    Affected Public: Businesses or other for-profit.

    Respondents: State member banks, U.S. bank holding companies, savings and loan holding companies, nonbank financial companies, foreign banking organizations, U.S. intermediate holding companies, foreign saving and loan holding companies, and foreign nonbank financial companies supervised by the Board.

    Abstract: Section 165 of the Dodd-Frank Act requires the Board to implement enhanced prudential standards for bank holding companies with total consolidated assets of $50 billion or more, including global systemically important foreign banking organizations with $50 billion or more in total consolidated assets. Section 165 of the Dodd-Frank Act also permits the Board to establish such other prudential standards for such banking organizations as the Board determines are appropriate.

    Reporting Requirements

    Section 252.85(b) of the proposed rule would require a covered banking entity to request the Board to approve as compliant with the requirements of section 252.84 of this subpart provisions of one or more forms of covered QFCs or amendments to one or more forms of covered QFCs, with enhanced creditor protection conditions. Enhanced creditor protection conditions means a set of limited exemptions to the requirements of section 252.85(b) of this subpart that are different than those of paragraphs (e), (g), and (i) of section 252.84 of this subpart. A covered banking entity making a request must provide (1) an analysis of the proposal under each consideration of paragraph 252.85(d); (2) a written legal opinion verifying that proposed provisions or amendments would be valid and enforceable under applicable law of the relevant jurisdictions, including, in the case of proposed amendments, the validity and enforceability of the proposal to amend the covered QFCs; and (3) any additional information relevant to its approval that the Board requests.

    Section 252.87(b) of the proposed rule would require each top-tier foreign banking organization that is or controls a covered company, as defined in section 243.2 the Board's Regulation QQ, to submit to the Board by January 1 of each calendar year (1) notice of whether the home country supervisor (or other appropriate home country regulatory authority) of the top-tier foreign banking organization has adopted standards consistent with the global methodology; and (2) whether the top-tier foreign banking organization or its home country supervisor has determined that the organization has the characteristics of a global systemically important banking organization under the global methodology.

    Estimated Paperwork Burden for Proposed Revisions

    Estimated Number of Respondents:

    Section 252.85(b)—1 respondent.

    Section 252.87(b)—22 respondents.

    Estimated Burden per Response:

    Section 252.85(b)—40 hours.

    Section 252.87(b)—1 hour.

    Current estimated annual burden for Reporting, Recordkeeping, and Disclosure Requirements Associated With Enhanced Prudential Standards (Regulation YY): 118,546 hours.

    Proposed revisions estimated annual burden: 62 hours.

    Total estimated annual burden: 118,608 hours.

    B. Regulatory Flexibility Act: Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601 et seq., requires an agency to consider whether the rules it proposes will have a significant economic impact on a substantial number of small entities.138 If so, the agency must prepare an initial and final regulatory flexibility analysis respecting the significant economic impact. Pursuant to section 605(b) of the RFA, the regulatory flexibility analysis otherwise required under sections 603 and 604 of the RFA is not required if an agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.

    138 A banking organization is generally considered to be a small banking entity for the purposes of the RFA if it has assets less than or equal to $175 million. See also 13 CFR 121.1302(a)(6) (noting factors that the Small Business Administration considers in determining whether an entity qualifies as a small business, including receipts, employees, and other measures of its domestic and foreign affiliates).

    An initial regulatory flexibility analysis must contain (1) a description of the reasons why action by the agency is being considered; (2) a succinct statement of the objectives of, and legal basis for, the proposed rule; (3) a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply; (4) a description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and (5) an identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap with, or conflict with the proposed rule.

    The Board has considered the potential impact of the proposed rule on small entities in accordance with the RFA. As discussed below, the proposed rule would not appear to have a significant impact on a substantial number of small entities, including small banking organizations. Nevertheless, the Board is publishing and inviting comment on this initial regulatory flexibility analysis.

    As discussed in detail above, the Board is issuing this proposed rule as part of its program to make GSIBs more resolvable in order to reduce the risk that their failure would pose to the financial stability of the United States, consistent with section 165 of the Dodd-Frank Act. In particular, the primary purpose of the proposal is to reduce the risk that the exercise of default rights by a failing GSIB's QFC counterparties would lead to a disorderly failure of the GSIB and would produce negative contagion and disruption that could destabilize the financial system. Section 165(b) of the Dodd-Frank Act provides the legal authority for this proposal.

    The proposed rule would only apply to GSIBs, which are the largest, most systemically important banking organizations, and certain of their subsidiaries. More specifically, the proposed rule would apply to (a) any U.S. GSIB top-tier bank holding company, (b) any subsidiary of such a bank holding company that is not a covered bank,139 and (c) the U.S. operations of any foreign GSIB with the exception of any covered bank. The Board estimates that the proposed rule would apply to approximately 29 banking organizations: Eight U.S. bank holding companies (i.e., U.S. GSIBs) and approximately 21 foreign banking organizations (i.e. foreign GSIBs with U.S. operations). None of these banking organizations would qualify as a small banking entity for the purposes of the FRA. However, as discussed above, the proposed rule would also apply to each covered GSIB's subsidiary that meets the definition of a covered entity (regardless of the subsidiary's size) because an exemption for small entities would significantly impair the effectiveness of the proposed stay-and-transfer provisions and thereby undermine a key objective of the proposal: To reduce the execution risk of an orderly GSIB resolution. The Board anticipates that any small subsidiary of a GSIB that would be covered by this proposed rule would rely on its parent GSIB or a large subsidiary of that GSIB for reporting, recordkeeping, or similar compliance requirements and would not bear additional costs. Finally, the proposed rule does not appear to duplicate, overlap with, or conflict with any other federal regulation.

    139 The term “covered bank” would be defined to include certain entities, such as certain national banks, that are supervised by the OCC.

    For the reasons stated above, the proposed rules would not appear to have a significant economic impact on a substantial number of small entities.

    Question 24: The Board welcomes written comments regarding this initial regulatory flexibility analysis, and requests that commenters describe the nature of any impact on small entities and provide empirical data to illustrate and support the extent of the impact. A final regulatory flexibility analysis will be conducted after consideration of comment received during the public comment period.

    C. Riegle Community Development and Regulatory Improvement Act of 1994

    The Riegle Community Development and Regulatory Improvement Act of 1994 (RCDRIA) requires that each Federal banking agency, in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, new regulations that impose additional reporting, disclosures, or other new requirements on insured depository institutions generally must take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.

    The Board has invited comment on these matters in other sections of this Supplementary Information section and will continue to consider them as part of the overall rulemaking process.

    Question 25: The Board invites comment on this section, including any additional comments that will inform the Board's consideration of the requirements of RCDRIA.

    D. Solicitation of Comments on the Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires the U.S. banking agencies to use plain language in proposed and final rulemakings.140 The Board has sought to present the proposed rule in a simple and straightforward manner, and invites comment on the use of plain language in this proposal.

    140 12 U.S.C. 4809(a).

    Question 26: Has the Board organized the proposal in a clear way? If not, how could the proposal organized more clearly?

    Question 27: Are the requirements of the proposed rule clearly stated? If not, how could they be stated more clearly?

    Question 28: Does the proposal contain unclear technical language or jargon? If so, which language requires clarification?

    Question 29: Would a different format (such as a different grouping and ordering of sections, a different use of section headings, or a different organization of paragraphs) make the regulation easier to understand? If so, what changes would make the proposal clearer?

    Question 30: What else could the Board do to make the proposal clearer and easier to understand?

    List of Subjects in 12 CFR Parts 217, 249, and 252

    Administrative practice and procedure, Banks, Banking, Federal Reserve System, Holding companies, Reporting and recordkeeping requirements, Securities.

    12 CFR Chapter II Authority and Issuance

    For the reasons stated in the Supplementary Information, the Board of Governors of the Federal Reserve System proposes to amend 12 CFR parts 217, 249, and 252 as follows:

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

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

    2. Section 217.2 is amended by: a. Revising the definitions of “collateral agreement” and “qualifying master netting agreement”; b. Revising paragraph (1)(iii) of the definition of “eligible margin loan”; c. Republishing the introductory text of the definition of “repo-style transaction”; and d. Revising paragraph 3(ii)(A) of the definition of “repo-style transaction”.

    The revisions are set forth below:

    § 217.2 Definitions.

    Collateral agreement means a legal contract that specifies the time when, and circumstances under which, a counterparty is required to pledge collateral to a Board-regulated institution for a single financial contract or for all financial contracts in a netting set and confers upon the Board-regulated institution a perfected, first-priority security interest (notwithstanding the prior security interest of any custodial agent), or the legal equivalent thereof, in the collateral posted by the counterparty under the agreement. This security interest must provide the Board-regulated institution with a right to close-out the financial positions and liquidate the collateral upon an event of default of, or failure to perform by, the counterparty under the collateral agreement. A contract would not satisfy this requirement if the Board-regulated institution's exercise of rights under the agreement may be stayed or avoided under applicable law in the relevant jurisdictions, other than:

    (1) In receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any similar insolvency law applicable to GSEs, or laws of foreign jurisdictions that are substantially similar 4 to the U.S. laws referenced in this paragraph (1) in order to facilitate the orderly resolution of the defaulting counterparty;

    4 The Board expects to evaluate jointly with the OCC and Federal Deposit Insurance Corporation whether foreign special resolution regimes meet the requirements of this paragraph.

    (2) Where the agreement is subject by its terms to any of the laws referenced in paragraph (1) of this definition; or

    (3) Where the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty is limited only to the extent necessary to comply with the requirements of subpart I of the Board's Regulation YY or any similar requirements of another U.S. federal banking agency, as applicable.

    Eligible margin loan means:

    (1) * * *

    (iii) The extension of credit is conducted under an agreement that provides the Board-regulated institution the right to accelerate and terminate the extension of credit and to liquidate or set-off collateral promptly upon an event of default, including upon an event of receivership, insolvency, liquidation, conservatorship, or similar proceeding, of the counterparty, provided that, in any such case, any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions, other than:

    (A) In receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any similar insolvency law applicable to GSEs,5 or laws of foreign jurisdictions that are substantially similar 6 to the U.S. laws referenced in this paragraph in order to facilitate the orderly resolution of the defaulting counterparty; or

    5 This requirement is met where all transactions under the agreement are (i) executed under U.S. law and (ii) constitute “securities contracts” under section 555 of the Bankruptcy Code (11 U.S.C. 555), qualified financial contracts under section 11(e)(8) of the Federal Deposit Insurance Act, or netting contracts between or among financial institutions under sections 401-407 of the Federal Deposit Insurance Corporation Improvement Act or the Federal Reserve Board's Regulation EE (12 CFR part 231).

    6 The Board expects to evaluate jointly with the OCC and Federal Deposit Insurance Corporation whether foreign special resolution regimes meet the requirements of this paragraph.

    (B) Where the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty is limited only to the extent necessary to comply with the requirements of subpart I of the Board's Regulation YY or any similar requirements of another U.S. federal banking agency, as applicable.

    Qualifying master netting agreement means a written, legally enforceable agreement provided that:

    (1) The agreement creates a single legal obligation for all individual transactions covered by the agreement upon an event of default following any stay permitted by paragraph (2) of this definition, including upon an event of receivership, conservatorship, insolvency, liquidation, or similar proceeding, of the counterparty;

    (2) The agreement provides the Board-regulated institution the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default, including upon an event of receivership, conservatorship, insolvency, liquidation, or similar proceeding, of the counterparty, provided that, in any such case, any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions, other than:

    (i) In receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any similar insolvency law applicable to GSEs, or laws of foreign jurisdictions that are substantially similar 7 to the U.S. laws referenced in this paragraph (2)(i) in order to facilitate the orderly resolution of the defaulting counterparty;

    7 The Board expects to evaluate jointly with the OCC and Federal Deposit Insurance Corporation whether foreign special resolution regimes meet the requirements of this paragraph.

    (ii) Where the agreement is subject by its terms to, or incorporates, any of the laws referenced in paragraph (2)(i) of this definition; or

    (iii) Where the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty is limited only to the extent necessary to comply with the requirements of subpart I of the Board's Regulation YY or any similar requirements of another U.S. federal banking agency, as applicable;

    Repo-style transaction means a repurchase or reverse repurchase transaction, or a securities borrowing or securities lending transaction, including a transaction in which the Board-regulated institution acts as agent for a customer and indemnifies the customer against loss, provided that:

    (3) * * *

    (ii) * * *

    (A) The transaction is executed under an agreement that provides the Board-regulated institution the right to accelerate, terminate, and close-out the transaction on a net basis and to liquidate or set-off collateral promptly upon an event of default, including upon an event of receivership, insolvency, liquidation, or similar proceeding, of the counterparty, provided that, in any such case, any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions, other than in receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any similar insolvency law applicable to GSEs, or laws of foreign jurisdictions that are substantially similar 8 to the U.S. laws referenced in this paragraph (3)(ii)(a) in order to facilitate the orderly resolution of the defaulting counterparty; or where the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty is limited only to the extent necessary to comply with the requirements of subpart I of the Board's Regulation YY or any similar requirements of another U.S. federal banking agency, as applicable;

    8 The Board expects to evaluate jointly with the OCC and Federal Deposit Insurance Corporation whether foreign special resolution regimes meet the requirements of this paragraph.

    or

    PART 249—LIQUIDITY RISK MEASUREMENT STANDARDS (REGULATION WW) 3. The authority citation for part 249 continues to read as follows: Authority:

    12 U.S.C. 248(a), 321-338a, 481-486, 1467a(g)(1), 1818, 1828, 1831p-1, 1831o-1, 1844(b), 5365, 5366, 5368.

    4. Section 249.3 is amended by revising the definition of “qualifying master netting agreement” to read as follows:
    § 249.3 Definitions.

    Qualifying master netting agreement means a written, legally enforceable agreement provided that:

    (1) The agreement creates a single legal obligation for all individual transactions covered by the agreement upon an event of default following any stay permitted by paragraph (2) of this definition, including upon an event of receivership, conservatorship, insolvency, liquidation, or similar proceeding, of the counterparty;

    (2) The agreement provides the Board-regulated institution the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default, including upon an event of receivership, conservatorship, insolvency, liquidation, or similar proceeding, of the counterparty, provided that, in any such case, any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions, other than:

    (i) In receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the Dodd-Frank Act, or under any similar insolvency law applicable to GSEs, or laws of foreign jurisdictions that are substantially similar 1 to the U.S. laws referenced in this paragraph (2)(i) in order to facilitate the orderly resolution of the defaulting counterparty;

    1 The Board expects to evaluate jointly with the OCC and Federal Deposit Insurance Corporation whether foreign special resolution regimes meet the requirements of this paragraph.

    (ii) Where the agreement is subject by its terms to, or incorporates, any of the laws referenced in paragraph (2)(i) of this definition; or

    (iii) Where the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty is limited only to the extent necessary to comply with the requirements of subpart I of the Board's Regulation YY or any similar requirements of another U.S. federal banking agency, as applicable;

    PART 252—ENHANCED PRUDENTIAL STANDARDS (REGULATION YY) 5. The authority citation for part 252 is revised to read as follows: Authority:

    12 U.S.C. 321-338a, 481-486, 1467a(g), 1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 3904, 3906-3909, 4808, 5361, 5365, 5366, 5367, 5368, 5371.

    6. Add subpart I to read as follows: Subpart I—Requirements for Qualified Financial Contracts of Global Systemically Important Banking Organizations Sec. 252.81 Definitions. 252.82 Applicability. 252.83 U.S. Special resolution regimes. 252.84 Insolvency proceedings. 252.85 Approval of enhanced creditor protection conditions. 252.86 Foreign bank multi-branch master agreements. 252.87 Identification of global systemically important foreign banking organizations. 252.88 Exclusion of certain QFCs. Subpart I—Requirements for Qualified Financial Contracts of Global Systemically Important Banking Organizations
    § 252.81 Definitions.

    Central counterparty (CCP) has the same meaning as in § 217.2 of the Board's Regulation Q (12 CFR 217.2).

    Chapter 11 proceeding means a proceeding under Chapter 11 of Title 11, United States Code (11 U.S.C. 1101-74.).

    Credit enhancement means a QFC of the type set forth in §§ 210(c)(8)(D)(ii)(XII), (iii)(X), (iv)(V), (v)(VI), or (vi)(VI) of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5390(c)(8)(D)(ii)(XII), (iii)(X), (iv)(V), (v)(VI), or (vi)(VI)) or a credit enhancement that the Federal Deposit Insurance Corporation determines by regulation is a QFC pursuant to section 210(c)(8)(D)(i) of Title II of the act (12 U.S.C. 5390(c)(8)(D)(i)).

    Covered bank means a national bank, Federal savings association, federal branch, or federal agency.

    Default right (1) Means, with respect to a QFC, any

    (i) Right of a party, whether contractual or otherwise (including, without limitation, rights incorporated by reference to any other contract, agreement, or document, and rights afforded by statute, civil code, regulation, and common law), to liquidate, terminate, cancel, rescind, or accelerate such agreement or transactions thereunder, set off or net amounts owing in respect thereto (except rights related to same-day payment netting), exercise remedies in respect of collateral or other credit support or property related thereto (including the purchase and sale of property), demand payment or delivery thereunder or in respect thereof (other than a right or operation of a contractual provision arising solely from a change in the value of collateral or margin or a change in the amount of an economic exposure), suspend, delay, or defer payment or performance thereunder, or modify the obligations of a party thereunder, or any similar rights; and

    (ii) Right or contractual provision that alters the amount of collateral or margin that must be provided with respect to an exposure thereunder, including by altering any initial amount, threshold amount, variation margin, minimum transfer amount, the margin value of collateral, or any similar amount, that entitles a party to demand the return of any collateral or margin transferred by it to the other party or a custodian or that modifies a transferee's right to reuse collateral or margin (if such right previously existed), or any similar rights, in each case, other than a right or operation of a contractual provision arising solely from a change in the value of collateral or margin or a change in the amount of an economic exposure;

    (2) With respect to section 252.84, does not include any right under a contract that allows a party to terminate the contract on demand or at its option at a specified time, or from time to time, without the need to show cause.

    FDI Act proceeding means a proceeding in which the Federal Deposit Insurance Corporation is appointed as conservator or receiver under section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821).

    FDI Act stay period means, in connection with an FDI Act proceeding, the period of time during which a party to a QFC with a party that is subject to an FDI Act proceeding may not exercise any right that the party that is not subject to an FDI Act proceeding has to terminate, liquidate, or net such QFC, in accordance with section 11(e) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)) and any implementing regulations.

    Master agreement means a QFC of the type set forth in section 210(c)(8)(D)(ii)(XI), (iii)(IX), (iv)(IV), (v)(V), or (vi)(V) of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5390(c)(8)(D)(ii)(XI), (iii)(IX), (iv)(IV), (v)(V), or (vi)(V)) or a master agreement that the Federal Deposit Insurance Corporation determines by regulation is a QFC pursuant to section 210(c)(8)(D)(i) of Title II of the act (12 U.S.C. 5390(c)(8)(D)(i)).

    Qualified financial contract (QFC) has the same meaning as in section 210(c)(8)(D) of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5390(c)(8)(D)).

    U.S. special resolution regimes means the Federal Deposit Insurance Act (12 U.S.C. 1811-1835a) and regulations promulgated thereunder and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5381-5394) and regulations promulgated thereunder.

    § 252.82 Applicability.

    (a) Scope of firms. This subpart applies to a “covered entity,” which is

    (1) A bank holding company that is identified as a global systemically important BHC pursuant to 12 CFR 217.402;

    (2) A subsidiary of a company identified in paragraph (a)(1) of this section (other than a subsidiary that is a covered bank); or

    (3) A U.S. subsidiary, U.S. branch, or U.S. agency of a global systemically important foreign banking organization (other than a U.S. subsidiary, U.S. branch, or U.S. agency that is a covered bank, section 2(h)(2) company or a DPC branch subsidiary).

    (b) Initial applicability of requirements for covered QFCs. A covered entity must comply with the requirements of §§ 252.83 and 252.84 beginning on the later of

    (1) The first day of the calendar quarter immediately following 365 days (1 year) after becoming a covered entity; or

    (2) The date this subpart first becomes effective.

    (c) Rule of construction. For purposes of this subpart, the exercise of a default right with respect to a covered QFC includes the automatic or deemed exercise of the default right pursuant to the terms of the QFC or other arrangement.

    § 252.83 U.S. Special Resolution Regimes.

    (a) QFCs required to be conformed. (1) A covered entity must ensure that each covered QFC conforms to the requirements of this section 252.83.

    (2) For purposes of this § 252.83, a covered QFC means a QFC that the covered entity:

    (i) Enters, executes, or otherwise becomes a party to; or

    (ii) Entered, executed, or otherwise became a party to before the date this subpart first becomes effective, if the covered entity or any affiliate that is a covered entity or a covered bank also enters, executes, or otherwise becomes a party to a QFC with the same person or affiliate of the same person on or after the date this subpart first becomes effective.

    (3) To the extent that the covered entity is acting as agent with respect to a QFC, the requirements of this section apply to the extent the transfer of the QFC relates to the covered entity or the default rights relate to the covered entity or an affiliate of the covered entity.

    (b) Provisions required. A covered QFC must explicitly provide that

    (1) The transfer of the covered QFC (and any interest and obligation in or under, and any property securing, the covered QFC) from the covered entity will be effective to the same extent as the transfer would be effective under the U.S. special resolution regimes if the covered QFC (and any interest and obligation in or under, and any property securing, the covered QFC) were governed by the laws of the United States or a state of the United States and the covered entity were under the U.S. special resolution regime; and

    (2) Default rights with respect to the covered QFC that may be exercised against the covered entity are permitted to be exercised to no greater extent than the default rights could be exercised under the U.S. special resolution regimes if the covered QFC was governed by the laws of the United States or a state of the United States and the covered entity were under the U.S. special resolution regime.

    (c) Relevance of creditor protection provisions. The requirements of this section apply notwithstanding paragraphs (e), (g), and (i) of § 252.84.

    § 252.84 Insolvency Proceedings.

    (a) QFCs required to be conformed. (1) A covered entity must ensure that each covered QFC conforms to the requirements of this § 252.84.

    (2) For purposes of this § 252.84, a covered QFC has the same definition as in paragraph (a)(2) of § 252.83.

    (3) To the extent that the covered entity is acting as agent with respect to a QFC, the requirements of this section apply to the extent the transfer of the QFC relates to the covered entity or the default rights relate to an affiliate of the covered entity.

    (b) General Prohibitions.

    (1) A covered QFC may not permit the exercise of any default right with respect to the covered QFC that is related, directly or indirectly, to an affiliate of the direct party becoming subject to a receivership, insolvency, liquidation, resolution, or similar proceeding.

    (2) A covered QFC may not prohibit the transfer of a covered affiliate credit enhancement, any interest or obligation in or under the covered affiliate credit enhancement, or any property securing the covered affiliate credit enhancement to a transferee upon an affiliate of the direct party becoming subject to a receivership, insolvency, liquidation, resolution, or similar proceeding unless the transfer would result in the supported party being the beneficiary of the credit enhancement in violation of any law applicable to the supported party.

    (c) Definitions relevant to the general prohibitions

    (1) Direct party. Direct party means a covered entity, or covered bank referenced in paragraph (a) of § 252.82, that is a party to the direct QFC.

    (2) Direct QFC. Direct QFC means a QFC that is not a credit enhancement, provided that, for a QFC that is a master agreement that includes an affiliate credit enhancement as a supplement to the master agreement, the direct QFC does not include the affiliate credit enhancement.

    (3) Affiliate credit enhancement. Affiliate credit enhancement means a credit enhancement that is provided by an affiliate of a party to the direct QFC that the credit enhancement supports.

    (d) Treatment of agent transactions. With respect to a QFC that is a covered QFC for a covered entity solely because the covered entity is acting as agent under the QFC, the covered entity is the direct party.

    (e) General creditor protections. Notwithstanding paragraph (b) of this section, a covered direct QFC and covered affiliate credit enhancement that supports the covered direct QFC may permit the exercise of a default right with respect to the covered QFC that arises as a result of

    (1) The direct party becoming subject to a receivership, insolvency, liquidation, resolution, or similar proceeding other than a receivership, conservatorship, or resolution under the FDI Act, Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or laws of foreign jurisdictions that are substantially similar to the U.S. laws referenced in this paragraph (e)(1) in order to facilitate the orderly resolution of the direct party;

    (2) The direct party not satisfying a payment or delivery obligation pursuant to the covered QFC or another contract between the same parties that gives rise to a default right in the covered QFC; or

    (3) The covered affiliate support provider or transferee not satisfying a payment or delivery obligation pursuant to a covered affiliate credit enhancement that supports the covered direct QFC.

    (f) Definitions relevant to the general creditor protections

    (1) Covered direct QFC. Covered direct QFC means a direct QFC to which a covered entity, or covered bank referenced in paragraph (a) of § 252.82, is a party.

    (2) Covered affiliate credit enhancement. Covered affiliate credit enhancement means an affiliate credit enhancement in which a covered entity, or covered bank referenced in paragraph (a) of § 252.82, is the obligor of the credit enhancement.

    (3) Covered affiliate support provider. Covered affiliate support provider means, with respect to a covered affiliate credit enhancement, the affiliate of the direct party that is obligated under the covered affiliate credit enhancement and is not a transferee.

    (4) Supported party. Supported party means, with respect to a covered affiliate credit enhancement and the direct QFC that the covered affiliate credit enhancement supports, a party that is a beneficiary of the covered affiliate support provider's obligation(s) under the covered affiliate credit enhancement.

    (g) Additional creditor protections for supported QFCs. Notwithstanding paragraph (b) of this section, with respect to a covered direct QFC that is supported by a covered affiliate credit enhancement, the covered direct QFC and the covered affiliate credit enhancement may permit the exercise of a default right that is related, directly or indirectly, to the covered affiliate support provider after the stay period if:

    (1) The covered affiliate support provider that remains obligated under the covered affiliate credit enhancement becomes subject to a receivership, insolvency, liquidation, resolution, or similar proceeding other than a Chapter 11 proceeding;

    (2) Subject to paragraph (i) of this section, the transferee, if any, becomes subject to a receivership, insolvency, liquidation, resolution, or similar proceeding;

    (3) The covered affiliate support provider does not remain, and a transferee does not become, obligated to the same, or substantially similar, extent as the covered affiliate support provider was obligated immediately prior to entering the receivership, insolvency, liquidation, resolution, or similar proceeding with respect to:

    (i) The covered affiliate credit enhancement;

    (ii) All other covered affiliate credit enhancements provided by the covered affiliate support provider in support of other covered direct QFCs between the direct party and the supported party under the covered affiliate credit enhancement referenced in paragraph (g)(3)(i) of this section; and

    (iii) All covered affiliate credit enhancements provided by the covered affiliate support provider in support of covered direct QFCs between the direct party and affiliates of the supported party referenced in paragraph (g)(3)(ii) of this section; or

    (4) In the case of a transfer of the covered affiliate credit enhancement to a transferee,

    (i) All of the ownership interests of the direct party directly or indirectly held by the covered affiliate support provider are not transferred to the transferee; or

    (ii) Reasonable assurance has not been provided that all or substantially all of the assets of the covered affiliate support provider (or net proceeds therefrom), excluding any assets reserved for the payment of costs and expenses of administration in the receivership, insolvency, liquidation, resolution, or similar proceeding, will be transferred or sold to the transferee in a timely manner.

    (h) Definitions relevant to the additional creditor protections for supported QFCs

    (1) Stay period. Stay period means, with respect to a receivership, insolvency, liquidation, resolution, or similar proceeding, the period of time beginning on the commencement of the proceeding and ending at the later of 5:00 p.m. (eastern time) on the business day following the date of the commencement of the proceeding and 48 hours after the commencement of the proceeding.

    (2) Business day. Business day means a day on which commercial banks in the jurisdiction the proceeding is commenced are open for general business (including dealings in foreign exchange and foreign currency deposits).

    (3) Transferee. Transferee means a person to whom a covered affiliate credit enhancement is transferred upon the covered affiliate support provider entering a receivership, insolvency, liquidation, resolution, or similar proceeding or thereafter as part of the restructuring or reorganization involving the covered affiliate support provider.

    (i) Creditor protections related to FDI Act proceedings. Notwithstanding paragraph (b) of this section, with respect to a covered direct QFC that is supported by a covered affiliate credit enhancement, the covered direct QFC and the covered affiliate credit enhancement may permit the exercise of a default right that is related, directly or indirectly, to the covered affiliate support provider becoming subject to FDI Act proceedings

    (1) After the FDI Act stay period, if the covered affiliate credit enhancement is not transferred pursuant to 12 U.S.C. 1821(e)(9)-(e)(10) and any regulations promulgated thereunder; or

    (2) During the FDI Act stay period, if the default right may only be exercised so as to permit the supported party under the covered affiliate credit enhancement to suspend performance with respect to the supported party's obligations under the covered direct QFC to the same extent as the supported party would be entitled to do if the covered direct QFC were with the covered affiliate support provider and were treated in the same manner as the covered affiliate credit enhancement.

    (j) Prohibited terminations. A covered QFC must require, after an affiliate of the direct party has become subject to a receivership, insolvency, liquidation, resolution, or similar proceeding,

    (1) The party seeking to exercise a default right to bear the burden of proof that the exercise is permitted under the covered QFC; and

    (2) Clear and convincing evidence or a similar or higher burden of proof to exercise a default right.

    § 252.85 Approval of Enhanced Creditor Protection Conditions.

    (a) Protocol compliance. Notwithstanding paragraph (b) of section 252.4, a covered QFC may permit the exercise of a default right with respect to the covered QFC if the covered QFC has been amended by the ISDA 2015 Universal Resolution Stay Protocol, including the Securities Financing Transaction Annex and Other Agreements Annex, published by the International Swaps and Derivatives Association, Inc., as of May 3, 2016, and minor or technical amendments thereto.

    (b) Proposal of enhanced creditor protection conditions. (1) A covered entity may request that the Board approve as compliant with the requirements of § 252.84 proposed provisions of one or more forms of covered QFCs, or proposed amendments to one or more forms of covered QFCs, with enhanced creditor protection conditions.

    (2) Enhanced creditor protection conditions means a set of limited exemptions to the requirements of § 252.84(b) of this subpart that are different than that of paragraphs (e), (g), and (i) of § 252.84.

    (3) A covered entity making a request under paragraph (b)(1) of this section must provide

    (i) An analysis of the proposal that addresses each consideration in paragraph (d) of this section;

    (ii) A written legal opinion verifying that proposed provisions or amendments would be valid and enforceable under applicable law of the relevant jurisdictions, including, in the case of proposed amendments, the validity and enforceability of the proposal to amend the covered QFCs; and

    (iii) Any other relevant information that the Board requests.

    (c) Board approval. The Board may approve, subject to any conditions or commitments the Board may set, a proposal by a covered entity under paragraph (b) of this section if the proposal, as compared to a covered QFC that contains only the limited exemptions in paragraphs of (e), (g), and (i) of § 252.84 or that is amended as provided under paragraph (a) of this section, would prevent or mitigate risks to the financial stability of the United States that could arise from the failure of a global systemically important BHC, a global systemically important foreign banking organization, or the subsidiaries of either and would protect the safety and soundness of bank holding companies and state member banks to at least the same extent.

    (d) Considerations. In reviewing a proposal under this section, the Board may consider all facts and circumstances related to the proposal, including:

    (1) Whether, and the extent to which, the proposal would reduce the resiliency of such covered entities during distress or increase the impact on U.S. financial stability were one or more of the covered entities to fail;

    (2) Whether, and the extent to which, the proposal would materially decrease the ability of a covered entity, or an affiliate of a covered entity, to be resolved in a rapid and orderly manner in the event of the financial distress or failure of the entity that is required to submit a resolution plan;

    (3) Whether, and the extent to which, the set of conditions or the mechanism in which they are applied facilitates, on an industry-wide basis, contractual modifications to remove impediments to resolution and increase market certainty, transparency, and equitable treatment with respect to the default rights of non-defaulting parties to a covered QFC;

    (4) Whether, and the extent to which, the proposal applies to existing and future transactions;

    (5) Whether, and the extent to which, the proposal would apply to multiple forms of QFCs or multiple covered entities;

    (6) Whether the proposal would permit a party to a covered QFC that is within the scope of the proposal to adhere to the proposal with respect to only one or a subset of covered entities;

    (7) With respect to a supported party, the degree of assurance the proposal provides to the supported party that the material payment and delivery obligations of the covered affiliate credit enhancement and the covered direct QFC it supports will continue to be performed after the covered affiliate support provider enters a receivership, insolvency, liquidation, resolution, or similar proceeding;

    (8) The presence, nature, and extent of any provisions that require a covered affiliate support provider or transferee to meet conditions other than material payment or delivery obligations to its creditors;

    (9) The extent to which the supported party's overall credit risk to the direct party may increase if the enhanced creditor protection conditions are not met and the likelihood that the supported party's credit risk to the direct party would decrease or remain the same if the enhanced creditor protection conditions are met; and

    (10) Whether the proposal provides the counterparty with additional default rights or other rights.

    § 252.86 Foreign Bank Multi-branch Master Agreements.

    (a) Treatment of foreign bank multi-branch master agreements. With respect to a U.S. branch or U.S. agency of a global systemically important foreign banking organization, a foreign bank multi-branch master agreement that is a covered QFC solely because the master agreement permits agreements or transactions that are QFCs to be entered into at one or more U.S. branches or U.S. agencies of the global systemically important foreign banking organization will be considered a covered QFC for purposes of this subpart only with respect to such agreements or transactions booked at such U.S. branches and U.S. agencies or for which a payment or delivery may be made at such U.S. branches or U.S. agencies.

    (b) Definition of foreign bank multi-branch master agreements. A foreign bank multi-branch master agreement means a master agreement that permits a U.S. branch or U.S. agency and another place of business of a foreign bank that is outside the United States to enter transactions under the agreement.

    § 252.87 Identification of Global Systemically Important Foreign Banking Organizations.

    (a) For purposes of this part, a top-tier foreign banking organization that is or controls a covered company (as defined at 12 CFR 243.2(f)) is a global systemically important foreign banking organization if any of the following conditions is met:

    (1) The top-tier foreign banking organization determines, pursuant to paragraph (c) of this section, that the top-tier foreign banking organization has the characteristics of a global systemically important banking organization under the global methodology; or

    (2) The Board, using information available to the Board, determines:

    (i) That the top-tier foreign banking organization would be a global systemically important banking organization under the global methodology;

    (ii) That the top-tier foreign banking organization, if it were subject to the Board's Regulation Q, would be identified as a global systemically important BHC under § 217.402 of the Board's Regulation Q; or

    (iii) That any U.S. intermediate holding company controlled by the top-tier foreign banking organization, if the U.S. intermediate holding company is or were subject to § 217.402 of the Board's Regulation Q, is or would be identified as a global systemically important BHC.

    (b) Each top-tier foreign banking organization that is or controls a covered company (as defined at 12 CFR 243.2(f)) shall submit to the Board by January 1 of each calendar year:

    (1) Notice of whether the home country supervisor (or other appropriate home country regulatory authority) of the top-tier foreign banking organization has adopted standards consistent with the global methodology; and

    (2) Whether the top-tier foreign banking organization or its home country supervisor has determined that the organization has the characteristics of a global systemically important banking organization under the global methodology.

    (c) A top-tier foreign banking organization that prepares or reports for any purpose the indicator amounts necessary to determine whether the top-tier foreign banking organization is a global systemically important banking organization under the global methodology must use the data to determine whether the top-tier foreign banking organization has the characteristics of a global systemically important banking organization under the global methodology.

    (d) For purposes of this section:

    (1) Global methodology means the assessment methodology and the higher loss absorbency requirement for global systemically important banks issued by the Basel Committee on Banking Supervision, as updated from time to time;

    (2) Global systemically important foreign banking organization means a global systemically important bank, as such term is defined in the global methodology;

    (3) Home country means, with respect to a foreign banking organization, the country in which the foreign banking organization is chartered or incorporated; and

    (4) Top-tier foreign banking organization means, with respect to a foreign banking organization, the top-tier foreign banking organization or, alternatively, a subsidiary of the top-tier foreign banking organization designated by the Board.

    § 252.88 Exclusion of Certain QFCs.

    (a) Exclusion of CCP-cleared QFCs. A covered entity is not required to conform a covered QFC to which a CCP is party to the requirements of §§ 252.83 or 252.84.

    (b) Exclusion of covered bank QFCs. A covered entity is not required to conform a covered QFC to the requirements of §§ 252.83 or 252.84 to the extent that a covered bank is required to conform the covered QFC to similar requirements of the Office of the Comptroller of the Currency if the QFC is either a direct QFC to which a covered bank is a direct party or an affiliate credit enhancement to which a covered bank is the obligor.

    By order of the Board of Governors of the Federal Reserve System, May 3, 2016. Robert deV. Frierson, Secretary of the Board.
    [FR Doc. 2016-11209 Filed 5-10-16; 8:45 am] BILLING CODE 6210-01-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6616; Directorate Identifier 2016-CE-004-AD] RIN 2120-AA64 Airworthiness Directives; Rosemount Aerospace, Inc. Pitot Probes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to adopt a new airworthiness directive (AD) for Rosemount Aerospace Model 851AK pitot probes that were repaired by CSI Aerospace, Inc. that are installed on airplanes. This proposed AD was prompted by a report that certain pitot probes are indicating the wrong airspeed during flight in icing conditions. This proposed AD would require inspecting the airplane to determine the number of affected pitot probes installed and replacing the affected pitot probes. We are proposing this AD to correct the unsafe condition on these products.

    DATES:

    We must receive comments on this proposed AD by June 27, 2016.

    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.

    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-2016-6616; 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:

    Jonathan Kim, Aerospace Engineer, Fort Worth Airplane Certification Office (ACO), FAA, 10101 Hillwood Parkway, Fort Worth, Texas 76177-1524; telephone: (817) 222-5131; fax: (817) 222-5245; 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-2016-6616; Directorate Identifier 2016-CE-004-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 a report about erroneous airspeed data being transmitted from multiple Rosemount Aerospace Model 851AK pitot probes on a Boeing Aircraft Company Model B717 airplane when flying in icing conditions.

    Investigation revealed that the pitot probes had been repaired by CSI Aerospace, Inc. between January 2013 and July 2014. During the investigation, it was determined that the repaired pitot probes had constricted openings, which was caused by migration of the silver brazing material. Further investigation revealed that the brazing material migrated because the heater was not properly located during the repair process. This condition, if not corrected, could result in incorrect airspeed indications during icing conditions, which could lead to loss of control. Due to design redundancy, this is only applicable if more than one deficient probe is installed.

    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 inspecting the airplane to determine the number of affected pitot probes installed and replacing the affected pitot probes if more than one is installed.

    Costs of Compliance

    We estimate that this proposed AD affects 679 products installed on 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
    Inspect to determine the number of defective pitot probes installed on the airplane 1 work-hour × $85 per hour = $85 N/A N/A $57,715

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

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Replace defective pitot probe 1 work-hour × $85 per hour = $85 $6,750 $6,835
    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): Rosemount Aerospace, Inc.: Docket No. FAA-2016-6616; Directorate Identifier 2016-CE-004-AD. (a) Comments Due Date

    We must receive comments by June 27, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to Rosemount Aerospace, Inc. Model 851AK pitot probes that were repaired by CSI Aerospace Inc. and have a serial number listed in paragraph (c)(1) of this AD that are known to be installed on but not limited to the airplanes listed in paragraph (c)(2) of this AD.

    (1) 53257, 61568, 68168, 69913, 69953, 71802, 71820, 73010, 73406, 75549, 75555, 80491, 83809, 84200, 84495, 84911, 84922, 85317, 85731, 87225, 87234, 87235, 87241, 87272, 87512, 87551, 87909, 88912, 90538, 91606, 93291, 93292, 93293, 93305, 93941, 93948, 93960, 94258, 94304, 94559, 94814, 94819, 95150, 95849, 97405, 99498, 99509, 100105, 100111, 100127, 100313, 100741, 101374, 101500, 102054, 102309, 102502, 104604, 106134, 106139, 106381, 106905, 107251, 107406, 107450, 107887, 108174, 108302, 108858, 108859, 108967, 108970, 109119, 109122, 109124, 109128, 109393, 109394, 109467, 109474, 109488, 109521, 109524, 109537, 109577, 109795, 109798, 109799, 109810, 109946, 109954, 109958, 109962, 109996, 110323, 110324, 110327, 110338, 110611, 110626, 110880, 110895, 110956, 111061, 111066, 111315, 111320, 111432, 111561, 111571, 111578, 111802, 111807, 112229, 112280, 112497, 112646, 112657, 112677, 112779, 112781, 112783, 112979, 112993, 113025, 113026, 113129, 113151, 113382, 113721, 113758, 113837, 113838, 113843, 113845, 113920, 113934, 114130, 114147, 114152, 114157, 114223, 114376, 114572, 114813, 114869, 114959, 114962A, 114966, 115428, 115713, 116249, 116253, 116255, 116271, 116424, 116557, 116734, 116792, 116994, 117022, 117144, 117310, 117412, 117414, 117426, 117427, 117428, 117587, 117961, 118111, 118234, 118331, 118637, 118639, 118770, 118938, 119115, 119281, 119290, 119414, 119441, 119593, 119694, 119695, 119737, 119852, 120456, 120461, 120728, 120823, 120825, 120826, 120829, 121040, 121041, 121110, 121116, 121145, 121172, 121320, 121322, 121524, 121834, 121852, 122662, 122934, 122935, 123286, 123289, 123330, 123745, 123746, 123753, 123767, 124144, 124385, 124390, 124396, 124890, 125016, 125021, 125077, 125163, 125174, 126785, 127449, 127894, 127899, 128302, 128307, 129503, 130371, 130377, 130688, 131422, 131423, 131752, 132065, 132067, 132297, 132825, 133103, 133161, 133220, 133291, 133310, 133394, 133396, 133512, 133521, 134102, 134403, 134535, 134537, 134639, 134675, 134681, 135136, 135234, 135246, 135250, 135554, 135561, 135568, 135735, 135743, 136075, 136208, 137049, 137398, 137543, 137544, 137642, 139076, 139081, 139433, 139444, 139691, 139694, 139759, 139763, 139971, 139976, 140188, 140565, 140643, 140649, 140650, 141161, 141356, 141362, 141497, 141501, 141605, 141607, 142426, 142765, 142774, 142775, 143405, 143409, 143411, 143418, 143816, 143818, 143988, 143992, 143999, 144591, 144814, 144816, 144976, 146116, 146835, 147421, 148524, 148765, 148777, 149460, 149464, 149510, 149941, 150206, 150211, 150212, 150214, 150542, 150725, 151086, 151095, 151493, 152097, 152819, 152922, 152969, 152974, 152981, 153232, 153453, 153625, 153628, 153635, 153641, 153956, 153962, 153966, 153984, 154007, 154156, 154704, 154721, 154738, 154741, 155003, 155042, 155045, 155238, 155278, 155517, 156022, 156025, 156222, 156526, 156529, 156672, 157023, 157137, 157143, 158393, 158790, 158797, 159033, 159036, 159413, 159440, 159891, 160000, 160002, 160456, 160459, 160463, 160466, 160468, 161137, 161139, 161159, 161177, 161184, 161185, 161363, 161364, 161366, 162376, 162384, 162674, 162682, 162685, 162688, 163176, 163178, 163181, 163557, 163559, 163602, 164279, 164746, 164750, 164907, 164908, 165135, 165259, 165459, 165805, 166235, 166324, 166325, 166326, 166331, 166477, 166481, 166608, 166671, 166673, 166892, 167030, 167035, 167037, 167182, 167341, 167556, 167559, 167705, 167707, 167709, 167763, 167764, 167765, 167766, 167811, 195627, 195628, 195706, 195707, 195710, 195796, 195833, 195876, 196041, 196042, 196045, 196137, 196234, 196397, 196400, 196401, 196403, 196498, 196500, 196761, 197097, 197140, 197143, 197238, 197657, 197874, 198528, 198687, 198775, 198788, 198872, 199034, 199042, 199187, 199441, 199613, 199616, 199669, 200293, 200324, 200534, 200535, 200538, 200737, 200738, 200793, 200830, 200834, 200872, 201576, 201685, 201733, 201892, 201893, 201964, 202053, 202305, 202306, 202469, 202471, 202472, 202596, 202625, 202633, 202760, 202879, 202901, 203010, 203016, 204629, 204665, 204714, 204820, 204821, 204822, 205249, 205253, 205329, 205335, 205526, 205527, 205529, 205700, 205882, 205967, 206273, 206406, 206436, 206441, 206646, 207019, 207020, 207021, 207364, 207369, 207683, 207684, 207837, 207849, 207850, 208206, 208381, 208394, 208396, 208543, 209148, 209698, 209704, 209707, 212176, 212525, 212697, 212700, 213952, 213953, 214085, 214089, 214144, 214795, 214803, 215392, 215476, 216214, 216509, 216951, 216955, 216957, 217368, 217369, 217382, 217441, 217708, 217805, 218112, 218610, 218613, 218757, 218761, 218958, 218965, 218967, 218970, 218976, 219226, 219228, 219233, 219236, 219411, 219418, 219832, 219840, 220990, 220991, 221197, 221286, 221635, 224540, 224700, 224701, 224704, 224707, 224876, 225257, 225262, 225586, 225910, 225974, 226133, 226136, 226465, 226466, 226467, 227159, 227174, 227836, 227837, 229277, 230190, 230191, 230192, 230193, 231082, 232015, 232681, 232684, 234534, 235621, 235628, 238097, 239755, 239760, 239956, 242109, 242998, 243350, 243351, 245230, 246792, 246851, 247007, 247302, 250747, 256327, 258614, 258861, 258865, 260508, 262743, 262744, 263643, 263644, 263645, 263651, 263700, 264117, 264119, 264122, 264123, 264125, 264193, 264738, 265208, 265210, 265655, 265656, 265657, 265658, 268055, 268562, 268564, 268565, 268566, 272372, 272592, 275276, 275663, 280433, 280435, and 296902.

    (2) DC-9-11, DC-9-12, DC-9-13, DC-9-14, DC-9-15, DC-9-15F, DC-9-21, DC-9-31, DC-9-32, DC-9-32 (VC-9C), DC-9-32F, DC-9-32F (C-9A, C-9B), DC-9-33F, DC-9-34, DC-9-34F, DC-9-41, DC-9-51, DC-9-81 (MD-81), DC-9-82 (MD-82), DC-9-83 (MD-83), DC-9-87 (MD-87), MD-88, MD-90-30, and 717-200.

    (d) Subject

    Joint Aircraft System Component (JASC)/Air Transport Association (ATA) of America Code 3414, Airspeed/Mach Indicator.

    (e) Unsafe Condition

    This AD was prompted by a report that the pitot probes are indicating the wrong airspeed during flight in icing conditions. We are issuing this AD to correct the unsafe condition on these products.

    (f) Compliance

    Do the actions in paragraphs (g) and (h)(1) through (h)(3) of this AD. If paragraphs (g), (h)(1), and (h)(2) of this AD have already been done before the effective date of this AD, then only paragraph (h)(3) of this AD applies.

    (g) Determine Number of Affected Pitot Probes Installed

    Within 30 days after the effective date of this AD, inspect the airplane to determine the number of pitot probes identified in paragraph (c)(1) of this AD that are installed on the airplane.

    (h) Replace Affected Pitot Probes

    (1) After the inspection required in paragraph (g) of this AD, if it is determined that more than one pitot probe identified in paragraph (c)(1) of this AD is installed on the airplane, within the next 2 months after the effective date of this AD, replace the pitot probes that are listed with pitot probes that do not have a serial number listed in paragraph (c)(1) of this AD so that no more than one pitot probe identified in paragraph (c)(1) is installed on any aircraft simultaneously.

    (2) After the inspection required in paragraph (g) of this AD, if it is determined that no more than one pitot probe identified in paragraph (c)(1) of this AD is installed on the airplane, no further action is required except for the ongoing requirement in paragraph (h)(3) of this AD.

    (3) As of the effective date of this, do not install on any airplane a pitot probe having a serial number listed in paragraph (c)(1) of this AD, unless it has been repaired by CSI and has a date of August 1, 2014, or later.

    (i) Alternative Methods of Compliance (AMOCs)

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

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

    (j) Related Information

    For more information about this AD, contact Jonathan Kim, Aerospace Engineer, Fort Worth ACO, FAA, 10101 Hillwood Parkway, Fort Worth, Texas 76177-1524; telephone: (817) 222-5131; fax: (817) 222-5245; email: [email protected]

    Issued in Kansas City, Missouri, on May 4, 2016. David R. Showers, Acting Manager, Small Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-10930 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6427; Directorate Identifier 2015-NM-200-AD] RIN 2120-AA64 Airworthiness Directives; The Boeing Company AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to supersede Airworthiness Directive (AD) 2007-11-13, which applies to all The Boeing Company Model 717-200 airplanes. AD 2007-11-13 currently requires revising the Airworthiness Limitations Section (ALS) of the Instructions for Continued Airworthiness to incorporate new removal limits for certain components of the flap system and to reduce the inspection interval s for fatigue cracking of principal structural elements (PSE). Since we issued AD 2007-11-13, a new Airworthiness Limitations Instructions (ALI) revision was released that incorporates nondestructive inspection (NDI) techniques and reduced repetitive inspection intervals for three PSEs. We have determined that these reduced intervals are necessary to address the unsafe condition. This proposed AD would require revising the maintenance or inspection program, as applicable, to incorporate reduced intervals for the inspections for three PSEs and add NDI techniques to the inspection process. We are proposing this AD to detect and correct fatigue cracking of certain PSEs. Such cracking could adversely affect the structural integrity of the airplane.

    DATES:

    We must receive comments on this proposed AD by June 27, 2016.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

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

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

    For service information identified in this NPRM, contact Boeing Commercial Airplanes, Attention: Data & Services Management, 3855 Lakewood Boulevard, MC D800-0019, Long Beach, CA 90846-0001; telephone 206-544-5000, extension 2; fax 206-766-5683; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    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-2016-6427; 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:

    Eric Schrieber, Aerospace Engineer, Airframe Branch, ANM-120L, FAA, Los Angeles Aircraft Certification Office (ACO), 3960 Paramount Boulevard, Lakewood, CA 90712-4137; phone: 562-627-5348; fax: 562-627-5210; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-6427; Directorate Identifier 2015-NM-200-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

    Discussion

    On June 29, 2007, we issued AD 2007-11-13, Amendment 39-15070 (72 FR 29237, May 25, 2007) (“AD 2007-11-13”), for all The Boeing Company Model 717-200 airplanes. AD 2007-11-13 requires revising the ALS of the Instructions for Continued Airworthiness to incorporate new removal limits for certain components of the flap system and to reduce the inspection intervals for fatigue cracking of PSEs. AD 2007-11-13 resulted from a revised damage tolerance analysis. We issued AD 2007-11-13 to detect and correct fatigue cracking of certain PSEs. Such cracking could adversely affect the structural integrity of the airplane.

    Actions Since AD 2007-11-13 Was Issued

    Since we issued AD 2007-11-13, a new ALI revision was released that incorporates NDI techniques and reduced repetitive inspection intervals for three PSEs. We have determined that these reduced intervals are necessary to address the unsafe condition.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing 717-200, Report MDC-96K9063, Airworthiness Limitations Instructions, Revision 14, dated July 2015. The service information describes procedures for inspecting PSEs, and includes a change to reduce the interval inspections for three PSEs and adds NDI techniques to the inspection process. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    FAA's Determination

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

    Proposed AD Requirements

    This proposed AD would retain all requirements of AD 2007-11-13. This proposed AD would require revising the maintenance or inspection program, as applicable, to incorporate reduced intervals for the inspections for three PSEs and add NDI techniques to the inspection process.

    This proposed AD would require revisions to certain operator maintenance documents to include new actions (e.g., inspections). Compliance with these actions is required by 14 CFR 91.403(c). For airplanes that have been previously modified, altered, or repaired in the areas addressed by this proposed AD, the operator may not be able to accomplish the actions described in the revisions. In this situation, to comply with 14 CFR 91.403(c), the operator must request approval for an alternative method of compliance according to paragraph (k) of this proposed AD. The request should include a description of changes to the required actions that will ensure the continued operational safety of the airplane.

    Costs of Compliance

    We estimate that this proposed AD affects 572 airplanes of U.S. registry.

    We estimate the following costs to comply with this proposed AD:

    Estimated Costs Action Labor cost Cost per
  • product
  • Cost on U.S. operators
    Maintenance or inspection program revision 1 work-hour × $85 per hour = $85 $85 $48,620
    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

    For the reasons discussed above, I certify that the proposed regulation:

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

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

    (3) Will not affect intrastate aviation in Alaska, and

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by removing Airworthiness Directive (AD) 2007-11-13, Amendment 39-15070 (72 FR 29237, May 25, 2007), and adding the following new AD: The Boeing Company: Docket No. FAA- 2016-6427; Directorate Identifier 2015-NM-200-AD. (a) Comments Due Date

    The FAA must receive comments on this AD action by June 27, 2016.

    (b) Affected ADs

    This AD replaces AD 2007-11-13, Amendment 39-15070 (72 FR 29237, May 25, 2007) (“AD 2007-11-13”).

    (c) Applicability

    This AD applies to all The Boeing Company Model 717-200 airplanes, certificated in any category.

    (d) Subject

    Air Transport Association (ATA) of America Code 51, Standard practices/structures.

    (e) Unsafe Condition

    This AD was prompted due to a reduction in the repetitive inspection interval for three principal structural elements (PSE). We are issuing this AD to detect and correct fatigue cracking of certain PSEs. Such cracking could adversely affect the structural integrity of the airplane.

    (f) Compliance

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

    (g) Retained Revising of the Airworthiness Limitations Section (ALS) With Updated Service Information

    This paragraph restates the requirements of paragraph (h) of AD 2007-11-13, with updated service information. Within 180 days after June 29, 2007 (the effective date of AD 2007-11-13): Revise the ALS of the Instructions for Continued Airworthiness, Airworthiness Limitations Instructions (ALI), in accordance with Boeing 717-200 ALI, Report MDC-96K9063, Revision 5, dated February 2006.

    (h) Retained Provision Regarding Alternative Actions, Intervals With Updated Information

    This paragraph restates the requirements of paragraph (i) of AD 2007-11-13, with updated information. Except as required by paragraph (i) of this AD: After the ALS has been revised as required by paragraph (g) of this AD, no alternative actions (e.g., inspections), intervals, may be used unless the actions, intervals, are approved as an alternative method of compliance (AMOC) in accordance with the procedures specified in paragraph (k) of this AD.

    (i) New Maintenance or Inspection Program Revision

    Within 180 days after the effective date of this AD: Revise the maintenance or inspection program, as applicable, to incorporate the information specified in Boeing 717-200 ALI, Report MDC-96K9063, Revision 14, dated July 2015. The initial compliance times for doing the actions specified in Boeing 717-200 ALI, Report MDC-96K9063, Revision 14, dated July 2015, are at the later of the times specified in paragraphs (i)(1) and (i)(2) of this AD. Compliance with this paragraph terminates the requirements of paragraph (g) of this AD.

    (1) Within the applicable compliance times specified in Boeing 717-200 ALI, Report MDC-96K9063, Revision 14, dated July 2015.

    (2) Within 180 days from the effective date of this AD.

    (j) No Alternative Actions or Intervals

    After the maintenance or inspection program has been revised as required by paragraph (i) of this AD, no alternative actions (e.g., inspections) or intervals may be used unless the actions or intervals are approved as an AMOC in accordance with the procedures specified in paragraph (k) of this AD.

    (k) Alternative Methods of Compliance (AMOCs)

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

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

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

    (4) AMOCs approved previously for AD 2007-11-13 are not approved as AMOCs with this AD.

    (l) Related Information

    (1) For more information about this AD, contact Eric Schrieber, Aerospace Engineer, Airframe Branch, ANM-120L, FAA, Los Angeles ACO, 3960 Paramount Boulevard, Lakewood, CA 90712-4137; phone: 562-627-5348; fax: 562-627-5210; email: [email protected]

    (2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, 3855 Lakewood Boulevard, MC D800-0019, Long Beach, CA 90846-0001; telephone 206-544-5000, extension 2; fax 206-766-5683; Internet https://www.myboeingfleet.com. You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Issued in Renton, Washington, on April 28, 2016. Dionne Palermo, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-10740 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6429; Directorate Identifier 2015-NM-117-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to supersede Airworthiness Directive (AD) 2015-05-02, for certain Airbus Model A318, A319, A320, and A321 series airplanes. AD 2015-05-02 requires revising the maintenance or inspection program to incorporate new, more restrictive airworthiness limitations. Since we issued AD 2015-05-02, an evaluation by the design approval holder (DAH) indicates that principal structural elements and certain life limited parts are subject to widespread fatigue damage (WFD). This proposed AD would require revising the maintenance or inspection program, as applicable, to incorporate new or revised structural inspection requirements. We are proposing this AD to prevent fatigue cracking, accidental damage, or corrosion in principal structural elements, and WFD, which could result in reduced structural integrity of the airplane.

    DATES:

    We must receive comments on this proposed AD by June 27, 2016.

    ADDRESSES:

    You may send comments by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

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

    Hand Delivery: U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

    For service information identified in this NPRM, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6429; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

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

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-6429; Directorate Identifier 2015-NM-117-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

    Discussion

    Structural fatigue damage is progressive. It begins as minute cracks, and those cracks grow under the action of repeated stresses. This can happen because of normal operational conditions and design attributes, or because of isolated situations or incidents such as material defects, poor fabrication quality, or corrosion pits, dings, or scratches. Fatigue damage can occur locally, in small areas or structural design details, or globally. Global fatigue damage is general degradation of large areas of structure with similar structural details and stress levels. Multiple-site damage is global damage that occurs in a large structural element such as a single rivet line of a lap splice joining two large skin panels. Global damage can also occur in multiple elements such as adjacent frames or stringers. Multiple-site-damage and multiple-element-damage cracks are typically too small initially to be reliably detected with normal inspection methods. Without intervention, these cracks will grow, and eventually compromise the structural integrity of the airplane, in a condition known as widespread fatigue damage (WFD). As an airplane ages, WFD will likely occur, and will certainly occur if the airplane is operated long enough without any intervention.

    The FAA's WFD final rule (75 FR 69746, November 15, 2010) became effective on January 14, 2011. The WFD rule requires certain actions to prevent structural failure due to WFD throughout the operational life of certain existing transport category airplanes and all of these airplanes that will be certificated in the future. For existing and future airplanes subject to the WFD rule, the rule requires that DAHs establish a limit of validity (LOV) of the engineering data that support the structural maintenance program. Operators affected by the WFD rule may not fly an airplane beyond its LOV, unless an extended LOV is approved.

    The WFD rule (75 FR 69746, November 15, 2010) does not require identifying and developing maintenance actions if the DAHs can show that such actions are not necessary to prevent WFD before the airplane reaches the LOV. Many LOVs, however, do depend on accomplishment of future maintenance actions. As stated in the WFD rule, any maintenance actions necessary to reach the LOV will be mandated by airworthiness directives through separate rulemaking actions.

    In the context of WFD, this action is necessary to enable DAHs to propose LOVs that allow operators the longest operational lives for their airplanes, and still ensure that WFD will not occur. This approach allows for an implementation strategy that provides flexibility to DAHs in determining the timing of service information development (with FAA approval), while providing operators with certainty regarding the LOV applicable to their airplanes.

    On February 25, 2015, we issued AD 2015-05-02, Amendment 39-18112 (80 FR 15152, March 23, 2015) (“AD 2015-05-02”) to supersede AD 2014-23-15, Amendment 39-18031 (80 FR 3871, January 26, 2015). AD 2015-05-02 requires revising the maintenance or inspection program, as applicable, to incorporate new, more restrictive airworthiness limitations on all Airbus Model A318, A319, A320, and A321 series airplanes.

    Since we issued AD 2015-05-02, an evaluation by the DAH indicates that principal structural elements and certain life limited parts are subject to widespread fatigue damage WFD. This proposed AD would require revising the maintenance or inspection program, as applicable, to incorporate new or revised structural inspection requirements.

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2015-0083, dated May 12, 2015 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition.

    The MCAI states:

    The airworthiness limitations for Airbus A320 family aeroplanes are currently included in Airbus A318/A319/A320/A321 Airworthiness Limitations Section (hereafter referred to as `ALS') documents. The Damage Tolerant airworthiness limitation items are published in ALS Part 2, approved by EASA.

    The instructions contained in the ALS Part 2 have been identified as mandatory actions for continued airworthiness. Failure to comply with these instructions could result in an unsafe condition.

    Previously, EASA issued AD 2013-0147 (http://ad.easa.europa.eu/blob/easa_ad_2013_0147_superseded.pdf/AD_2013-0147_1) [which corresponds to FAA AD 2014-23-15, Amendment 39-18031 (80 FR 3871, January 26, 2015) to require accomplishment of all maintenance tasks as described in ALS Part 2 at Revision 02. The new ALS Part 2 Revision 03 [Issue October 27, 2014] includes new and/or more restrictive items and was approved on 27 October 2014.

    For the reason described above, this [EASA] AD retains the requirements of EASA AD 2013-0147, which is superseded, and requires accomplishment of all maintenance tasks as described in ALS Part 2 at Revision 03.

    The required action is revising the maintenance or inspection program to incorporate new or revised structural inspection requirements. The unsafe condition is fatigue cracking, accidental damage, or corrosion in principal structural elements, and WFD, which could result in reduced structural integrity of the airplane. You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6429.

    Other Relevant Rulemaking

    We have issued NPRM Docket FAA-2015-6539, Directorate Identifier 2015-NM-036-AD (80 FR 74723, November 30, 2015), for all Airbus Model A318-111 and -112 airplanes; Model A319-111, -112, -113, -114, and -115 airplanes; Model A320-211, -212, and -214 airplanes; and Model A321-111, -112, -211, -212, and -213 airplanes. That NPRM proposes to require repetitive inspections that reduce the compliance time for Task 712111-01, Detailed Inspection of Forward Engine Mount Installation. Therefore, Task 712111-01 is not included in this proposed AD.

    Related Service Information Under 1 CFR Part 51

    Airbus has issued Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Revision 04, dated December 18, 2015, of the A318/A319/A320/A321 Airworthiness Limitation Section (ALS). The service information describes DT ALIs associated with WFD.

    Airbus has also issued Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Variation 4.2, dated January 15, 2016, of the A318/A319/A320/A321 Airworthiness Limitation Section (ALS). The service information describes DT ALIs associated with WFD.

    This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    FAA's Determination and Requirements of This Proposed AD

    This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of these same type designs.

    This proposed AD requires revisions to certain operator maintenance documents to include new actions (e.g., inspections). Compliance with these actions is required by 14 CFR 91.403(c). For airplanes that have been previously modified, altered, or repaired in the areas addressed by this proposed AD, the operator might not be able to accomplish the actions described in the revisions. In this situation, to comply with 14 CFR 91.403(c), the operator must request approval for an alternative method of compliance (AMOC) in accordance with the provisions of paragraph (k)(1) of this proposed AD. The request should include a description of changes to the required actions that will ensure the continued damage tolerance of the affected structure.

    Differences Between This Proposed AD and the MCAI or Service Information

    This proposed AD differs from the MCAI in that it specifies revising the maintenance or inspection program, as applicable, to incorporate the ALIs specified in Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Revision 04, dated December 18, 2015; and Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Variation 4.2, dated January 15, 2016. The MCAI specifies incorporating the ALIs specified in Airbus A318/A319/A320/A321 ALS Safe Life Airworthiness Limitation Section (ALS), Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Revision 03, Issue October 27, 2014. We have coordinated this change with EASA.

    EASA has issued EASA Proposed Airworthiness Directive (PAD) 16-029, dated February 24, 2016, which specifies incorporating the ALI's in Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Revision 04, dated December 18, 2015; and Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Variation 4.2, dated January 15, 2016.

    The MCAI specifies that if there are findings from the ALS inspection tasks, corrective actions must be accomplished in accordance with Airbus maintenance documentation. However, this proposed AD does not include that requirement. Operators of U.S.-registered airplanes are required by general airworthiness and operational regulations to perform maintenance using methods that are acceptable to the FAA. We consider those methods to be adequate to address any corrective actions necessitated by the findings of ALS inspections required by this proposed AD.

    Airworthiness Limitations Based on Type Design

    The FAA recently became aware of an issue related to the applicability of ADs that require incorporation of an ALS revision into an operator's maintenance or inspection program.

    Typically, when these types of ADs are issued by civil aviation authorities of other countries, they apply to all airplanes covered under an identified type certificate (TC). The corresponding FAA AD typically retains applicability to all of those airplanes. In addition, U.S. operators must operate their airplanes in an airworthy condition, in accordance with 14 CFR 91.7(a). Included in this obligation is the requirement to perform any maintenance or inspections specified in the ALS, and in accordance with the ALS as specified in 14 CFR 43.16 and 91.403(c), unless an alternative has been approved by the FAA.

    When a type certificate is issued for a type design, the specific ALS, including revisions, is a part of that type design, as specified in 14 CFR 21.31(c). The sum effect of these operational and maintenance requirements is an obligation to comply with the ALS defined in the type design referenced in the manufacturer's conformity statement. This obligation may introduce a conflict with an AD that requires a specific ALS revision if new airplanes are delivered with a later revision as part of their type design.

    To address this conflict, the FAA has approved AMOCs that allow operators to incorporate the most recent ALS revision into their maintenance/inspection programs, in lieu of the ALS revision required by the AD. This eliminates the conflict and enables the operator to comply with both the AD and the type design.

    However, compliance with AMOCs is normally optional, and we recently became aware that some operators choose to retain the AD-mandated ALS revision in their fleet-wide maintenance/inspection programs, including those for new airplanes delivered with later ALS revisions, to help standardize the maintenance of the fleet. To ensure that operators comply with the applicable ALS revision for newly delivered airplanes containing a later revision than that specified in an AD, we plan to limit the applicability of ADs that mandate ALS revisions to those airplanes that are subject to an earlier revision of the ALS, either as part of the type design or as mandated by an earlier AD.

    This proposed AD therefore applies to the airplanes identified in paragraph (c) of this proposed AD with an original certificate of airworthiness or original export certificate of airworthiness that was issued on or before the date of approval of the ALS revision identified in this proposed AD. Operators of airplanes with an original certificate of airworthiness or original export certificate of airworthiness issued after that date must comply with the airworthiness limitations specified as part of the approved type design and referenced on the type certificate data sheet.

    Record of Ex Parte Communication

    In preparation of AD actions, it is the practice of the FAA to obtain technical information and information on the operational and economic impact from design approval holders and aircraft operators. We discussed certain issues related to this NPRM in a recent meeting with Airlines for America (A4A). Shortly after this NPRM is published, we will post a summary of this meeting in the rulemaking docket. For information on locating the docket, see “Examining the AD Docket.”

    Costs of Compliance

    We estimate that this proposed AD affects 959 airplanes of U.S. registry.

    The actions required by AD 2015-05-02, and retained in this proposed AD take about 2 work-hours per product, at an average labor rate of $85 per work-hour. Based on these figures, the estimated cost of the actions that are required by AD 2015-05-02 is $170 per product.

    We also estimate that it would take about 2 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $163,030, or $170 per product.

    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

    For the reasons discussed above, I certify this proposed regulation:

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

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

    3. Will not affect intrastate aviation in Alaska; and

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by removing Airworthiness Directive (AD) 2015-05-02, Amendment 39-18112 (80 FR 15152, March 23, 2015), and adding the following new AD: Airbus: Docket No. FAA-2016-6429; Directorate Identifier 2015-NM-117-AD. (a) Comments Due Date

    We must receive comments by June 27, 2016.

    (b) Affected ADs

    This AD replaces AD 2015-05-02, Amendment 39-18112 (80 FR 15152, March 23, 2015) (“AD 2015-05-02”).

    (c) Applicability

    This AD applies to the Airbus airplanes identified in paragraphs (c)(1) through (c)(4) of this AD, certificated in any category, with an original certificate of airworthiness or original export certificate of airworthiness issued on or before January 15, 2016.

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

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

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

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

    (d) Subject

    Air Transport Association (ATA) of America Code 05, Periodic Inspections.

    (e) Reason

    This AD was prompted by an evaluation by the design approval holder (DAH) which indicates that principal structural elements and certain life limited parts are subject to widespread fatigue damage (WFD). We are issuing this AD to prevent fatigue cracking, accidental damage, or corrosion in principal structural elements, and WFD, which could result in reduced structural integrity of the airplane.

    (f) Compliance

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

    (g) Retained Maintenance or Inspection Program Revision, With No Changes

    This paragraph restates the requirements of paragraph (n) of AD 2015-05-02, with no changes. Within 30 days after March 2, 2015 (the effective date of AD 2014-23-15, Amendment 39-18031 (80 FR 3871, January 26, 2015) (“AD 2014-23-15”)), revise the maintenance or inspection program, as applicable, to incorporate the Airworthiness Limitation Items (ALIs) specified in paragraphs (g)(1) and (g)(2) of this AD. The initial compliance time for accomplishing the actions is at the applicable time identified in the ALIs specified in paragraphs (g)(1) and (g)(2) of this AD; or within 4 months after March 2, 2015 (the effective date of AD 2014-23-15); whichever occurs later.

    (1) Airbus A318/A319/A320/A321 ALS Part 1—Safe Life Airworthiness Limitation Items, Revision 02, dated May 13, 2011.

    (2) Airbus A318/A319/A320/A321 ALS Part 2—Damage-Tolerant Airworthiness Limitation Items (DT ALI), Revision 02, dated May 28, 2013.

    (h) Retained Limitation: No Alternative Actions, Intervals, and/or Critical Design Configuration Control Limitations (CDCCLs), With Exception

    This paragraph restates the requirements of paragraph (o) of AD 2015-05-02, with an exception. Except as required by paragraph (i) of this AD, after accomplishing the revision required by paragraph (g) of this AD, no alternative actions (e.g., inspections), intervals, and/or CDCCLs may be used unless the actions, intervals, and/or CDCCLs are approved as an alternative method of compliance (AMOC) in accordance with the procedures specified in paragraph (k)(1) of this AD.

    (i) New Requirement of This AD: Maintenance or Inspection Program Revision

    Within 60 days after the effective date of this AD, revise the maintenance or inspection program, as applicable, to incorporate the ALIs specified in Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Revision 04, dated December 18, 2015; and Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Variation 4.2, dated January 15, 2016. The initial compliance time for accomplishing the actions is at the applicable time identified in the ALIs specified in Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Revision 04, dated December 18, 2015; and Airbus A318/A319/A320/A321 ALS Part 2, Damage Tolerant Airworthiness Limitation Items (DT-ALI), Variation 4.2, dated January 15, 2016; without exceeding the inspection intervals in the ALIs specified in the service information identified in paragraph (g)(2) of this AD, except for the ALI tasks identified in paragraphs (i)(1) though (i)(4) of this AD. Accomplishing these actions terminates the requirements of paragraph (g)(2) of this AD.

    (1) Task 712111-01-1, “Detailed Inspection of Forward Engine Mount Installation.”

    (2) Task 712111-01-2, “Detailed Inspection of Forward Engine Mount Installation.”

    (3) Task 712111-01-3, “Detailed Inspection of Forward Engine Mount Installation.”

    (4) Task 712111-01-4, “Detailed Inspection of Forward Engine Mount Installation.”

    (j) New No Alternative Actions and/or Intervals

    After accomplishing the revision required by paragraph (i) of this AD, no alternative actions (e.g., inspections) and/or intervals may be used unless the actions and/or intervals are approved as an AMOC in accordance with the procedures specified in paragraph (k)(1) of this AD.

    (k) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the International Branch, send it to ATTN: Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone 425-227-1405; fax 425-227-1149. Information may be emailed to: [email protected]

    (i) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office. The AMOC approval letter must specifically reference this AD.

    (ii) AMOCs approved previously for AD 2015-05-02, are approved as AMOCs for the corresponding provisions of paragraphs (g) and (h) of this AD.

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

    (l) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2015-0083, dated May 12, 2015, for related information. This MCAI may be found in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6429.

    (2) For service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email [email protected]; Internet http://www.airbus.com. You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Issued in Renton, Washington, on May 3, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-10914 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6430; Directorate Identifier 2015-NM-176-AD;] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to supersede Airworthiness Directive (AD) 2005-13-30, which applies to all Boeing Model 737-100, -200, and -200C series airplanes. AD 2005-13-30 currently requires repetitive inspections to detect discrepancies of certain fuselage skin panels located just aft of the wheel well, and repair if necessary. Since we issued AD 2005-13-30, an evaluation by the design approval holder (DAH) indicates that the fuselage skin is subject to widespread fatigue damage (WFD), and we have received reports of cracks at the chem-milled steps in the fuselage skin. This proposed AD would add new fuselage skin inspections for cracking, inspections to detect missing or loose fasteners and any disbonding or cracking of bonded doublers, permanent repairs of time-limited repairs, related investigative and corrective actions if necessary, and skin panel replacement. We are proposing this AD to detect and correct fatigue cracking of the fuselage skin panels, which could cause rapid decompression of the airplane.

    DATES:

    We must receive comments on this proposed AD by June 27, 2016.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

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

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

    For service information identified in this NPRM, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6430.

    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-2016-6430; 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:

    Wade Sullivan, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6430; fax: 425-917-6590; email: [email protected]

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-6430; Directorate Identifier 2015-NM-176-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

    Fatigue damage can occur locally, in small areas or structural design details, or globally, in widespread areas. Multiple-site damage is widespread damage that occurs in a large structural element such as a single rivet line of a lap splice joining two large skin panels. Widespread damage can also occur in multiple elements such as adjacent frames or stringers. Multiple-site damage and multiple-element damage cracks are typically too small initially to be reliably detected with normal inspection methods. Without intervention, these cracks will grow, and eventually compromise the structural integrity of the airplane. This condition is known as widespread fatigue damage. It is associated with general degradation of large areas of structure with similar structural details and stress levels. As an airplane ages, WFD will likely occur, and will certainly occur if the airplane is operated long enough without any intervention.

    The FAA's WFD final rule (75 FR 69746, November 15, 2010) became effective on January 14, 2011. The WFD rule requires certain actions to prevent structural failure due to WFD throughout the operational life of certain existing transport category airplanes and all of these airplanes that will be certificated in the future. For existing and future airplanes subject to the WFD rule, the rule requires that DAHs establish a limit of validity (LOV) of the engineering data that support the structural maintenance program. Operators affected by the WFD rule may not fly an airplane beyond its LOV, unless an extended LOV is approved.

    The WFD rule (75 FR 69746, November 15, 2010) does not require identifying and developing maintenance actions if the DAHs can show that such actions are not necessary to prevent WFD before the airplane reaches the LOV. Many LOVs, however, do depend on accomplishment of future maintenance actions. As stated in the WFD rule, any maintenance actions necessary to reach the LOV will be mandated by airworthiness directives through separate rulemaking actions.

    In the context of WFD, this action is necessary to enable DAHs to propose LOVs that allow operators the longest operational lives for their airplanes, and still ensure that WFD will not occur. This approach allows for an implementation strategy that provides flexibility to DAHs in determining the timing of service information development (with FAA approval), while providing operators with certainty regarding the LOV applicable to their airplanes.

    On June 24, 2005, we issued AD 2005-13-30, Amendment 39-14167 (70 FR 36829, June 27, 2005) (“AD 2005-13-30”), for all Boeing Model 737-100, -200, and -200C series airplanes. AD 2005-13-30 requires repetitive inspections to detect discrepancies of certain fuselage skin panels located just aft of the wheel well, and repair if necessary. AD 2005-13-30 resulted from reports of fatigue cracking of the skins and doublers located aft of the wing, between body station (BS) 727 and BS 1016, and between body stringers S-14 and S-25 on numerous Boeing Model 737-100, -200, and -200C series airplanes. On some airplanes, reinforcing angles had been installed on the skin doublers; however, cracking was detected on both modified and unmodified airplanes. The cracking has been attributed to fatigue from a combination of shear stresses due to repeated wrinkling of the skin, and the skin chem-milled pockets configuration. We issued AD 2005-13-30 to detect and correct fatigue cracking of the fuselage skin panels, which could cause rapid decompression of the airplane.

    Actions Since AD 2005-13-30 Was Issued

    Since we issued AD 2005-13-30, an evaluation by the DAH indicates that the fuselage skin is subject to WFD, and we have received reports of cracks at the chem-milled steps in the fuselage skin.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015. The service information describes procedures for inspection and repair of the fuselage skin panels between BS 727 and BS 1016, and between stringers S-14 and S-25; and also describes procedures for skin panel replacement. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    FAA's Determination

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

    Proposed AD Requirements

    Although this proposed AD does not explicitly restate the requirements of AD 2005-13-30, this proposed AD would retain certain requirements of AD 2005-13-30. Those requirements are referenced in the service information identified previously, which, in turn, is referenced in paragraph (h) of this proposed AD.

    This proposed AD would also require accomplishing the actions specified in the service information described previously, except as discussed under “Differences Between this Proposed AD and the Service Information.” For airplanes having line numbers 1 through 291, this proposed AD would require actions done in accordance with a method approved by the Manager, Seattle ACO, FAA.

    The phrase “related investigative actions” is used in this proposed AD. “Related investigative actions” are follow-on actions that (1) are related to the primary actions, and (2) further investigate the nature of any condition found. Related investigative actions in an AD could include, for example, inspections.

    The phrase “corrective actions” is used in this proposed AD. “Corrective actions” are actions that correct or address any condition found. Corrective actions in an AD could include, for example, repairs.

    Differences Between This Proposed AD and the Service Information

    Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, specifies to contact the manufacturer for instructions on how to repair certain conditions and also to obtain certain work instructions, but this proposed AD would require repairing those conditions and also to obtain those work instructions in one of the following ways:

    • In accordance with a method that we approve; or

    • Using data that meet the certification basis of the airplane, and that have been approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) whom we have authorized to make those findings.

    Explanation of Compliance Time

    The compliance time for the replacement specified in this proposed AD for addressing WFD was established to ensure that discrepant structure is replaced before WFD develops in airplanes. Standard inspection techniques cannot be relied on to detect WFD before it becomes a hazard to flight. We will not grant any extensions of the compliance time to complete any AD-mandated service bulletin related to WFD without extensive new data that would substantiate and clearly warrant such an extension.

    Costs of Compliance

    We estimate that this proposed AD affects 9 airplanes of U.S. registry.

    We estimate the following costs to comply with this proposed AD:

    Estimated Costs Action Labor cost Parts cost Cost per product Cost on U.S.
  • operators
  • Inspection [actions retained from AD 2005-13-30] Up to 88 work-hours × $85 per hour = $7,480 per inspection cycle $0 Up to $7,480 per inspection cycle Up to $67,320 per inspection cycle. Inspection [new proposed action] Up to 1,914 work-hours × $85 per hour = $162,690 per inspection cycle $0 Up to $162,690 per inspection cycle Up to $1,464,210 per inspection cycle. Skin panel replacement [new proposed action] 688 work-hours × $85 per hour = $58,480 $96,000 $154,480 $1,390,320.

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

    On-Condition Costs Action Labor cost Parts cost Cost per
  • product
  • Time-limited repair 24 work-hours × $85 per hour = $2,040 (1) 1 $2,040 Permanent repair 43 work-hours × $85 per hour = $3,655 (1) 1 $3,655 Permanent repair inspection 7 work-hours × $85 per hour = $595 (1) 1 $595 1 We have received no definitive data that would enable us to provide parts cost estimates for the on-condition actions specified in this proposed AD.

    According to the manufacturer, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all available costs in our cost estimate.

    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

    For the reasons discussed above, I certify that the proposed regulation:

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

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

    (3) Will not affect intrastate aviation in Alaska, and

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by removing Airworthiness Directive (AD) 2005-13-30, Amendment 39-14167 (70 FR 36829, June 27, 2005), and adding the following new AD: The Boeing Company: Docket No. FAA-2016-6430; Directorate Identifier 2015-NM-176-AD. (a) Comments Due Date

    The FAA must receive comments on this AD action by June 27, 2016.

    (b) Affected ADs

    This AD replaces AD 2005-13-30, Amendment 39-14167 (70 FR 36829, June 27, 2005) (“AD 2005-13-30”).

    (c) Applicability

    This AD applies to all The Boeing Company Model 737-100, -200, and -200C series airplanes, certificated in any category.

    (d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

    (e) Unsafe Condition

    This AD was prompted by an evaluation by the design approval holder (DAH) indicating that the fuselage skin is subject to widespread fatigue damage (WFD), and reports of cracks at the chem-milled steps in the fuselage skin. We are issuing this AD to detect and correct fatigue cracking of the fuselage skin panels, which could cause rapid decompression of the airplane.

    (f) Compliance

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

    (g) Actions for Group 1 Airplanes

    For Group 1 airplanes identified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: Within 120 days after the effective date of this AD, accomplish actions to correct the unsafe condition (e.g., inspections, repairs, modifications, and related investigative and corrective actions) using a method approved in accordance with the procedures specified in paragraph (o) of this AD.

    (h) Inspections, Related Investigative and Corrective Actions

    Except for Group 1 airplanes identified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: At the applicable times specified in tables 1 and 2 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraphs (i)(1) and (i)(2) of this AD: Do the applicable inspections to detect cracks in the fuselage skin panels; and do all applicable related investigative and corrective actions; in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraphs (i)(3) and (i)(4) of this AD. Do all applicable related investigative and corrective actions before further flight. Repeat the applicable inspections thereafter at the applicable intervals specified Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015. Accomplishment of a repair in accordance with “Part 3: Repair” of the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD, is terminating action for the repetitive inspections required by this paragraph at the repaired locations only.

    (i) Exceptions to Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, Dated June 30, 2015

    (1) Where Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, specifies compliance times “after the Revision 3 date of this service bulletin,” this AD requires compliance within the specified compliance times after the effective date of this AD.

    (2) The Condition column of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, refers to airplanes in certain configurations as of the “issue date of Revision 3 of this service bulletin.” However, this AD applies to airplanes in the specified configurations “as of the effective date of this AD.”

    (3) Where Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, specifies contacting Boeing for repair instructions or work instructions, before further flight, repair or perform the work instructions using a method approved in accordance with the procedures specified in paragraph (o) of this AD, except as required by paragraph (i)(4) of this AD.

    (4) For airplanes on which an operator has a record that a skin panel was replaced with a production skin panel at or before 59,000 total flight cycles: At the applicable time for the next inspection as specified in tables 1 and 2 of paragraph 1.E., “Compliance,” Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as provided by paragraphs (i)(1) and (i)(2) of this AD: Perform inspections and applicable corrective actions using a method approved in accordance with the procedures specified in paragraph (o) of this AD.

    (j) Actions for Airplanes With a Time Limited Repair Installed

    Except for Group 1 airplanes identified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: Do the applicable actions required by paragraphs (j)(1) and (j)(2) of this AD.

    (1) For airplanes with a time limited repair installed as specified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001: At the applicable times specified in table 3 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as provided by paragraphs (i)(1) and (i)(2) of this AD: Do the actions specified in paragraphs (j)(1)(i) and (j)(1)(ii) of this AD.

    (i) Do the applicable inspections to detect missing or loose fasteners and any disbonding or cracking of bonded doublers; and do all applicable related investigative and corrective actions; in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD. Do all applicable related investigative and corrective actions before further flight. Repeat the applicable inspections thereafter at the applicable intervals specified Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015.

    (ii) Make the time limited repair permanent; and do all applicable related investigative and corrective actions; in accordance the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD. Do all applicable related investigative and corrective actions before further flight. Accomplishing the permanent repair required by this paragraph terminates the inspections required by paragraph (j)(1)(i) of this AD for the permanently repaired area only.

    (2) For airplanes with a time limited repair installed as specified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: At the applicable times specified in table 4 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: Do the actions specified in paragraphs (j)(2)(i) and (j)(2)(ii) of this AD.

    (i) Do the applicable inspections to detect missing or loose fasteners and any disbonding or cracking of bonded doublers; and do all applicable related investigative and corrective actions; in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD. Do all applicable related investigative and corrective actions before further flight. Repeat the applicable inspections thereafter at the applicable intervals specified Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015.

    (ii) Make the time limited repair permanent; and do all applicable related investigative and corrective actions; in accordance the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD. Do all applicable related investigative and corrective actions before further flight. Accomplishing the permanent repair required by this paragraph terminates the inspections required by paragraph (j)(2)(i) of this AD for the permanently repaired area only.

    (k) Modification of Certain Permanent Repairs

    Except for Group 1 airplanes identified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: For airplanes with an existing time limited repair that was made permanent as specified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001: At the applicable times specified in table 5 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(1) of this AD: Modify the existing permanent repair; and do all applicable related investigative and corrective actions; in accordance the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD. Do all applicable related investigative and corrective actions before further flight.

    (l) Certain Post-Repair Inspections

    For airplanes with a permanent repair installed as specified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: At the applicable time specified in table 6 of paragraph 1.E., “Compliance,” of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: Do an external low frequency eddy current (LFEC) inspection for cracking of the skin at the critical fastener row of the repair doubler; and do all applicable corrective actions; in accordance the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015, except as required by paragraph (i)(3) of this AD. Do all applicable corrective actions before further flight. Repeat the LFEC inspection thereafter at the applicable intervals specified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015.

    (m) Skin Panel Replacement

    Except for Group 1 airplanes identified in Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015: At the later of the times specified in paragraphs (m)(1) and (m)(2) of this AD: Replace the applicable skin panels, and do all applicable related investigative and corrective actions, in accordance with the Accomplishment Instructions of Boeing Special Attention Service Bulletin 737-53-1065, Revision 3, dated June 30, 2015. Do all applicable related investigative and corrective actions before further flight. Doing the skin panel replacement required by this paragraph terminates the inspection requirements of paragraph (h) of this AD for that skin panel only, provided the skin panel was replaced with a production skin panel after 59,000 total flight cycles.

    (1) Before 60,000 total flight cycles, but not at or before 59,000 total flight cycles.

    (2) Within 6,000 flight cycles after the effective date of this AD, but not at or before 59,000 total flight cycles.

    (n) Credit for Previous Actions

    This paragraph provides credit for the actions required by paragraph (h) of this AD, if those actions were performed before the effective date of this AD using Boeing Special Attention Service Bulletin 737-53-1065, Revision 2, dated April 19, 2001, which was incorporated by reference in AD 2005-13-30.

    (o) Alternative Methods of Compliance (AMOCs)

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

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

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

    (4) AMOCs approved previously for AD 2005-13-30, are approved as AMOCs for the corresponding provisions of paragraph (h) of this AD.

    (p) Related Information

    (1) For more information about this AD, contact Wade Sullivan, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle ACO, 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6430; fax: 425-917-6590; email: [email protected]

    (2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P. O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, 1601 Lind Avenue SW., Renton, Washington. For information on the availability of this material at the FAA, call 425-227-1221.

    Issued in Renton, Washington, on May 4, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-11095 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6428; Directorate Identifier 2015-NM-119-AD] RIN 2120-AA64 Airworthiness Directives; The Boeing Company Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to adopt a new airworthiness directive (AD) for certain The Boeing Company Model 787-8 airplanes. This proposed AD was prompted by reports indicating that certain wing side-of-body stringer fittings have been installed with faying surface mismatch beyond the allowed machining tolerance. This proposed AD would require inspection of certain stringer fittings for faying surface mismatch common to the side-of-body rib chord, replacement if necessary, and replacement of the clearance fit fasteners common to the side-of-body fittings and upper side-of-body rib chord with tapered sleeve bolts. We are proposing this AD to prevent an unacceptable reduction of the fatigue life in the upper side-of-body rib chord. Associated fatigue cracks can reduce the structural capability to a point where it cannot sustain limit load, which could adversely affect the structural integrity of the airplane.

    DATES:

    We must receive comments on this proposed AD by June 27, 2016.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

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

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

    For service information identified in this NPRM, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6428.

    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-2016-6428; 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:

    Allen Rauschendorfer, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6487; fax: 425-917-6590; email: [email protected]

    SUPPLEMENTARY INFORMATION: Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-6428; Directorate Identifier 2015-NM-119-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

    Discussion

    We have received reports indicating that certain wing side-of-body stringer fittings have been installed with faying surface mismatch beyond the allowed machining tolerance. The fittings are assembled to the mating side-of-body rib chord. The faying surface mismatch produces a gouge in the mating surface which reduces the fatigue life, and could grow into a widespread fatigue condition on the upper side-of-body rib chord. We are proposing this AD to prevent an unacceptable reduction of the fatigue life in the upper side-of-body rib chord. Associated fatigue cracks can reduce the structural capability to a point where it cannot sustain limit load, which could adversely affect the structural integrity of the airplane.

    Related Service Information Under 1 CFR Part 51

    We reviewed Boeing Alert Service Bulletin B787-81205-SB570018-00, Issue 001, dated July 1, 2015. The service information describes procedures for inspection of the left and right hand side stringer 1 fittings for faying surface mismatch common to the side-of-body rib chord. If faying surface mismatch is found, instructions are also given to replace the stringer 1 fitting, and removal and replacement of the clearance fit fasteners common to the side-of-body fittings and upper side-of-body rib chord with tapered sleeve bolts from stringer 5 to stringer 11. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    FAA's Determination

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

    Proposed AD Requirements

    This proposed AD would require accomplishing the actions specified in the service information described previously, except as described in “Differences Between this Proposed AD and the Service Information.”

    Differences Between This Proposed AD and the Service Information

    Boeing Alert Service Bulletin B787-81205-SB570018-00, Issue 001, dated July 1, 2015, specifies to contact the manufacturer for instructions on how to repair certain conditions, but this proposed AD would require repairing those conditions in one of the following ways:

    • In accordance with a method that we approve; or

    • Using data that meet the certification basis of the airplane, and that have been approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) whom we have authorized to make those findings.

    Costs of Compliance

    We estimate that this proposed AD affects 5 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
    Modification and inspection 144 work-hours × $85 per hour = $12,240 $100,079 $112,319 $561,595

    We estimate the following costs to do any necessary corrective action for fretting damage or cutter mismatch 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 corrective actions:

    On-condition Costs Action Labor cost Parts cost Cost per
  • product
  • Repair for fretting damage or cutter mismatch 9 work-hours × $85 per hour = $765 $0 $765

    We have received no definitive data that would enable us to provide cost estimates for the crack repair specified in this proposed AD.

    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

    For the reasons discussed above, I certify this proposed regulation:

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

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

    (3) Will not affect intrastate aviation in Alaska, and

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): The Boeing Company: Docket No. FAA-2016-6428; Directorate Identifier 2015-NM-119-AD. (a) Comments Due Date

    We must receive comments by June 27, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to The Boeing Company Model 787-8 airplanes, certificated in any category, as identified in Boeing Alert Service Bulletin B787-81205-SB570018-00, Issue 001, dated July 1, 2015.

    (d) Subject

    Air Transport Association (ATA) of America Code 57, Wings.

    (e) Unsafe Condition

    This AD was prompted by reports indicating that certain wing side-of-body stringer fittings have been installed with faying surface mismatch beyond the allowed machining tolerance. We are issuing this AD to prevent an unacceptable reduction of the fatigue life in the upper side-of-body rib chord. Associated fatigue cracks can reduce the structural capability to a point where it cannot sustain limit load, which could adversely affect the structural integrity of the airplane.

    (f) Compliance

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

    (g) Inspection

    Before the accumulation of 18,000 total flight cycles, or within 13 years after the effective date of this AD, whichever occurs first, do the inspections specified in paragraphs (g)(1), (g)(2), and (g)(3) of this AD, and all applicable corrective actions, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin B787-81205-SB570018-00, Issue 001, dated July 1, 2015, except as required by paragraph (i) of this AD. Do all applicable corrective actions before further flight.

    (1) Do a detailed inspection for fretting damage of the faying surface of the aluminum T-chord.

    (2) Do an eddy current inspection for cracking of the fastener holes.

    (3) Do a detailed inspection for a machine mismatch condition of the stringer 1 fitting faying surface.

    (h) Modifications

    Concurrently with accomplishment of the requirements of paragraph (g) of this AD: Modify the stringer fitting fasteners, and do an eddy current inspection for cracking of the fastener holes, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin B787-81205-SB570018-00, Issue 001, dated July 1, 2015. If any crack is found, before further flight, repair using a method approved in accordance with the procedures specified in paragraph (j) of this AD.

    (i) Exception to Service Information Specifications

    Where Boeing Alert Service Bulletin B787-81205-SB570018-00, Issue 001, dated July 1, 2015, specifies to contact Boeing for repair of cracking: Before further flight, repair the cracking using a method approved in accordance with the procedures specified in paragraph (j) of this AD.

    (j) Alternative Methods of Compliance (AMOCs)

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

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

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

    (4) Except as required by paragraph (i) of this AD: For service information that contains steps that are labeled as Required for Compliance (RC), the provisions of paragraphs (j)(4)(i) and (j)(4)(ii) apply.

    (i) The steps labeled as RC, including substeps under an RC step and any figures identified in an RC step, must be done to comply with the AD. An AMOC is required for any deviations to RC steps, including substeps and identified figures.

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

    (k) Related Information

    (1) For more information about this AD, contact Allen Rauschendorfer, Aerospace Engineer, Airframe Branch, ANM-120S, FAA, Seattle Aircraft Certification Office (ACO), 1601 Lind Avenue SW., Renton, WA 98057-3356; phone: 425-917-6487; fax: 425-917-6590; email: [email protected]

    (2) For service information identified in this AD, Boeing Commercial Airplanes, Attention: Data & Services Management, P. O. Box 3707, MC 2H-65, Seattle, WA 98124-2207; telephone 206-544-5000, extension 1; fax 206-766-5680; Internet https://www.myboeingfleet.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Issued in Renton, Washington, on May 3, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-10915 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA-2016-6431; Directorate Identifier 2015-NM-182-AD] RIN 2120-AA64 Airworthiness Directives; Airbus Airplanes AGENCY:

    Federal Aviation Administration (FAA), DOT.

    ACTION:

    Notice of proposed rulemaking (NPRM).

    SUMMARY:

    We propose to adopt a new airworthiness directive (AD) for certain Airbus Model A318-112 airplanes, A319-111, -112, -115, -132, and -133 airplanes, A320-214, -232, and -233 airplanes, and A321-211, -212, -213, -231, and -232 airplanes. This proposed AD was prompted by a quality control review on the final assembly line, which determined that aluminum alloy with inadequate heat treatment had been delivered and used on several structural parts. This proposed AD would require a one-time eddy current conductivity measurement of certain cabin, cargo compartment, and frame structural parts to determine if aluminum alloy with inadequate heat treatment was used, and replacement if necessary. We are proposing this AD to detect and replace structural parts made of aluminum alloy with inadequate heat treatment. This condition could result in reduced structural integrity of the airplane.

    DATES:

    We must receive comments on this proposed AD by June 27, 2016.

    ADDRESSES:

    You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:

    Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.

    Fax: 202-493-2251.

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

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

    For service information identified in this NPRM, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email: [email protected]; Internet: http://www.airbus.com. You may view this referenced service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6431; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone: 800-647-5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

    FOR FURTHER INFORMATION CONTACT:

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

    SUPPLEMENTARY INFORMATION:

    Comments Invited

    We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2016-6431; Directorate Identifier 2015-NM-182-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments.

    We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

    Discussion

    The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2015-0219, dated November 3, 2015 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Airbus Model A318-112 airplanes, A319-111, -112, -115, -132, and -133 airplanes, A320-214, -232, and -233 airplanes, and A321-211, -212, -213, -231, and -232 airplanes. The MCAI states:

    Following an Airbus quality control review on the final assembly line, it was discovered that aluminum alloy with inadequate heat treatment were delivered by a supplier for several structural parts. The results of the investigations highlighted that 1% of the stock could be impacted by this wrong material.

    Structural investigations demonstrated the capability to sustain the static limits loads, and sufficient fatigue life up to a certain inspection threshold.

    This condition, if not detected and corrected, could reduce the aeroplane structural integrity following fatigue load.

    To address this potential unsafe condition, Airbus issued Service Bulletin (SB) A320-53-1292, SB A320-53-1293, and SB A320-53-1294 to provide inspection instructions.

    For the reasons described above, this [EASA] AD requires a one-time Special Detailed Inspection (SDI) [i.e., eddy current conductivity measurement] of certain cabin, cargo compartment and frame parts [for material identification] and, depending on findings, replacement with serviceable parts.

    You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6431.

    Related Service Information Under 1 CFR Part 51

    Airbus has issued the following service information:

    • Airbus Service Bulletin A320-53-1292, dated July 23, 2015; including Appendices 01 and 02, dated July 23, 2015.

    • Airbus Service Bulletin A320-53-1293, dated July 30, 2015; including Appendices 01 and 02, dated July 30, 2015.

    • Airbus Service Bulletin A320-53-1294, dated July 23, 2015; including Appendices 01 and 02, dated July 23, 2015.

    The service information describes procedures for a one-time eddy current conductivity measurement of certain cabin, cargo compartment, and frame structural parts to determine if aluminum alloy with inadequate heat treatment was used, and replacement of any affected part with a serviceable part. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

    FAA's Determination and Requirements of This Proposed AD

    This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of these same type designs.

    Costs of Compliance

    We estimate that this proposed AD affects 46 airplanes of U.S. registry.

    We also estimate that it would take about 6 work-hours per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this proposed AD on U.S. operators to be $23,460, or $510 per product.

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

    According to the manufacturer, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all available costs in our cost estimate.

    Authority for This Rulemaking

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

    We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

    Regulatory Findings

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

    For the reasons discussed above, I certify this proposed regulation:

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

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

    3. Will not affect intrastate aviation in Alaska; and

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

    List of Subjects in 14 CFR Part 39

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

    The Proposed Amendment

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

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

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

    § 39.13 [Amended]
    2. The FAA amends § 39.13 by adding the following new airworthiness directive (AD): Airbus: Docket No. FAA-2016-6431; Directorate Identifier 2015-NM-182-AD. (a) Comments Due Date

    We must receive comments by June 27, 2016.

    (b) Affected ADs

    None.

    (c) Applicability

    This AD applies to the Airbus airplanes identified in paragraphs (c)(1) through (c)(4) of this AD, certificated in any category; manufacturer serial numbers 4895, 4903, 4911, 4919, 4929, 4938, 4942, 4944, 4946, 4948, and 4951, 4956 through 5541 inclusive, 5544, 5547, 5550, 5551, 5553, 5556, 5559, 5561, 5562, 5563, 5565, 5566, 5570, 5572, 5576, and 5578.

    (1) Airbus Model A318-112 airplanes.

    (2) Airbus Model A319-111, -112, -115, -132, and -133 airplanes.

    (3) Airbus Model A320-214, -232, and -233 airplanes.

    (4) Airbus Model A321-211, -212, -213, -231, and -232 airplanes.

    (d) Subject

    Air Transport Association (ATA) of America Code 53, Fuselage.

    (e) Reason

    This AD was prompted by a quality control review on the final assembly line, which determined that aluminum alloy with inadequate heat treatment had been delivered and used on several structural parts. We are issuing this AD to detect and replace structural parts made of aluminum alloy with inadequate heat treatment. This condition could result in reduced structural integrity of the airplane.

    (f) Compliance

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

    (g) One-time Measurement

    Within 6 years since the date of issuance of the original certificate of airworthiness or the date of issuance of the original export certificate of airworthiness: Do a one-time eddy current conductivity measurement of the cabin, cargo compartment, and frame structural parts identified in the “Affected P/N (part number)” column of tables 1, 2, and 3 to paragraphs (g) and (h) of this AD to determine if aluminum alloy with inadequate heat treatment was used, in accordance with the Accomplishment Instructions of the applicable service information identified in paragraphs (g)(1), (g)(2), and (g)(3) of this AD.

    (1) For cabin structural parts: Airbus Service Bulletin A320-53-1292, dated July 23, 2015; including Appendices 01 and 02, dated July 23, 2015.

    (2) For cargo compartment structural parts: Airbus Service Bulletin A320-53-1293, dated July 30, 2015; including Appendices 01 and 02, dated July 30, 2015.

    (3) For frame structural parts: Airbus Service Bulletin A320-53-1294, dated July 23, 2015; including Appendices 01 and 02, dated July 23, 2015.

    Table 1 to Paragraphs (g) and (h) of this AD—Parts to be Inspected/Installed [Airbus Service Bulletin A320-53-1292] Affected P/N Acceptable replacement P/N Area D2127245500000 D2127245500000 Cabin D2127247600200 D2127247600200 Cabin D2127247600300 D2127247600300 Cabin D2127399900200 D2127399900200 Cabin D2127399900300 D2127399900300 Cabin D2127698900800 D2127698900800 Cabin D2127698902400 D2127698902400 Cabin D2527075131200 D2527075131251 Cabin D2527075131300 D2527075131351 Cabin D2527075138000 D2527075138000 Cabin D2527075138100 D2527075138100 Cabin D2527075138200 D2527075138200 Cabin D2527075138300 D2527075138300 Cabin D2527075138600 D2527075138651 Cabin D2527075138800 D2527075138851 Cabin D2527240220600 D2527240220651 Cabin D2527240220700 D2527240220751 Cabin D2527240220800 D2527240220851 Cabin D9249591201000 D9249591201000 Cabin D9249591201800 D9249591201800 Cabin D9249591227800 D9249591227851 Cabin D9249591227900 D9249591227951 Cabin D9249591228000 D9249591228051 Cabin D9249591228100 D9249591228151 Cabin Table 2 to Paragraphs (g) and (h) of this AD—Parts to be Inspected/Installed [Airbus Service Bulletin A320-53-1293] Affected P/N Acceptable replacement P/N Area D2707033520000 D2707033520000 Cargo D2827027120000 D2827027120000 Cargo D2827093500400 D2827093500400 Cargo D2907013701200 D2907013701251 Cargo D2907013800400 D2907013800451 Cargo D3247012900000 D3247012900051 Cargo D3817003820000 D3817003820000 Cargo D3817012320200 D3817012320251 Cargo D3837021201600 D3837021201600 Cargo D3837033300400 D3837033300400 Cargo D4918518320200 D4918518320200 Cargo D5347043420400 D5347043420451 Cargo D9248511000000 D9248511000051 Cargo D9249254100200 D9249254100251 Cargo D9249282300000 D9249282300000 Cargo Table 3 to Paragraphs (g) and (h) of this AD—Parts to be Inspected/Installed [Airbus Service Bulletin A320-53-1294] Affected P/N Acceptable replacement P/N Area D2827098326800 D2827098326851 Frame D5347051620600 D5347051620651 Frame D5347051720600 D5347051720651 Frame D5347057120000 D5347057120051 Frame D5347067520600 D5347067520651 Frame D5347067521400 D5347067521451 Frame D5347067520800 D5347067520851 Frame D5347067521000 D5347067521051 Frame D5347067521600 D5347067521651 Frame D5347067620600 D5347067620600 Frame D5347067720200 D5347067720251 Frame D5347067720400 D5347067720451 Frame D5347986520200 D5347986520251 Frame (h) Replacement

    If during the measurement required by paragraph (g) of this AD, any affected P/N specified in table 1, 2, or 3 to paragraphs (g) and (h) of this AD is found to have a measured value greater than that specified in Figure A-GFAAA, Sheet 01, “Inspection Flowchart,” of the applicable service information identified in paragraphs (g)(1), (g)(2), and (g)(3) of this AD: Before further flight, replace the affected part with the corresponding acceptable replacement part specified in table 1, 2, or 3 to paragraphs (g) and (h) of this AD, in accordance with the Accomplishment Instructions of the applicable service information identified in paragraphs (g)(1), (g)(2), and (g)(3) of this AD.

    (i) Other FAA AD Provisions

    The following provisions also apply to this AD:

    (1) Alternative Methods of Compliance (AMOCs): The Manager, International Branch, ANM-116, Transport Airplane Directorate, FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the International Branch, send it to ATTN: Sanjay Ralhan, Aerospace Engineer, International Branch, ANM-116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone: 425-227-1405; fax: 425-227-1149. Information may be emailed to: [email protected] Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office. The AMOC approval letter must specifically reference this AD.

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

    (3) Required for Compliance (RC): If any service information contains procedures or tests that are identified as RC, those procedures and tests must be done to comply with this AD; any procedures or tests that are not identified as RC are recommended. Those procedures and tests that are not identified as RC may be deviated from using accepted methods in accordance with the operator's maintenance or inspection program without obtaining approval of an AMOC, provided the procedures and tests identified as RC can be done and the airplane can be put back in an airworthy condition. Any substitutions or changes to procedures or tests identified as RC require approval of an AMOC.

    (j) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA AD 2015-0219, dated November 3, 2015, for related information. This MCAI may be found in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-6431.

    (2) For service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 44 51; email: [email protected]; Internet: http://www.airbus.com. You may view this service information at the FAA, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA. For information on the availability of this material at the FAA, call 425-227-1221.

    Issued in Renton, Washington, on May 4, 2016. Michael Kaszycki, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service.
    [FR Doc. 2016-11094 Filed 5-10-16; 8:45 am] BILLING CODE 4910-13-P
    SOCIAL SECURITY ADMINISTRATION 20 CFR Parts 404, 411, and 416 [Docket No. SSA-2014-0016] RIN 0960-AH66 Unsuccessful Work Attempts and Expedited Reinstatement Eligibility AGENCY:

    Social Security Administration.

    ACTION:

    Notice of proposed rulemaking.

    SUMMARY:

    We propose to remove some of the requirements for evaluation of an unsuccessful work attempt (UWA) that lasts between 3 and 6 months. We also propose to allow previously entitled beneficiaries to apply for expedited reinstatement (EXR) in the same month they stop performing substantial gainful activity (SGA). Provisional benefits will begin the month after the request for EXR if the beneficiary stops performing SGA in the month of the EXR request. These changes would simplify our policies and make them easier for the public to understand.

    DATES:

    To ensure that your comments are considered, we must receive them no later than July 11, 2016.

    ADDRESSES:

    You may submit comments by any one of three methods—Internet, fax, or mail. Do not submit the same comments multiple times or by more than one method. Regardless of which method you choose, please state that your comments refer to Docket No. SSA-2014-0016 so that we may associate your comments with the correct regulation.

    CAUTION: You should be careful to include in your comments only information that you wish to make publicly available. We strongly urge you not to include in your comments any personal information, such as Social Security numbers or medical information.

    1. Internet: We strongly recommend that you submit your comments via the Internet. Please visit the Federal eRulemaking portal at http://www.regulations.gov. Use the Search function to find docket number SSA-2014-0016. The system will issue a tracking number to confirm your submission. You will not be able to view your comment immediately because we must post each comment manually. It may take up to a week for your comment to be viewable.

    2. Fax: Fax comments to (410) 966-2830.

    3. Mail: Mail your comments to the Office of Regulations and Reports Clearance, Social Security Administration, 3100 West High Rise Building, 6401 Security Boulevard, Baltimore, Maryland 21235-6401.

    Comments are available for public viewing on the Federal eRulemaking portal at http://www.regulations.gov or in person, during regular business hours, by arranging with the contact person identified below.

    FOR FURTHER INFORMATION CONTACT:

    Kristine Erwin-Tribbitt, Office of Retirement and Disability Policy, Office of Research, Demonstration, and Employment Support, Social Security Administration, 6401 Security Boulevard, Robert Ball Building 3-A-26, Baltimore, MD 21235-6401, (410) 965-3353. For information on eligibility or filing for benefits, call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet site, Social Security Online, at http://www.socialsecurity.gov.

    SUPPLEMENTARY INFORMATION: SGA and UWA

    To be eligible for disability benefits, an individual must be unable to engage in any SGA.1 SGA is work activity that is both substantial and gainful.2 Work activity is substantial if it involves the performance of significant physical or mental activities.3 “Gainful work activity” is work done for pay or profit, or if it is the kind of work usually done for pay or profit, whether or not a profit is realized.4 We will not determine that an individual is disabled or continues to be disabled if he or she is able to perform SGA.

    1 42 U.S.C. 223(d)(1), 42 U.S.C. 1382c(a)(3)(A).

    2 20 CFR 404.1572 and 416.972.

    3 20 CFR 404.1572(a) and 416.972(a).

    4 20 CFR 404.1572(b) and 416.972(b).

    We use several rules to decide whether an individual has performed SGA. Generally, our first consideration in evaluating work activity will be the earnings derived from the work activity.5 We use earnings guidelines to evaluate whether work activity is SGA.6 We ordinarily consider an individual who is earning more than a certain monthly amount to be engaged in SGA.7 For the self-employed, we consider income or the value of the individual's activities to the business when determining whether he or she engaged in SGA.8

    5 20 CFR 404.1574(a)(1) and 416.974(a)(1).

    6 Id.; see also 20 CFR 404.1574(b) and 416.974(b).

    7 20 CFR 404.1574(b)(2) and 416.974(b)(2).

    8 20 CFR 404.1575(a)(2) and 416.975(a).

    Disability evaluation is generally concerned with the ability to work over an extended period rather than in short, isolated periods. Disability claimants and beneficiaries may attempt to return to work and engage in SGA following a break in the continuity of their work. For SGA determination purposes, we may disregard work in employment or self-employment if a claimant or beneficiary, after working for a period of 6 months or less, stops working or reduces the amount of work so that the earnings fall below the SGA level because of the original impairment or the removal of special conditions that were essential to the performance of his or her work, and if there was a significant break in the continuity of work before this work attempt.9 We call this a UWA. Earnings from a UWA will not show that a claimant or beneficiary is able to do SGA.10 For purposes of the Social Security disability program under title II of the Act, we apply UWA policies when we determine initial entitlement to benefits as well as after approval for benefits. For purposes of the Supplemental Security Income (SSI) program under title XVI of the Act, we apply UWA only when determining initial entitlement to benefits.

    9 20 CFR 404.1574(c) and 416.974(c).

    10 20 CFR 404.1574(a)(1) and 416.974(a)(1).

    Under our current rules, we evaluate the success of a work attempt by its duration. We look at work attempts lasting less than 3 months and those lasting between 3 and 6 months. We consider work of 3 months or less to be a UWA if the claimant or beneficiary stopped working or reduced the work and earnings below the SGA earnings level because of the claimant or beneficiary's impairment, or because of the removal of special conditions which took into account the claimant or beneficiary's impairment and permitted the claimant or beneficiary to work. In contrast, to qualify as a UWA, we require the work attempt to last between 3 and 6 months to meet the same conditions for work attempts lasting 3 months or less and to also meet several additional conditions. The claimant or beneficiary must also have: (1) Been frequently absent from work because of his or her impairment, (2) performed the work unsatisfactorily because of his or her impairment, (3) worked during a period of temporary remission of his or her impairment, or (4) worked under special conditions essential to his or her performance and those conditions were removed.11

    11 20 CFR 404.1574(c)(4) and 416.974(c)(4).

    We propose to revise 20 CFR 404.1574(c), 404.1575(d), 416.974(c), and 416.975(d) to remove the additional conditions that we use when evaluating a work attempt in employment or self-employment that lasts between 3 and 6 months. We propose to use the current 3-month standards for all work attempts that are 6 months or less. This change would apply to Social Security Disability Insurance (SSDI) and SSI claimants and beneficiaries.12

    12 20 CFR 404.1574 (c)(3) and 416.974(c)(3).

    Under the current rule, when an individual works between 3 and 6 months, we are required to perform additional development to determine if any of the additional conditions are met. This additional step delays case processing, in part, because we must contact the individual's employer and physician for information to support the individual's claim. Our proposed changes would result in simplified case processing and faster and better determinations and decisions.

    EXR Eligibility and Provisional Benefits

    Previously entitled individuals may request EXR within 60 months of their prior termination of benefits if their medical condition no longer permits them to perform SGA. To qualify for EXR, a previously entitled individual must be unable to perform SGA due to an impairment that is the same as or related to an impairment that was the basis for the previous entitlement.13 The standard for evaluating disability on an EXR claim may be more advantageous to the claimant than the standard for evaluating disability on a completely new claim for benefits.14 EXR applies to both SSDI and SSI programs.

    13 20 CFR 404.1592c and 416.999a.

    14 20 CFR 404.1592b and 416.999.

    Currently, our regulations state that individuals are not eligible for EXR if they perform SGA during the month in which they apply for EXR.15 In many cases, a previously entitled individual will request EXR in the same month that he or she stopped working. However, since earnings already exceeded SGA for that month, the individual is not eligible to file for EXR until the following month. In such cases, we are required to deny the EXR request, and the individual can request EXR in the following month.

    15 20 CFR 404.1592c and 416.999a.

    We propose to revise 20 CFR 404.1592c and 416.999a to allow previously entitled individuals to request EXR in the same month they stop performing SGA. This change would apply to SSDI and SSI claimants and beneficiaries. This change would make requesting EXR easier as we will be able to accept the request at first contact. It would also allow us to forward the individual's file immediately for a medical determination, reducing wait time and the possibility of a gap in benefit payments.

    For a beneficiary who has requested EXR, provisional benefits are available for a period of up to 6 months while we make a reinstatement determination.16 We stop paying provisional benefits when we send a notice of our determination on reinstatement, when the individual performs SGA, when the individual attains full retirement age, or when we have paid 6 months of provisional benefits. We also propose to revise 20 CFR 404.1592e(a)(1) to clarify that provisional benefits will begin the month after the individual files a request for EXR if the individual stops performing SGA in the month of request.

    16 20 CFR 404.1592e.

    Clarity of This Rule

    Executive Order 12866 requires each agency to write all rules in plain language. In addition to your substantive comments on this proposed rule, we invite your comments on how to make rules easier to understand.

    For example:

    • Would more, but shorter, sections be better?

    • Are the requirements in the rule clearly stated?

    • Have we organized the material to suit your needs?

    • Could we improve clarity by adding tables, lists, or diagrams?

    • What else could we do to make the rule easier to understand?

    • Does the rule contain technical language or jargon that is not clear?

    • Would a different format make the rule easier to understand, e.g. grouping and order of sections, use of headings, paragraphing?

    Regulatory Procedures Executive Order 12866

    We consulted with the Office of Management and Budget (OMB) and determined that this proposed rule meets the criteria for a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563, and was subject to OMB review.

    Regulatory Flexibility Act

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

    Paperwork Reduction Act

    This rule does not create any new or affect any existing collections and, therefore, it does not require Office of Management and Budget approval under the Paperwork Reduction Act.

    (Catalog of Federal Domestic Assistance Program Nos. 9601, Social Security—Disability Insurance; 96.006, Supplemental Security Income; 96.008, Social Security—Work Incentives Planning and Assistance Program.) List of Subjects 20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, Reporting and recordkeeping requirements, Social security, Vocational rehabilitation.

    20 CFR Part 416

    Administrative practice and procedure, Medicaid, Reporting and recordkeeping requirements, Supplemental Security Income (SSI), Vocational rehabilitation.

    Dated: March 14, 2016. Carolyn W. Colvin, Acting Commissioner of Social Security.

    For the reasons set out in the preamble, we propose to amend 20 CFR part 404 subpart P and 20 CFR part 416 subpart I as set forth below:

    PART 404—FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE Subpart P—Determining Disability and Blindness 1. The authority citation for subpart P of part 404 continues to read as follows: Authority:

    Secs. 202, 205(a)-(b) and (d)-(h), 216(i), 221(a), (i), and (j), 222(c), 223, 225, and 702(a)(5) of the Social Security Act (42 U.S.C. 402, 405(a)-(b) and (d)-(h), 416(i), 421(a), (i), and (j), 422(c), 423, 425, and 902(a)(5)); sec. 211(b), Pub. L. 104-193, 110 Stat. 2105, 2189; sec. 202, Pub. L. 108-203, 118 Stat. 509 (42 U.S.C. 902 note).

    2. Amend § 404.1574 by revising the first sentence of paragraph (c)(1), revising paragraph (c)(3), removing paragraph (c)(4), and redesignating paragraph (c)(5) as (c)(4).

    The revisions read as follows:

    § 404.1574 Evaluation guides if you are an employee.

    (c)* * *

    (1) General. Ordinarily, work you have done will not show that you are able to do substantial gainful activity if, after you worked for a period of 6 months or less, your impairment forced you to stop working or to reduce the amount of work you do so that your earnings from such work fall below the substantial gainful activity earnings level in paragraph (b)(2) of this section, and you meet the conditions described in paragraphs (c)(2), (3), and (4) of this section. * * *

    (3) If you worked 6 months or less. We will consider work of 6 months or less to be an unsuccessful work attempt if you stopped working or you reduced your work and earnings below the substantial gainful activity earnings level because of your impairment or because of the removal of special conditions that took into account your impairment and permitted you to work.

    3. Amend § 404.1575 by revising the first sentence of paragraph(d)(1), revising paragraph (d)(3), removing paragraph (d)(4), and redesignating paragraph (d)(5) as (d)(4).

    The revisions read as follows:

    § 404.1575 Evaluation guides if you are self-employed.

    (d) * * *

    (1) General. Ordinarily, work you have done will not show that you are able to do substantial gainful activity if, after working for a period of 6 months or less, you were forced by your impairment to stop working or to reduce the amount of work you do so that you are no longer performing substantial gainful activity and you meet the conditions described in paragraphs (d)(2), (3), and (4) of this section. * * *

    (3) If you worked 6 months or less. We will consider work of 6 months or less to be an unsuccessful work attempt if you stopped working or you reduced your work and earnings below the substantial gainful activity earnings level because of your impairment or because of the removal of special conditions that took into account your impairment and permitted you to work.

    5. Amend § 404.1592c by revising paragraph (a)(4)(i) and (c)(2) to read as follows:
    § 404.1592c Who is entitled to expedited reinstatement?

    (a)* * *

    (4)* * *

    (i) You are not able or become unable to do substantial gainful activity because of your medical condition as determined under paragraph (c) of this section;

    (c)* * *

    (2) You are not able or become unable to do substantial gainful activity in the month you file your request for reinstatement; and

    6. Amend § 404.1592e by revising paragraph (a)(1) to read as follows:
    § 404.1592e How do we determine provisional benefits?

    (a) * * *

    (1) We will pay you provisional benefits, and reinstate your Medicare if you are not already entitled to Medicare, beginning with the month you file your request for reinstatement under § 404.1592c(a) if you do not perform substantial gainful activity in that month. We will pay you provisional benefits, and reinstate your Medicare if you are not already entitled to Medicare, beginning with the month after you file your request for reinstatement under § 404.1592c(a) if you perform substantial gainful activity in the month in which you file your request for reinstatement.

    PART 416—SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND DISABLED Subpart I—Determining Disability and Blindness 13. The authority citation for subpart I of part 416 continues to read as follows: Authority:

    Secs. 221(m), 702(a)(5), 1611, 1614, 1619, 1631(a), (c), (d)(1), and (p), and 1633 of the Social Security Act (42 U.S.C. 421(m), 902(a)(5), 1382, 1382c, 1382h, 1383(a), (c), (d)(1), and (p), and 1383 (b); secs. 4(c) and 5, 6(c)-(e), 14(a), and 15, Pub. L. 98-460, 98 Stat. 1794, 1801, 1802, and 1808 (42 U.S.C. 421 note, 423 note, and 1382h note).

    14. Amend § 416.974 by revising paragraph (c)(3), removing paragraph (c)(4), and redesignating paragraph (c)(5) as (c)(4).

    The revisions read as follows:

    § 416.974 Evaluation guides if you are an employee.

    (c) * * *

    (3) If you worked 6 months or less. We will consider work of 6 months or less to be an unsuccessful work attempt if you stopped working or you reduced your work and earnings below the substantial gainful activity earnings level because of your impairment or because of the removal of special conditions that took into account your impairment and permitted you to work.

    15. Amend § 416.975 by revising paragraph (d)(1) and (3), removing paragraph (d)(4), and redesignating paragraph (d)(5) as (d)(4).

    The revisions read as follows:

    § 416.975 Evaluation guides if you are self-employed.

    (d) * * *

    (1) General. Ordinarily, work you have done will not show that you are able to do substantial gainful activity if, after working for a period of 6 months or less, you were forced by your impairment to stop working or to reduce the amount of work you do so that you are no longer performing substantial gainful activity and you meet the conditions described in paragraphs (d)(2), (3), and (4) of this section.

    (3) If you worked 6 months or less. We will consider work of 6 months or less to be an unsuccessful work attempt if you stopped working or you reduced your work and earnings below the substantial gainful activity earnings level because of your impairment or because of the removal of special conditions that took into account your impairment and permitted you to work.

    16. Amend § 416.999a by revising paragraph (a)(4)(i) and (c)(2) to read as follows:
    § 416.999a Who is eligible for expedited reinstatement?

    (a) * * *

    (4) * * *

    (i) You are not able or become unable to do substantial gainful activity because of your medical condition as determined under paragraph (c) of this section.

    (c) * * *

    (2) You are not able or become unable to do substantial gainful activity in the month you file your request for reinstatement; and

    [FR Doc. 2016-10932 Filed 5-10-16; 8:45 am] BILLING CODE 4191-02-P
    DEPARTMENT OF JUSTICE 28 CFR Part 90 [OVW Docket No. 120] RIN 1105-AB46 Conforming STOP Violence Against Women Formula Grant Program Regulations to Statutory Change; Definitions and Confidentiality Requirements Applicable to All OVW Grant Programs AGENCY:

    Office on Violence Against Women, Justice.

    ACTION:

    Proposed rule.

    SUMMARY:

    This rule proposes to amend the regulations for the STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program (STOP Program) and the general provisions governing Office on Violence Against Women (OVW) Programs to comply with statutory changes and reduce repetition of statutory language. Also, this document would implement statutory requirements for nondisclosure of confidential or private information relating to all OVW grant programs.

    DATES:

    Written comments must be postmarked and electronic comments must be submitted on or before July 11, 2016. Comments received by mail will be considered timely if they are postmarked on or before that date. The electronic Federal Docket Management System (FDMS) will accept comments until Midnight Eastern Time at the end of that day.

    ADDRESSES:

    To ensure proper handling of comments, please reference “Docket No. OVW 120” on all electronic and written correspondence. The Department encourages the electronic submission of all comments through http://www.regulations.gov using the electronic comment form provided on that site. For easy reference, an electronic copy of this document is also available at the http://www.regulations.gov Web site. It is not necessary to submit paper comments that duplicate the electronic submission, as all comments submitted to http://www.regulations.gov will be posted for public review and are part of the official docket record. However, should you wish to submit written comments through regular or express mail, they should be sent to Marnie Shiels, Office on Violence Against Women, United States Department of Justice, 145 N Street NE., 10W.100, Washington, DC 20530.

    FOR FURTHER INFORMATION CONTACT:

    Marnie Shiels, Office on Violence Against Women, 145 N Street NE., Suite 10W.100, Washington, DC 20530, by telephone (202) 307-6026 or by email at [email protected]

    SUPPLEMENTARY INFORMATION:

    Posting of Public Comments. Please note that all comments received are considered part of the public record and made available for public inspection online at http://www.regulations.gov. Such information includes personal identifying information (such as your name and address) voluntarily submitted by the commenter.

    You are not required to submit personal identifying information in order to comment on this rule. If you want to submit personal identifying information (such as your name and address) as part of your comment, but do not want it posted online, you must include the phrase “PERSONAL IDENTIFYING INFORMATION” in the first paragraph of your comment. You also must locate all personal identifying information that you do not want posted online in the first paragraph of your comment and identify what information you want redacted.

    If you want to submit confidential business information as part of your comment, but do not want it to be posted online, you must include the phrase “CONFIDENTIAL BUSINESS INFORMATION” in the first paragraph of your comment. You also must prominently identify confidential business information to be redacted within the comment. If a comment has so much confidential business information that it cannot be effectively redacted, all or part of that comment may not be posted on http://www.regulations.gov.

    Personal identifying and confidential business information identified and located as set forth above will be placed in the agency's public docket file, but not posted online. If you wish to inspect the agency's public docket file in person by appointment, please see the paragraph above entitled FOR FURTHER INFORMATION CONTACT.

    I. Executive Summary

    The Violence Against Women Act (VAWA) was enacted on September 13, 1994, by title IV of the Violent Crime Control and Law Enforcement Act of 1994, Public Law 103-322, 108 Stat. 1796. The STOP Program is codified at 42 U.S.C. 3796gg through 3796gg-5 and 3796gg-8. The final rule for this program, found at 28 CFR part 90, subpart B, was promulgated on April 18, 1995. General provisions affecting all OVW grant programs are found at 28 CFR part 90, subpart A.

    This rule proposes to amend the general provisions applicable to all OVW grant programs and the regulations governing the STOP Program to comply with the amendments to these programs enacted by the Violence Against Women Act of 2000 (VAWA 2000), Division B of the Victims of Trafficking and Violence Protection Act of 2000, Public Law 106-386, 114 Stat. 1464 (Oct. 28, 2000), the Violence Against Women and Department of Justice Reauthorization Act of 2005 (VAWA 2005), Public Law 109-162, 119 Stat. 2960 (Jan. 5, 2006), and the Violence Against Women Reauthorization Act of 2013 (VAWA 2013), Public Law 113-4, 127 Stat. 54 (Mar. 7, 2013). These proposed changes to the regulations incorporate the statutory changes, make minor technical corrections, implement enhanced administrative and planning practices for formula grantees, and streamline existing regulations to reduce repetition of statutory language.

    In addition, this rule proposes to amend an existing regulatory provision, § 90.2, that sets forth certain definitions that apply to all OVW grant programs. Furthermore, the rule proposes to add a new regulatory provision, § 90.4, that would be applicable to all OVW grant programs to implement statutory amendments requiring nondisclosure of confidential or private information pertaining to victims of domestic violence, dating violence, sexual assault and stalking.

    II. Background

    In 1994, Congress passed the Violence Against Women Act (VAWA), a comprehensive legislative package aimed at ending violence against women. VAWA was enacted on September 13, 1994, as title IV of the Violent Crime Control and Law Enforcement Act of 1994, Public Law 103-322, 108 Stat. 1796. VAWA was designed to improve criminal justice system responses to domestic violence, sexual assault, and stalking, and to increase the availability of services for victims of these crimes. VAWA was reauthorized and amended in 2000, 2005, and 2013, with each new reauthorization making improvements to the law and adding new programs and provisions.

    A. The Violence Against Women Act

    VAWA recognized the need for specialized responses to violence against women given the unique barriers that impede victims from accessing assistance from the justice system. To help communities develop these specialized responses, VAWA authorized the STOP Program, among others. See 42 U.S.C. 3796gg through 3796gg-5 and 3796gg-8; 28 CFR part 90, subpart B.

    VAWA requires a coordinated community response to domestic violence, dating violence, sexual assault and stalking crimes and encourages jurisdictions to bring together stakeholders from multiple disciplines to share information and to improve community responses. These often include victim advocates, police officers, prosecutors, judges, probation and corrections officials, health care professionals, and survivors. In some communities, these multidisciplinary teams also include teachers, leaders within faith communities, public officials, civil legal attorneys, health care providers, advocates from population-specific community-based organizations representing underserved populations, and others.

    VAWA's legislative history indicates that Congress passed VAWA to improve justice system responses to violence against women. For example, Congress wanted to encourage jurisdictions to treat domestic violence as a serious crime, by instituting comprehensive reforms in their arrest, prosecution, and judicial policies. Congress was further interested in giving law enforcement and prosecutors the tools to pursue domestic violence and sexual assault cases without blaming victims for behavior that is irrelevant in determining whether a crime occurred and discouraging judges from issuing lower sentences for sexual assault crimes than for other violent crimes. VAWA was intended to bring an end to archaic prejudices throughout the justice system, provide support for victims and assurance that their attackers will be prosecuted, and focus criminal proceedings on the conduct of attackers rather than the conduct of victims.1

    1See S. Rep. No. 103-138, at 37-48 (Sept. 10, 1993).

    B. Violence Against Women Act of 2000

    On October 28, 2000, Congress enacted the Violence Against Women Act of 2000 (VAWA 2000), Division B of the Victims of Trafficking and Violence Protection Act of 2000, Public Law 106-386, 114 Stat. 1464. VAWA 2000 continued and strengthened the federal government's commitment to helping communities change the way they respond to violence against women. VAWA 2000 reauthorized critical grant programs, established new programs, and strengthened federal law. It had an emphasis on increasing responses to victims of dating violence and expanding options and services for immigrant and other vulnerable victims.

    VAWA 2000 made several changes relevant to the STOP Program. First, it amended the statutory purposes for which grant funds may be used. Second, it clarified the eligibility of courts as subgrantees. Third, it modified the requirement under the STOP Program, to be eligible for funding, states must certify that victims not bear the costs for certain filing fees related to domestic violence cases. Finally, it added a new provision applicable to all OVW grant programs requiring grantees to report on the effectiveness of activities carried out with program funds.

    C. Violence Against Women Act of 2005

    On January 5, 2006, Congress enacted the Violence Against Women and Department of Justice Reauthorization Act (VAWA 2005), Public Law 109-162, 119 Stat. 2960. VAWA 2005 strengthened provisions of the previous Acts, including revising the STOP Program, and created a number of new grant programs. It also created a set of universal definitions and grant conditions that apply to all programs authorized by VAWA and subsequent legislation. VAWA 2005 had an emphasis on enhancing responses to sexual assault, youth victims, and victims in Indian country. Its provisions included new sexual assault focused programs, the addition of sexual assault to a number of OVW grant programs, new youth-focused programs, and the creation of a comprehensive violence against women program for tribal governments.

    The revisions to the STOP Program made by VAWA 2005 included adding new purpose areas to the program and modifying the requirements for the development of state implementation plans, the allocation of funds to subgrantees, and documentation of consultation with victim service programs. VAWA 2005 also required that the regulations governing the program ensure that states would recognize and meaningfully respond to the needs of underserved populations and distribute funds intended for culturally specific services—for which the act created a new set-aside—equitably among culturally specific populations. It further amended the certification requirement under the program related to payment for forensic medical exams for victims of sexual assault and added new certifications related to prohibiting the use of polygraph examinations in sexual assault cases and to judicial notification to domestic violence offenders of laws prohibiting their possession of a firearm.

    D. Violence Against Women Reauthorization Act of 2013

    On March 7, 2013, Congress enacted the Violence Against Women Reauthorization Act of 2013 (VAWA 2013), Public Law 113-4, 127 Stat. 54. VAWA 2013 made further improvements to the OVW grant programs, including several new requirements for the STOP Program. It also included two new historic provisions, one extending civil rights protections based on gender identity and sexual orientation and another recognizing the inherent jurisdiction of Indian tribes to prosecute non-Indians who commit certain domestic violence offenses in Indian country.2

    2 These two provisions are not addressed in this proposed rule but were addressed in a set of frequently asked questions on the new civil rights provision and in two Federal Register notices related to the implementation of the new provision on tribal jurisdiction. See U.S. Department of Justice, Office of Justice Programs, Office for Civil Rights, “Frequently Asked Questions: Nondiscrimination Grant Condition in the Violence Against Women Reauthorization Act of 2013” (April 9, 2014), available at: http://www.justice.gov/sites/default/files/ovw/legacy/2014/06/20/faqs-ngc-vawa.pdf; Pilot Project for Tribal Jurisdiction Over Crimes of Domestic Violence, 78 FR 35961 (June 14, 2013); Pilot Project for Tribal Jurisdiction Over Crimes of Domestic Violence, 78 FR 71645 (Nov. 29, 2013.

    VAWA 2013 amended the universal definitions and grant conditions established by VAWA 2005 for all OVW grant programs and amended and added to the STOP Program purpose areas. It also amended the requirements under the STOP Program that states develop and submit with their applications and implementation plan—including documentation of planning committee members' participation in the development of the plan—and consult and coordinate with a variety of entities and stakeholders. VAWA 2013 modified the allocation requirements governing STOP subgrants, creating a set-aside for projects addressing sexual assault, and made changes to the statute's requirement that states provide matching funds for their grant award. It also made several changes to provisions governing payment for forensic medical exams for sexual assault victims and certain filing costs related to cases of domestic violence, dating violence, sexual assault, and stalking.

    E. Grants To Combat Violent Crimes Against Women

    VAWA, as amended, added a part T to the Omnibus Crime Control and Safe Streets Act of 1968, Public Law 90-351, codified at 42 U.S.C. 3711 et seq., titled Grants to Combat Violent Crimes Against Women. Part T authorizes four OVW-administered grant programs: the STOP Program, Grants to Indian Tribal Governments, the Grants to State Sexual Assault and Domestic Violence Coalitions Program (State Coalitions), and the Grants to Tribal Domestic Violence and Sexual Assault Coalitions Program (Tribal Coalitions).

    The STOP Program grants are awarded to states to develop and strengthen the justice system's response to violence against women and to support and enhance services for victims. As described above, each subsequent VAWA reauthorization made numerous changes to this program, including adding purpose areas, imposing new or revised certification requirements, creating set-asides for sexual assault and culturally specific services, and making changes to the funding formula, funding allocations, and matching funds requirement.

    III. Definitions and Confidentiality Requirements Applicable to All OVW Grant Programs

    As discussed above, VAWA 2005 established universal definitions and grant conditions for OVW grant programs, and VAWA 2013 amended these provisions. This section describes how the proposed rule would implement these definitions, as well as a grant condition protecting the confidentiality and privacy of persons receiving victim services for the purpose of ensuring victim safety.

    A. Definitions

    The universal definitions added by VAWA 2005, codified at 42 U.S.C. 13925(a), superseded previous program-specific definitions originally enacted in 1994. This proposed rule would revise the definitions section of part 90, 28 CFR 90.2, by removing definitions from the existing regulations that are codified in statute, adding definitions for terms that are used in statute but not defined, and clarifying statutory definitions that, based on OVW's experience managing its grant programs, require further explanation.

    Section 90.2 currently contains definitions for the following terms: domestic violence, forensic medical examination, Indian tribe, law enforcement, prosecution, sexual assault, state, unit of local government, and victim services. This proposed rule would remove the definitions for domestic violence, Indian tribe, law enforcement, sexual assault, state, and victim services, as they all appear in the statute and do not need further clarification. The proposed rule would revise the definition of “forensic medical examination,” a term that is used but not defined in a statutory provision directing that states, Indian tribal governments, and units of local government may not receive STOP Program funds unless they incur the full out-of-pocket cost of forensic medical exams for victims of sexual assault. See 42 U.S.C. 3796gg-4(a)(1). The proposed rule would change the list of minimum elements that the exam should include to bring the definition in line with best practices for these exams as they have developed since part 90 was implemented in 1995, and, in particular, with the Department of Justice's national protocol for sexual assault medical forensic examinations, which was updated in April 2013.3

    3 U.S. Department of Justice, Office on Violence Against Women, “A National Protocol for Sexual Assault Medical Forensic Examinations: Adults/Adolescents” (2d ed. 2013), available at https://www.ncjrs.gov/pdffiles1/ovw/241903.pdf.

    The proposed rule's definition of “prosecution” contains minor technical changes from the definition in the existing regulation. These changes implement the VAWA 2005 provision making the definitions applicable to all OVW grant programs and conform the definition to the statute. The definition retains the existing regulation's clarification of the statutory definition, which explains that prosecution support services fall within the meaning of the term for funding purposes. This clarification continues to be important because allocating prosecution grant funds to activities such as training and community coordination helps to achieve the statutory goal of improving prosecution response to domestic violence, dating violence, sexual assault, and stalking. In addition, the statutory definition for “prosecution” uses, but does not define, the term “public agency,” which the proposed rule would define using the definition for this term in the Omnibus Crime Control and Safe Streets Act. See 42 U.S.C. 3791.

    The proposed rule would revise the definition of “unit of local government,” which did not have a statutory definition specific to all OVW grant programs until the enactment of VAWA 2013, to make it consistent with the statutory language. In addition, it would include in the definition a list of entities and organizations that do not qualify as units of local government for funding purposes and would need a unit of local government to apply on their behalf for those programs where “unit of local government” is an eligible entity but other types of public or private entities are not eligible. The list reflects OVW's long-standing interpretation of the term “unit of local government” and is consistent with OVW's practice of excluding these entities and organizations from eligibility to apply for OVW funding as units of local government.

    The proposed rule also would add definitions to the regulation for terms that are used in OVW grant program statutes but are undefined and that OVW believes would be helpful to applicants and grantees. The term “community-based organization” is defined in 42 U.S.C. 13925(a), but the term “community-based program,” which also appears in OVW grant program statutes, is not. To preserve consistency across OVW programs and minimize confusion, OVW is proposing to use the statutory definition for both terms. The proposed rule would provide a definition of “prevention” that distinguishes the term from “outreach” both because OVW has observed that some grant applicants propose outreach activities to implement prevention programming under OVW programs and because funding for “prevention” is more limited than funding for “outreach.” Finally, the proposed rule would add a definition for “victim services division or component of an organization, agency, or government” because the proposed rule uses this term in implementing the confidentiality provision enacted by VAWA 2005 and amended by VAWA 2013, which is discussed in more detail in the next section.

    B. Confidentiality

    VAWA 2005 added a provision on confidentiality and privacy of victim information as part of the new, universal grant conditions, and this provision was amended by VAWA 2013. See 42 U.S.C. 13925(b)(2). This provision recognizes the critical importance to victim safety of protecting victims' personally identifying information. It generally requires grantees and subgrantees to protect victim confidentiality and privacy to ensure the safety of victims and their families and prohibits the disclosure of victims' information without their informed, written, and reasonably time-limited consent. These requirements, implemented in proposed § 90.4(b), would be applicable to all OVW grant programs, not just STOP grants.

    In administering this confidentiality provision, OVW has received numerous inquiries regarding what kinds of disclosures require written consent, and OVW is proposing to answer these questions in this rule. OVW welcomes comments on the impact of these issues on victims as well as comments on the specific proposals enumerated in this draft rule. OVW specifically requests comments in the following three areas:

    (1) OVW has received numerous questions regarding how the confidentiality provision applies when the grantee is an organization or governmental entity with multiple divisions or components, some of which do not provide victim services. For example, if the grantee is a college campus, the campus administration might seek identifying information about victims served by the campus victim services division, and the victim services division would need to know whether such a disclosure is permissible under the VAWA confidentiality provision absent victim consent. OVW has included language in proposed § 90.4(b)(2)(C) providing that, for a victim services division of such an organization or governmental entity to disclose information to non-victim services divisions, it would need a signed, informed, reasonably time-limited release from the victim. Proposed § 90.2(h) would define such a victim services division as a division within a larger organization, agency, or government, where the division has as its primary purpose to assist or advocate for victims of domestic violence, dating violence, sexual assault, or stalking. Proposed section 90.4(b)(2) also would require a release for the leadership of the larger organization, agency, or government (e.g., the executive director, mayor, tribal chair, etc.) to access identifying information. OVW welcomes comments on the impact of this proposal on grantees' and subgrantees' ability to protect victim confidentiality and ensure victim safety.

    (2) OVW often receives questions about fatality reviews of domestic-violence-related homicides and release of information about deceased victims to individuals conducting such reviews. Fatality reviews examine the events leading up to domestic violence homicides to discover missed opportunities for intervention and points at which intervention was not effective so that communities can make systemic changes designed to improve identification, intervention, and prevention efforts in future cases. Fatality review teams usually are comprised of representatives from a wide variety of disciplines involved in responding to domestic violence incidents, including law enforcement, prosecution, judges, medical professionals, child protection workers, and community-based advocates. The proposed rule, at § 90.4(b)(4), would allow the sharing of information about deceased victims for the purpose of a fatality review, provided that (1) the objectives of the review are to prevent future deaths, enhance victim safety, and increase offender accountability, and (2) the review includes measures to protect information from release outside the fatality review team. This provision strikes a balance between recognizing the importance of such reviews and making sure that the reviews protect information about any surviving children, keeping in mind that the confidentiality provision and fatality reviews are both intended to enhance victim safety. OVW requests comments on the impact of this proposal on grantees' and subgrantees' ability to ensure the safety and privacy of victims and their families.

    (3) OVW has received a number of questions about the propriety of placing victim-identifying data on third-party servers, such as those maintained by “cloud storage” companies. OVW is interested in receiving comments about whether and how such third-party servers can be used without compromising victim safety or violating the confidentiality provision at 42 U.S.C. 13925(b)(2) and whether this is an area where rulemaking would be desirable. In particular, the statutory prohibition on the disclosure of victim information applies to personally identifying or individual information collected in connection with grantees' and subgrantees' programs, regardless of whether the information has been encoded, encrypted, hashed, or otherwise protected. OVW welcomes comments on how this language would apply to information stored on third-party servers.

    IV. Provisions of This Proposed Rule Relating to the Stop Program A. Introduction

    The STOP Program regulations and general provisions were originally promulgated in April, 1995. On December 30, 2003, OVW published a proposed rule to clarify the match requirement for the STOP Program. On January 21, 2004, section 90.3, regarding participation by faith based organizations, was added to the general provisions. After the enactment of VAWA 2013, OVW consulted with tribal governments about the implementation of statutory changes to the STOP Program as part of the Department of Justice's annual government-to-government violence against women tribal consultations held in October 2013 and October 2014. In addition, during November and December of 2013, OVW held a series of listening sessions with relevant constituencies to solicit input on the update to the STOP Program regulations. The specific sessions were focused on state STOP Program administrators, state coalitions, culturally specific and underserved populations, tribes and tribal coalitions, nonprofit organizations, and the justice system. Sessions were an hour each and were held by phone and web interface. Participants offered a diverse array of comments during the sessions. The following section summarizes the common themes of the comments and OVW's responses.

    B. Listening Sessions and Tribal Consultations

    State administrators for OVW's two state formula grant programs, the STOP and Sexual Assault Services Programs, requested that OVW be flexible in administering the program and reduce the amount of documentation required from state administrators. Because the STOP Program statute, as amended by the Violence Against Women Acts of 2000, 2005, and 2013, includes many requirements for the program (such as certifications, implementation planning, allocations, equitable distribution of funds, etc.), OVW must require a significant amount of documentation to ensure compliance with all the program's statutory mandates. Therefore, the proposed regulation does include some detailed documentation requirements, particularly in the area of statutorily-mandated consultation. OVW has attempted to minimize the burden of these documentation requirements by proposing to use checklists and permit states to submit summaries of significant concerns. OVW also has provided flexibility where possible. For example, proposed § 90.12(d) leaves it to the states to determine how they will achieve and document the equitable distribution of funds.

    In contrast to the state administrators, state coalitions and victim service providers advocated strict documentation requirements for implementation planning consultation to ensure that coalitions and victim service providers are fully consulted, as required by statute. Some participants described instances where they were asked to support a state plan, but were not given an opportunity to provide true input into the planning process. To address these concerns, proposed § 90.12(b) outlines a robust planning process, with involvement from all of the statutorily required parties, including state coalitions and victim service providers. Proposed § 90.12(c) requires that states document their outreach to planning committee members and the extent to which such members cooperated in the development of the plan.

    State coalitions also recommended adding survivors in the state planning process. In response, proposed § 90.12(b)(4) provides that, if possible, states should include survivors of domestic violence, dating violence, sexual assault, and stalking in the planning process.

    Victim service providers and groups representing underserved populations asked that organizations working with underserved populations be included in the state planning process and in the subgrantee pool. Proposed § 90.12(b)(2) requires each state to examine its demographics and include any significant culturally specific or underserved population in the planning process. If the state does not have any culturally specific or population specific organizations at the state or local level, the state can use national organizations to collaborate on the plan. Per the statute (42 U.S.C. 4796gg-1(e)(2)(D)), proposed § 90.12(e) requires states to include in their implementation plans information about how the state plans to meet the needs of identified underserved populations, including, but not limited to, culturally specific populations, victims who are underserved because of sexual orientation or gender identity, and victims with limited English proficiency. Participants in the listening sessions identified these specific populations as ones that particularly needed to be addressed by state implementation plans.

    Tribal representatives and advocates from the tribal listening session and consultations strongly recommended that states meaningfully consult with all tribes in the state, including Alaska Native villages, during their planning process. Participants emphasized that tribal coalitions can assist state administrators in forging relationships with tribes, but do not speak for the tribes. Participants also emphasized that each tribe is a unique sovereign, and one tribe's input does not obviate the need for input from other tribes. Proposed § 90.12(b)(3) therefore provides that states must invite all state or federally recognized tribes to participate in the planning process. The statutory definition of “tribe” includes Alaska Native villages. Tribal coalitions and state or regional tribal consortia can help the state reach out to tribes but cannot be used as substitutes for consultation with all tribes.

    The justice system participants recommended including probation and parole entities within the mandatory implementation planning participants. In response, proposed § 90.12(b)(5) provides that states should include probation and parole entities in their planning process.

    VAWA 2013 included a new provision that permits states to reallocate grant funds from one statutory “allocation” category (i.e., prosecution, law enforcement, courts, and victims services) to another. Participants in all the sessions were asked what should be required before a state could reallocate funds to a different category. Many participants recommended that there should be documentation of the state's inability to award funds to entities within the assigned allocation category and that state-wide agencies, such as the administrative office of the courts, or state coalitions might be able to help both with publicizing the availability of funds and documenting the inability to award funds. For example, some participants noted that their state's administrative office of the courts will not accept the STOP funds allocated to courts. In proposed § 90.25, OVW tried to maintain a balance between ensuring that states make legitimate efforts to identify eligible subrecipients and permitting states to reallocate the funds when their efforts to adhere to the allocation categories are unsuccessful.

    Participants were asked if there are any terms that should be defined in the regulations. Several commenters recommended including a definition of “prevention” to clarify the distinction between “prevention” and “outreach”. Proposed § 90.2(d) specifies that a “prevention program” is “a program that has a goal of stopping domestic violence, dating violence, sexual assault, or stalking from happening in the first place.”

    Participants were also asked about the best way to ensure that states coordinate with health care providers to notify victims of the availability of sexual assault forensic medical examinations as required by 42 U.S.C. 3796gg-4. The consensus of commenters was that, because both the structure of health care and available resources for this coordination vary greatly by state, the regulations should be flexible. Tribal participants also recommended including Indian Health Services in this consultation. Proposed § 90.13(e) addresses these comments by allowing states to meet this coordination obligation by partnering with associations that are likely to have the broadest reach to the relevant health care providers, such as forensic nursing or hospital associations. States with significant tribal populations are recommended to include local Indian Health Services facilities.

    C. Proposed Changes to the STOP Program Regulations

    In light of the statutory changes summarized above, the listening sessions with various constituencies and the tribal consultations, and OVW's experience in administering the STOP Program over the years, OVW is proposing to amend the existing STOP Program regulations in the following ways:

    1. Reorganizing the Provisions of the Rule

    This proposed rule would reorganize subpart B to promote a more logical flow of information, which better reflects the cycle of making and administering grants. To cite one example, the revised rule would describe the need for a state administering office, which is the starting point of a state's work under the STOP Program, at the beginning of subpart B rather than in the middle. In addition, proposed § 90.14 would implement the judicial notification requirement and proposed § 90.16 would implement the polygraph testing prohibition, which both were added by VAWA 2005. Proposed § 90.25 would implement a new provision from VAWA 2013, permitting states to reallocate STOP funds. Proposed § 90.24 would codify a long-standing OVW policy against funding activities that may compromise victim safety and recovery, based on the program's purpose to enhance victim safety and offender accountability. The following chart shows the changes from the current rule to this proposed rule.

    Section No. Current rule Proposed disposition of current section Proposed rule 90.10 Description of STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program Same STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program-General. 90.11 Program Criteria Merged with 90.10 and 90.12 State office. 90.12 Eligible Purposes Merged with 90.10 Implementation plans. 90.13 Eligibility Now in 90.10 Forensic medical examination payment requirement. 90.14 Forensic Medical Examination Payment Requirement Now 90.13 Judicial notification requirement. 90.15 Filing Costs for Criminal Charges Same Costs for criminal charges and protection orders. 90.16 Availability and Allocation of Funds (a) Is now in 90.17, (b) and (c) are merged with 90.12 Polygraph testing prohibition. 90.17 Matching Requirements Now 90.18 Subgranting of funds. 90.18 Non-supplantation Removed Matching funds. 90.19 State Office Now 90.11 Application content. 90.20 Application Content Now 90.19 90.21 Evaluation Same Evaluation. 90.22 Review of State Applications Same Review of State applications. 90.23 State Implementation Plan Now 90.12 Annual grantee and subgrantee reporting. 90.24 Grantee Reporting Now 90.23 Activities that may compromise victim safety and recovery. 90.25 Reallocation of funds. 2. Removing Duplicative Regulatory Language

    OVW is proposing to remove much of the existing regulation to avoid duplication with the statute. Specifically, OVW is proposing to remove the following sections and paragraphs of the current regulation for this reason: § 90.10; § 90.11(a); § 90.12; § 90.16(a); and § 90.18. Other sections have been streamlined by referencing the statutory provision rather than repeating the statutory language.

    3. Statutory Changes

    As discussed above, the Violence Against Women Acts of 2000, 2005, and 2013 have amended and enhanced this program. Specific changes are as follows:

    • Expanded purpose areas (incorporated by reference in proposed § 90.10) • Changes in allocations: (1) The victim services allocation increased from 25 percent to 30 percent; (2) a set aside was added of ten percent of the victim services funds (or three percent of the total award) for culturally specific community based organizations; (3) a set aside was added of five percent to courts; and (4) a 20-percent set aside was added for programs that meaningfully address sexual assault in two or more of the specified allocations (proposed § 90.11(c)) • Changes in the implementation planning process, including an expanded list of entities that the state is required to consult with and additional information that needs to be included in a state's implementation plan (proposed § 90.12) • Changes to the existing certification requirements and additions of new certification requirements (proposed § 90.13, forensic medical examination payment; proposed § 90.14, judicial notification; proposed § 90.15, costs for criminal charges and protection orders; and proposed § 90.16, polygraph testing prohibition) The proposed rule also would remove references to the Assistant Attorney General for the Office of Justice Programs to reflect statutory changes made by the Violence Against Women Office Act, Title IV of the 21st Century Department of Justice Appropriations Authorization Act, Public Law 107-273 (Nov. 2, 2002). 4. Section-by-Section Summary of the Proposed Regulatory Text § 90.10 STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program—General

    Proposed § 90.10 lists the eligible applicants for the program and specifies that the purposes, criteria, and requirements for the program are established by 42 U.S.C. 3796gg et seq.

    § 90.11 State Office

    Proposed § 90.11 describes the role of the State office, which is to be designated by the chief executive of the state. As detailed in proposed § 90.11(a) and (b), the State office is responsible for submitting the application, including certifications, developing the implementation plan, and administering the funds. Paragraph (c) is intended to ensure that statutorily allocated funds are meaningfully targeted to the appropriate entities and activities.

    § 90.12 Implementation Plans

    As discussed above, VAWA 2013 added new requirements to the state implementation planning process. Proposed § 90.12 implements these requirements. Subsection (a) is consistent with the current § 90.23(a) and follows 42 U.S.C. 3796gg-1(i), but adds language incorporating a long-standing OVW practice of allowing states to submit a full implementation plan every three years and then updates to the plan in the other two years.

    Subsections (b) and (c) are new to the regulations, but incorporate provisions from 42 U.S.C. 3796gg-1(c)(2) and (i) regarding consultation and coordination. The statute provides a list of entities that states must consult with during the implementation planning process and requires documentation from members of the planning committee as to their participation in the planning process. OVW must ensure that states consult with all the required entities and fully document such consultation. The subsections attempt to strike a balance between sufficient documentation and the burdens on state administrators inherent in providing such documentation. The proposed rule therefore would require states to submit to OVW a checklist documenting the specific extent of each partner's participation, a summary of any significant concerns that were raised during the planning process, and a description of how those concerns were resolved. In the past, when the statute required that states consult only victim service providers regarding the implementation plan, OVW heard from some state coalitions that they were being asked to document approval of an implementation plan without having any actual input into the plan. Proposed § 90.12(c) is intended to ensure meaningful collaboration with partners, while minimizing the administrative burden on states.

    Based on recommendations from the tribal listening session, consultation with tribal governments must include all tribes in a state, not just a selection of tribes or organizations that work with tribes, such as tribal coalitions. In addition to the statutorily mandated planning partners, the proposed rule also encourages states to consult with probation and parole entities and survivors based on recommendations from the listening sessions.

    Proposed subsection (d) implements 42 U.S.C. 3796gg-1(e)(2). This is similar to both the current § 90.16(b) and § 90.23(b). The language in current § 90.16(b) is proposed to be removed both because it is duplicative and to provide additional flexibility for states by reducing unnecessary specificity regarding how states will document compliance with this requirement.

    Proposed subsection (e) implements 42 U.S.C. 3796gg-1(i)(2)(E) and includes some of the current § 90.16(b)(4). The subsection allows states the flexibility to identify underserved populations, while requiring documentation of why the specific populations were selected. The statute requires specific consideration of culturally specific populations. At the recommendation of the participants in the listening sessions, the proposed subsection also would require states to consider the needs of victims who are underserved because of sexual orientation or gender identity and victims with limited English proficiency.

    Proposed paragraph (f) implements 42 U.S.C. 3796gg-1(i)(2)(G), which requires state implementation plans to include goals and objectives for reducing domestic violence-related homicide. The proposed subsection requires states to provide statistics on domestic violence homicide within the state, consult with relevant entities such as law enforcement and victim service providers, and establish specific goals and objectives to reduce homicide, including addressing challenges specific to the state and how the plan can overcome them.

    Proposed subsection (g) outlines additional content that implementation plans must include, as follows:

    (1) Current demographic information regarding a state's population

    (2) A description how the state will reach out to community-based organizations that provide linguistically and culturally specific services

    (3) A description of how the state will meet the needs of each category of victims (domestic violence, dating violence, sexual assault, and stalking) and how the state will hold offenders accountable

    (4) A description of how the state will ensure that eligible entities are aware of funding opportunities

    (5) Information on specific projects the state plans to fund

    (6) An explanation of how the state coordinated the plan with other relevant state formula grant administering agencies as required by 42 U.S.C. 3796gg-1(c)(3)

    (7) Information on the state's compliance with the Prison Rape Elimination Act (PREA, Pub. L. 108-79) and how the state plans to use program funds towards compliance, if applicable

    (8) A description of how the state will identify and select applicants for subgrants

    These required elements are designed to help OVW ensure that states follow statutory requirements for the program and to provide a better understanding of how the state plans to allocate its STOP Program funds. Proposed paragraph (7), regarding PREA, is designed to ensure that states that submit assurances under PREA that they will spend five percent of “covered funds” towards compliance with PREA are including such funds in their planning.

    Proposed subsection (h) implements a change in VAWA 2013 that makes the implementation plans due at the time of application rather than 180 days after award.

    § 90.13 Forensic Medical Examination Payment Requirement

    Section 3796gg-4 of Title 42 requires states to ensure that the state or another governmental entity bears the “full out-of-pocket” costs of sexual assault medical forensic examinations. Proposed § 90.13(b) provides a definition of “full out-of-pocket costs.” Proposed subsection (c) is the same as current § 90.14(c), but text has been removed to reflect the fact that VAWA 2005 changed the statute to allow states to use STOP Formula grant funds to pay for forensic exams if certain requirements are met. Proposed subsection (d) would clarify that, if states use victims' personal health insurance to pay for the exams, they must ensure that any expenses not covered by insurance are not billed to the victims, as these would constitute “out-of-pocket” costs. Proposed subsection (e) would implement a new provision from VAWA 2013 (42 U.S.C. 3796gg-4(a)(1)(B)), which requires states to coordinate with health care providers in the region to notify victims of the availability of forensic examinations.

    § 90.14 Judicial Notification Requirement

    Proposed § 90.14 implements the requirements of 42 U.S.C. 3796gg-4(e), which provides that states and units of local government are not entitled to funds unless they certify that their judicial administrative policies and practices include notification to domestic violence offenders of relevant federal, state, and local firearms prohibitions that might affect them. This requirement was added by VAWA 2005.

    § 90.15 Costs for Criminal Charges and Protection Orders

    Proposed § 90.15 would implement the requirements of 42 U.S.C. 3796gg-5, which provides that states, tribes, and units of local government are not entitled to funds unless they certify that victims of domestic violence, dating violence, sexual assault, or stalking are not charged certain costs associated with criminal prosecution or protection orders. These requirements were amended by VAWA 2000 and VAWA 2013.

    § 90.16 Polygraph Testing Prohibition

    Proposed § 90.16 would implement 42 U.S.C. 3796gg-8, which provides that, to be eligible for STOP Program funding, states, tribes, and units of local government must certify that their laws, policies, and practices ensure that law enforcement officers, prosecutors, and other government officials do not ask or require sexual assault victims to submit to a polygraph examination or other truth telling device as a condition for investigating the offense. These requirements were added by VAWA 2005.

    § 90.17 Subgranting of Funds

    Proposed § 90.17(a) describes the type of entities that can receive subgrants from the state (state agencies and offices, courts, local governments, public agencies, tribal governments, victim service providers, community-based organizations, and legal services programs). This is currently addressed in § 90.13(a), but it has been separated out for clarity and expanded to reflect statutory changes to the STOP Program and the types of entities that, in practice, receive subgrants under this program.

    Proposed § 90.17(b) would allow states to use up to ten percent of each allocation category (law enforcement, prosecution, victim services, courts, and discretionary) to support the state's administrative costs. Examples of such costs include the salary and benefits of staff who administer the program and costs of conducting peer review. This proposed subsection codifies a long-standing OVW policy regarding state administrative costs.

    § 90.18 Matching Funds

    Proposed § 90.18 would implement the match provisions of 42 U.S.C. 3796gg-1(f) and 13925(b)(1). This topic is currently addressed in § 90.17. VAWA 2005 provided that match could not be required for subgrants to tribes, territories, or victim service providers. It also authorized a waiver of match for states that have “adequately demonstrated [their] financial need.” 42 U.S.C. 13925(b)(1). VAWA 2013 further specified that the costs of subgrants for victim services or tribes would not count toward the total amount of the STOP award in calculating match. 42 U.S.C. 3796gg-1(f).

    Proposed subsection (a) states the match requirement in general and reflects that the match requirement does not apply to territories.

    Proposed subsection (b) would allow for in-kind match, consistent with 2 CFR 200.306, and provide information on calculating the value of in-kind match.

    Proposed subsection (c) would provide that states may not require match for subgrants for Indian tribes or victim service providers. This is consistent with 42 U.S.C. 13925(b)(1), as added by VAWA 2005.

    Proposed subsection (d) would implements the waiver provisions of 42 U.S.C. 13925(b)(1), as added by VAWA 2005. In developing the criteria for waiver, OVW balanced the importance of state and local support for the efforts funded under the STOP Program with the need for waiver where there is legitimate financial need. The proposed subsection would ensure that the needs identified by the state are specifically tied to funding for violence against women programs. For example, if a state has had across the board budget cuts, it would need to show how those cuts have impacted state funding for violence against women programs (and hence, its ability to provide matching funds). In most cases, a state would receive a partial waiver based on the specific impact of the cuts. For example, if the state had a 20-percent reduction in violence against women funding, then it would receive a 20-percent waiver. The 20-percent cut should leave the state with 80-percent of funds that could still be used toward match. In most cases, the states pass the match on to subgrantees, except for Indian tribes and victim service providers. In cases of awards to Indian tribes or awards to victim service providers for victim services purposes (as opposed to another purpose, such as law enforcement training) the state is exempted from the match requirement.

    Proposed subsection (e) would provide that matching funds must be used for the same purposes as the federal funds and must be tracked for accountability purposes. This is consistent with the current § 90.17(e).

    § 90.19 Application Content

    Proposed § 90.19 would provide that states will apply for STOP Program funding using an annual solicitation issued by OVW. The proposed section differs from the current § 90.20 to reflect current practice and significant changes that VAWA 2013 made to the application process. Prior to fiscal year 2014 (the year that VAWA 2013 amendments to the STOP Program took effect), a STOP application included certain documentation and information, such as documentation from the prosecution, law enforcement, court, and victim service programs to be assisted, demonstrating the need for funds, the intended use of the funds, expected results, and demographic characteristics of the population to be served. The state then had 180 days from the date of award to complete and submit its implementation plan, which included more detail. VAWA 2013 streamlined this process by including most information and documentation in the implementation plan, but also requiring the plan to be submitted at the time of application.

    § 90.21 Evaluation

    Proposed § 90.21 would encourage states to have plans for evaluating the impact and effectiveness of their programs and requires them to cooperate with federally-sponsored evaluations of their programs. This is generally consistent with current § 90.21.

    § 90.22 Review of State Applications

    Proposed § 90.22 would provide the basis for review of state applications and implement the single point of contact requirement of Executive Order 12372 (Intergovernmental Review of Federal Programs). Current subsection (c) has been removed because OVW is no longer part of the Office of Justice Programs (OJP) and the section is no longer relevant.

    § 90.23 Annual Grantee and Subgrantee Reporting

    Proposed § 90.23 describes the annual reporting requirement for the program. Subgrantees submit annual progress reports to the state, which then forwards them to OVW. States also submit an annual progress report. Information on progress reports, along with the forms and instructions are available at http://muskie.usm.maine.edu/vawamei/stopformulamain.htm. This is different from the current § 90.24 because OVW's grant reporting processes have changed, and OVW is no longer a component within OJP.

    § 90.24 Activities That May Compromise Victim Safety and Recovery

    Proposed § 90.24 would provide that grant funds may not be used to support activities that compromise victim safety and recovery. This proposed section is based on the overall purpose of the Violence Against Women Act to enhance victim safety. Specific examples of such activities are included in the STOP Program solicitation each year. For example, past solicitations explained that such unsafe activities include procedures or policies that exclude victims from receiving safe shelter, advocacy services, counseling, and other assistance based on their actual or perceived age, immigration status, race, religion, sexual orientation, gender identity, mental health condition, physical health condition, criminal record, work in the sex industry, or the age and/or gender of their children.

    § 90.25 Reallocation of Funds

    Proposed § 90.25 implements a new provision from VAWA 2013 (42 U.S.C. 3796gg-1(j)), which allows states to reallocate funds in the law enforcement, prosecution, courts, and victim services (including culturally specific services) allocation categories if they did not receive “sufficient eligible applications.” The proposed section defines an “eligible” application and provides the information that states must have on file to document a lack of sufficient eligible applications. The proposed section would ensure that states conduct sufficient outreach to the eligible category of subgrantees before reallocating the funds.

    V. Request for Comments

    OVW is soliciting comments on the proposed amendments to part 90 subparts A and B. OVW welcomes all comments, including comments on specific sections of the rule.

    Regulatory Certifications Executive Orders 12866 and 13563—Regulatory Review

    This regulation has been drafted and reviewed in accordance with Executive Order 12866, “Regulatory Planning and Review,” section 1(b), Principles of Regulation, and in accordance with Executive Order 13563, “Improving Regulation and Regulatory Review,” section 1(b). General Principles of Regulation.

    The Department of Justice has determined that this rule is not a “significant regulatory action” under Executive Order 12866, § 3(f) because it is not likely to: (1) Have an annual effect on the economy of $100 million or more; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues.

    (1) The rule's impact is limited to OVW grant funds. It does not change the economic impact of the grant funds and will impose very few economic costs, as discussed below.

    (2) The Department of Health and Human Services (HHS) has a similar program under the Family Violence Prevention and Services Act (FVPSA), which uses some of the same definitions and a similar confidentiality provision. OVW and the HHS FVPSA office coordinate to ensure consistency in implementation of programs.

    (3) The requirements in the rule are statutory and apply only to OVW grantees. In some cases, OVW has added some additional specificity to clarify the statutory requirements. The rule provides details on what information the states must provide as “documentation,” but does not impose new requirements.

    (4) This rule does not raise any novel legal or policy issues.

    Further, both Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and to select regulatory approaches that maximize net benefits. The Department has assessed the costs and benefits of this regulation and believes that the regulatory approach selected maximizes net benefits. In most cases, the proposed rule simply clarifies the statutory requirements, such as providing definitions, that would not have any cost or might reduce costs by providing administrators with clear guidance.

    OVW provides the following analysis of the most noteworthy costs, benefits, and alternative choices.

    Subpart A. In general, most of this subsection comes from the statute. OVW developed all of these provisions to answer questions received regularly from grantees and provide greater clarity for grantees and save them the time and effort of analyzing the requirements and seeking further guidance from OVW staff. Under the proposed rule, the victim service component will need a victim release to share the information. The use of the release will increase the degree of control that the victim has over his/her information, which is widely considered a best practice in the violence against women field. The cost of the proposed rule is the time and administrative burden in executing and tracking the release. This cost cannot be quantified, however, because the discussion of release with the victim would take place in the context of a larger conversation between the victim and the service provider about options for the victim and next steps. OVW considered whether to prevent the release of information about deceased victims in the context of fatality reviews, out of consideration for surviving family members, but concluded that the proposed rule could include protections that would meet the would meet the needs of the fatality reviews while protecting the privacy of surviving family members.

    Subpart B. In general, proposed changes to subpart B reflect a balance between the burden on the state Administrators and the need to ensure compliance with the statute. The relevant statute requires state implementation plans which must identify how the state will use STOP funds and meet certain statutory requirements. OVW opted to require full plans only every three years to reduce the burden on states in developing these plans. In the other years, states only submit updates to their plans.

    Executive Order 13132—Federalism

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

    Regulatory Flexibility Act

    The Office on Violence Against Women, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and, by approving it, certifies that this regulation will not have a significant economic impact upon a substantial number of small entities for the following reason: Except for the match provisions in proposed § 90.18, the direct economic impact is limited to the Office on Violence Against Women's appropriated funds. For more information on economic impact, please see above.

    Executive Order 12988—Civil Justice Reform

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

    Executive Order 13175—Consultation and Coordination With Indian Tribal Governments

    This rule will not result in substantial direct increased costs to Indian Tribal governments. The definitions and confidentiality provisions of the rule will impact grantees that are tribes. OVW currently has 246 active awards to 159 tribes, for a total of over $140 million. As discussed above, any financial costs imposed by the rule are minimal.

    In addition, although a small number of tribes are subgrantees of the STOP Formula Program, discussed in subpart B, the requirements of the rule are imposed on grantees, not subgrantees. The one provision in subpart B that will have a direct effect on tribes is proposed § 90.12(b)(3), which implements the statutory requirement that states consult with “tribal governments in those States with State or federally recognized Indian tribes.” 42 U.S.C. 3796gg-1(c)(2)(F). The proposed rule would require states to invite all State or federally recognized tribes in the state to participate in the planning process. This approach was recommended by tribal participants in the tribal listening session and at OVW's annual government-to-government tribal consultations in 2013 and 2014.

    As discussed above, OVW included regulatory implementation of statutory changes to the STOP Program as a topic at its annual tribal consultations in 2013 and 2014. At the 2013 consultation, tribal leaders were asked for testimony on terms that should be defined in the regulations, additional entities that states should consult with in developing their implementation plans, how states should document the participation of planning committee members, and how states should consult with tribes, among other specific questions. The questions presented at the 2014 consultation included how states might better consult with tribes during STOP implementation planning, and how states should include tribes in the equitable distribution of funds for underserved populations and culturally specific services. At both consultations, tribal leaders emphasized the importance of states engaging in meaningful consultation with all tribes in their state. Tribal leaders noted that such consultation should involve a cooperative decision making process designed to reach consensus before a decision is made or action is taken, and that effective consultation leads to an implementation plan that takes into account the needs of tribes. Tribal leaders also pointed out that a state's failure to consult with tribes can prevent tribes from accessing STOP funds or even being aware that they are available. Finally, testimony at the tribal consultations raised concerns about states asking tribal shelters to volunteer to provide matching funds in order to receive STOP subgrant funding.

    Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it will not uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

    Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 or more; a major increase in cost or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete in domestic and export markets.

    List of Subjects in 28 CFR Part 90

    Grant programs; Judicial administration.

    For the reasons set forth in the preamble, the Office on Violence Against Women proposes to amend 28 CFR part 90 as follows:

    PART 90—VIOLENCE AGAINST WOMEN 1. The authority for part 90 is revised to read as follows: Authority:

    42 U.S.C. 3711 et seq.; 42 U.S.C. 13925.

    Subpart A—General Provisions 2. Section 90.1 is revised to read as follows:
    § 90.1 General

    (a) This part implements certain provisions of the Violence Against Women Act (VAWA), and subsequent legislation as follows:

    (1) The Violence Against Women Act (VAWA), Title IV of the Violent Crime Control and Law Enforcement Act of 1994, Public Law 103-322 (Sept. 13, 1994);

    (2) The Violence Against Women Act of 2000 (VAWA 2000), Division B of the Victims of Trafficking and Violence Protection Act of 2000, Public Law 106-386 (Oct. 28, 2000);

    (3) The Violence Against Women Office Act, Title IV of the 21st Century Department of Justice Appropriations Authorization Act, Public Law 107-273 (Nov. 2, 2002);

    (4) The Violence Against Women and Department of Justice Reauthorization Act of 2005 (VAWA 2005), Public Law 109-162 (January 5, 2006); and,

    (5) The Violence Against Women Reauthorization Act of 2013 (VAWA 2013), Public Law 113-4 (Mar. 7, 2013).

    (b) Subpart B of this part defines program eligibility criteria and sets forth requirements for application for and administration of formula grants to States to combat violent crimes against women. This program is codified at 42 U.S.C. 3796gg through 3796gg-5 and 3796gg-8.

    (c) Subpart C of this part was removed on September 9, 2013.

    (d) Subpart D of this part defines program eligibility criteria and sets forth requirements for the discretionary Grants to Encourage Arrest Policies and Enforcement of Protection Orders Program.

    3. Section 90.2 is revised to read as follows:
    § 90.2 Definitions

    (a) In addition to the definitions in this section, the definitions in 42 U.S.C. 13925(a) apply to all grants awarded by the Office on Violence Against Women and all subgrants made under such awards.

    (b) The term “community-based program” has the meaning given the term “community-based organization” in 42 U.S.C. 13925(a).

    (c) The term “forensic medical examination” means an examination provided to a sexual assault victim by medical personnel to gather evidence of a sexual assault in a manner suitable for use in a court of law.

    (1) The examination should include at a minimum:

    (A) Gathering information from the patient for the forensic medical history;

    (B) head to toe examination of the patient;

    (C) documentation of biological and physical findings; and

    (D) collection of evidence from the patient.

    (2) Any costs associated with the items listed in paragraph (1), such as equipment or supplies, are considered part of the “forensic medical examination.”

    (3) The inclusion of additional procedures (e.g., testing for sexually transmitted diseases) may be determined by the State, Indian tribal government, or unit of local government in accordance with its current laws, policies, and practices.

    (d) A prevention program is a program that has a goal of stopping domestic violence, dating violence, sexual assault, or stalking from happening in the first place. Prevention is distinguished from “outreach,” which has the goal of informing victims and potential victims about available services.

    (e) The term “prosecution” means any public agency charged with direct responsibility for prosecuting criminal offenders, including such agency's component bureaus (such as governmental victim services programs). Public agencies that provide prosecution support services, such as overseeing or participating in Statewide or multi-jurisdictional domestic violence task forces, conducting training for State, tribal, or local prosecutors or enforcing victim compensation and domestic violence-related restraining orders also fall within the meaning of “prosecution” for purposes of this definition.

    (f) The term “public agency” has the meaning provided in 42 U.S.C. 3791.

    (g) For the purpose of this part, a “unit of local government” is any city, county, township, town, borough, parish, village, or other general purpose political subdivision of a State.

    The following are not considered units of local government for purposes of this part:

    • Police departments;

    • Pre-trial service agencies;

    • District or city attorneys' offices;

    • Sheriffs' departments;

    • Probation and parole departments;

    • Shelters;

    • Nonprofit, nongovernmental victim service agencies including faith-based or community organizations; and

    • Universities.

    (h) The term “Victim services division or component of an organization, agency, or government” refers to a division within a larger organization, agency, or government, where the division has as its primary purpose to assist or advocate for domestic violence, dating violence, sexual assault, or stalking victims and has a documented history of work concerning such victims.

    4. Section 90.4 is added to read as follows:
    § 90.4 Grant conditions

    (a) In addition to the grant conditions in paragraphs (b) and (c), the grant conditions in 42 U.S.C. 13925(b) apply to all grants awarded by the Office on Violence Against Women and all subgrants made under such awards.

    (b) Nondisclosure of confidential or private information.

    (1) In general. In order to ensure the safety of adult, youth, and child victims of domestic violence, dating violence, sexual assault, or stalking and their families, grantees and subgrantees under this part shall protect the confidentiality and privacy of persons receiving services.

    (2) Nondisclosure.

    (i) Subject to paragraph (b)(2)(iii), grantees and subgrantees shall not disclose any personally identifying information or individual information collected in connection with services requested, utilized, or denied through grantees' and subgrantees' programs, regardless of whether the information has been encoded, encrypted, hashed, or otherwise protected.

    (ii) This subsection applies whether the information is being requested for a Department of Justice grant program or another Federal agency, State, tribal, or territorial grant program. This subsection also limits disclosures by subgrantees to grantees, including disclosures to Statewide or regional databases.

    (C) This subsection also applies to disclosures from the victim services divisions or components of an organization, agency, or government to other non-victim service divisions within an organization, agency, or government. It also applies to disclosures from victim services divisions or components of an organization, agency, or government to the leadership of the organization, agency, or government (e.g., executive director or chief executive). Such executives shall have access without releases only in extraordinary and rare circumstances.

    (3) Release.

    (i) Personally identifying information or individual information that is collected as described in paragraph (b)(2) may not be released except under the following circumstances:

    (A) the victim signs a release as provided in paragraph (b)(3)(ii);

    (B) release is compelled by statutory mandate, which includes mandatory child abuse reporting laws; or

    (C) release is compelled by court mandate.

    (ii) Victim releases must meet the following criteria—

    (A) Releases must be written, informed, and reasonably time-limited. Grantees and subgrantees may not use a blanket release and must specify the scope and limited circumstances of any disclosure. At a minimum, grantees and subgrantees must inform victims why the information might be shared, who would have access to the information, and what information could be shared under the terms of the release. A release must specify the duration for which information may be shared. The reasonableness of this time period will depend on the specific situation.

    (B) Grantees and subgrantees may not require consent to release of information as a condition of service.

    (C) Releases must be signed by the victim unless the victim is a minor who lacks the capacity to consent to release or is a legally incapacitated person and has a court-appointed guardian. Except as provided in paragraph (b)(3)(ii)(D), in the case of an unemancipated minor, the release must be signed by the minor and a parent or guardian; in the case of a legally incapacitated person, it must be signed by a legally-appointed guardian. Consent may not be given by the abuser of the minor or incapacitated person or the abuser of the other parent of the minor.

    (D) If the minor or person with a legally appointed guardian is permitted by law to receive services without the parent's or guardian's consent, the minor or person with a guardian may consent to release information without additional consent.

    (iv) If the release is compelled by statutory or court mandate, grantees and subgrantees must make reasonable efforts to notify victims affected by the disclosure and take steps necessary to protect the privacy and safety of the affected persons.

    (4) Fatality reviews. The prohibition on sharing identifying information does not apply to information about deceased victims being sought for purposes of a fatality review, assuming the fatality review meets the following requirements:

    (i) The underlying objectives of the fatality review are to prevent future deaths, enhance victim safety, and increase offender accountability; and

    (ii) The fatality review includes policies or protocols to protect identifying information, including identifying information about the victim's children, from further release outside the fatality review team.

    (5) Confidentiality assessment and assurances. Grantees and subgrantees are required to document their compliance with the requirements of this subsection. All applicants for Office on Violence Against Women funding are required to submit a signed acknowledgement form, indicating that they have notice that, if awarded funds, they will be required to comply with the provisions of this subsection, will mandate that subgrantees, if any, comply with this provision, and will create and maintain documentation of compliance, such as policies and procedures for release of victim information, and will mandate that subgrantees, if any, will do so as well.

    (c) Reports. An entity receiving a grant under this part shall submit to the Office on Violence Against Women reports detailing the activities undertaken with the grant funds. These reports must comply with the requirements set forth in 2 CFR 200.328 and provide any additional information that the Office on Violence Against Women requires.

    5. Subpart B is revised to read as follows: Subpart B—The STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program 90.10 STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program—General 90.11 State office 90.12 Implementation plans 90.13 Forensic medical examination payment requirement 90.14 Judicial notification requirement 90.15 Costs for criminal charges and protection orders 90.16 Polygraph testing prohibition 90.17 Subgranting of funds 90.18 Matching funds 90.19 Application content 90.20 [Reserved] 90.21 Evaluation 90.22 Review of State applications 90.23 Annual grantee and subgrantee reporting 90.24 Activities that may compromise victim safety and recovery 90.25 Reallocation of funds
    § 90.10 STOP (Services—Training—Officers—Prosecutors) Violence Against Women Formula Grant Program—General

    The purposes, criteria, and requirements for the STOP Violence Against Women Formula Grant Program are established by 42 U.S.C. 3796gg et seq. Eligible applicants for the program are the 50 States, American Samoa, Guam, Puerto Rico, Northern Mariana Islands, U.S. Virgin Islands, and the District of Columbia, hereinafter referred to as “States”.

    § 90.11 State office

    (a) Statewide plan and application. The chief executive of each participating State shall designate a State office for the purposes of:

    (1) Certifying qualifications for funding under this program;

    (2) developing a Statewide plan for implementation of the STOP Violence Against Women Formula Grants as described in section 90.12; and

    (3) preparing an application to receive funds under this program.

    (b) Administration and fund disbursement. In addition to the duties specified by subsection (a) of this section, the State office shall:

    (1) Administer funds received under this program, including receipt, review, processing, monitoring, progress and financial report review, technical assistance, grant adjustments, accounting, auditing, and fund disbursements; and

    (2) Coordinate the disbursement of funds provided under this part with other State agencies receiving Federal, State, or local funds for domestic violence, dating violence, sexual assault, or stalking prosecution, prevention, treatment, education, victim services, and research activities and programs.

    (c) Allocation requirement.

    (1) The State office shall allocate funds as provided in 42 U.S.C. 3796gg-1(c)(4) to courts and for law enforcement, prosecution, and victim services (including funds that must be awarded to culturally specific community-based organizations).

    (2) The State office shall ensure that the allocated funds benefit law enforcement, prosecution and victim services and are awarded to courts and culturally specific community-based organizations. In ensuring that funds benefit the appropriate entities, if funds are not subgranted directly to law enforcement, prosecution, and victim services, the State must require demonstration from the entity to be benefitted in the form of a memorandum of understanding signed by the chief executives of both the entity and the subgrant recipient, stating that the entity supports the proposed project and agrees that it is to the entity's benefit.

    (3) Culturally Specific Allocation. 42 U.S.C. 13925 defines “culturally specific” as primarily directed toward racial and ethnic minority groups (as defined in 42 U.S.C. 300u-6(g)). An organization will qualify for funding for the culturally specific allocation if its primary mission is to address the needs of racial and ethnic minority groups or if it has developed a special expertise regarding a particular racial and ethnic minority group. The organization must do more than merely provide services to the targeted group; rather, the organization must provide culturally competent services designed to meet the specific needs of the target population.

    (4) Sexual Assault Set Aside. As provided in 42 U.S.C. 3796gg-1(c)(5), the State must also award at least 20 percent of the total State award to projects in two or more allocations in 42 U.S.C. 3796gg-1(c)(4) that meaningfully address sexual assault. States should evaluate whether the interventions are tailored to meet the specific needs of sexual assault victims including ensuring that projects funded under the set aside have a legitimate focus on sexual assault and that personnel funded under such projects have sufficient expertise and experience on sexual assault. States may assess the percentage that a project addresses sexual assault and count that percentage of the project toward the set aside.

    § 90.12 Implementation plans

    (a) In general. Each State must submit a plan describing its identified goals under this program and how the funds will be used to accomplish those goals. The plan must include all of the elements specified in 42 U.S.C. 3796gg-1(i). The plan will cover a three-year period. In years two and three of the plan, each State must submit information on any updates or changes to the plan, as well as updated demographic information.

    (b) Consultation and coordination. In developing this plan, a State must consult and coordinate with the entities specified in 42 U.S.C. 3796gg-1(c)(2).

    (1) This consultation process must include at least one sexual assault victim service provider and one domestic violence victim service provider and may include other victim service providers.

    (2) In determining what population specific organizations, representatives from underserved populations, and culturally specific organizations to include in the consultation process, States should look at the demographics of their State and include any significant underserved and culturally specific populations in the State. This includes organizations working with lesbian, gay, bisexual, and transgender (LGBT) people and organizations that focus on people with limited English proficiency. If the State does not have any culturally specific or population specific organizations at the State or local level, the State can use national organizations to collaborate on the plan.

    (3) States must invite all State or Federally recognized tribes to participate in the planning process. Tribal coalitions and State or regional tribal consortia can help the State reach out to the tribes but can not be used as a substitute for consultation with all tribes.

    (4) If possible, States should include survivors of domestic violence, dating violence, sexual assault, and stalking in the planning process.

    (5) States should also include probation and parole entities in the planning process.

    (6) As provided in 42 U.S.C. 3796gg-1(c)(3), States must also coordinate the plan with the State plan for the Family Violence Prevention and Services Act (42 U.S.C. 10407), the State Victim Assistance Formula Grants under the Victims of Crime Act (42 U.S.C. 10603), and the Rape Prevention and Education Program (42 U.S.C. 280b-1b). The purposes of this coordination process are to provide greater diversity of projects funded and leverage efforts across the various funding streams.

    (7) Although all of the entities specified in 42 U.S.C. 3796gg-1(c)(2) must be consulted, they do not all need to be on the “planning committee.” The planning committee must include the following, at a minimum:

    (i) The State domestic violence and sexual assault coalitions as defined by 42 U.S.C. 13925(a)(32) and (33) (or dual coalition)

    (ii) A law enforcement entity or State law enforcement organization

    (C) A prosecution entity or State prosecution organization

    (D) A court or the State Administrative Office of the Courts

    (E) Representatives from tribes, tribal organizations, or tribal coalitions

    (F) Population specific organizations representing the most significant underserved populations and culturally specific populations in the State other than tribes, which are addressed separately.

    (8) The full consultation should include more robust representation from each of the required groups as well as all State and Federally recognized tribes.

    (c) Documentation of consultation. As part of the implementation plan, the grantee must submit a checklist documenting the type and extent of each entity's or individual's participation in the planning process, as well as major issues that were raised during the process and how they were resolved. This must include all of the entities specified in both subsection (b) and in 42 U.S.C. 3796gg-1(c)(2).

    (1) The State must retain documentation regarding attendees at all planning meetings.

    (2) For in-person meetings, the State should use and retain a sign-in sheet with name, title, organization, which of the required entity types (e.g., tribal government, population specific organization, prosecution, courts, State coalition) the person is representing, phone number, email address, and signature.

    (3) For phone or online meetings, attendees should “sign-in” by emailing or faxing that they are on the call and the State should retain these emails and/or faxes.

    (4) The State must create a summary of major concerns that were raised during the development process and how they were addressed, or why they awere not addressed. This should be sent to the planning committee along with any draft implementation plan and with the final plan.

    (5) The State must keep track of any method of document review that occurred outside the context of a meeting, such as to whom the draft implementation plan was sent, how it was sent (for example by email versus mail), and who responded. Although States do not need to note every comment and how it was addressed, if there are serious or significant concerns with the draft implementation plan, these should be added to the summary of major concerns described above.

    (6) The State must create and submit to the Office on Violence Against Women a checklist for each planning committee member that documents, at a minimum, whether they were informed of meetings, whether they attended meetings, whether they were given drafts of the implementation plan to review, whether they submitted comments on the draft, and whether they received a copy of the final plan and the State's summary of major concerns. The checklist should also include space for participants to include any major concerns that they have with the final plan. Each participant should check the appropriate categories on the checklist, sign the form, and return it to the State, which will attach the checklists to the plan when submitting the plan to the Office on Violence Against Women.

    (7) Only the checklists and summary of significant concerns must be sent to OVW with the implementation plans. The remaining documentation described above must be kept on file by the State.

    (d) Equitable distribution. The implementation plan must describe, on an annual or three-year basis, how the State, in disbursing monies, will:

    (1) Give priority to areas of varying geographic size with the greatest showing of need based on the range and availability of existing domestic violence and sexual assault programs in the population and geographic area to be served in relation to the availability of such programs in other such populations and geographic areas, including Indian reservations;

    (2) Determine the amount of subgrants based on the population and geographic area to be served;

    (3) Equitably distribute monies on a geographic basis including nonurban and rural areas of various geographic sizes; and

    (4) Recognize and meaningfully respond to the needs of underserved populations and ensure that monies set aside to fund linguistically and culturally specific services and activities for underserved populations are distributed equitably among those populations.

    (e) Underserved populations. Each State has flexibility to determine the methods it uses for identifying underserved populations within the State, which may include public hearings, needs assessments, task forces, and United States Census Bureau data. The implementation plan must include details regarding the methods used and the results of those methods. It must also include information on how the State plans to meet the needs of identified underserved populations, including, but not limited to, culturally specific populations, victims who are underserved because of sexual orientation or gender identity, and victims with limited English proficiency.

    (f) Goals and objectives for reducing domestic violence homicide. As required in 42 U.S.C. 3796gg-1(i)(2)(G), State plans must include goals and objectives for reducing domestic violence homicide.

    (1) The plan must include available statistics on the rates of domestic violence homicide within the State.

    (2) As part of the State's consultation with law enforcement, prosecution, and victim service providers, the State and these entities should discuss and document the perceived accuracy of these statistics and the best ways to address domestic violence homicide.

    (3) The plan must identify specific goals and objectives for reducing domestic violence homicide, based on these discussions, which include challenges specific to the State and how the plan can overcome them.

    (g) Additional contents. State plans must also include the following:

    (1) Demographic information regarding the population of the State derived from the most recent available United States Census Bureau data including population data on race, ethnicity, age, disability, and limited English proficiency.

    (2) A description of how the State will reach out to community-based organizations that provide linguistically and culturally specific services.

    (3) A description of how the State will address the needs of sexual assault victims, domestic violence victims, dating violence victims, and stalking victims, as well as how the State will hold offenders who commit each of these crimes accountable.

    (4) A description of how the State will ensure that eligible entities are aware of funding opportunities, including projects serving underserved populations as defined by 42 U.S.C. 13925(a).

    (5) Information on specific projects the State plans to fund.

    (6) An explanation of how the State coordinated the plan as described in paragraph (b)(6) and the impact of that coordination on the contents of the plan.

    (7) Information on the status of the State's compliance with the Prison Rape Elimination Act standards (28 CFR part 115) and how the State plans to use STOP Violence Against Women Formula Grant Program funds towards compliance, if applicable.

    (8) A description of how the State will identify and select applicants for subgrant funding, including whether a competitive process will be used.

    (h) Deadline. State plans will be due at application. If the Office on Violence Against Women determines the submitted plan is incomplete, the State will receive the award, but will not be able to access funding until the plan is completed and approved. The State will have 60 days from the award date to complete the plan. If the State does not complete it in that time, then the funds will be deobligated and the award closed.

    § 90.13 Forensic medical examination payment requirement

    (a) To be eligible for funding under this program, a State must meet the requirements at 42 U.S.C. 3796gg-4(a)(1) with regard to incurring the full out-of-pocket costs of forensic medical examinations for victims of sexual assault.

    (b) “Full out-of-pocket costs” means any expense that may be charged to a victim in connection with a forensic medical examination for the purpose of gathering evidence of a sexual assault (e.g., the full cost of the examination, an insurance deductible, or a fee established by the facility conducting the examination). For individuals covered by insurance, full out-of-pocket costs means any costs that the insurer does not pay.

    (c) Coverage of the cost of additional procedures (e.g., testing for sexually transmitted diseases) may be determined by the State or governmental entity responsible for paying the costs.

    (d) States may only use the victims' private insurance as a source of payment for the exams if they are not using STOP Violence Against Women Formula Grant Program funds to pay for the cost of the exams. In addition, any expenses not covered by the insurer must be covered by the State or other governmental entity and cannot be billed to the victim. This includes any deductibles or denial of claims by the insurer.

    (e) The State or other governmental entity responsible for paying the costs of forensic medical exams must coordinate with health care providers in the region to notify victims of sexual assault of the availability of rape exams at no cost to the victims. States can meet this obligation by partnering with associations that are likely to have the broadest reach to the relevant health care providers, such as forensic nursing or hospital associations. States with significant tribal populations should also consider reaching out to local Indian Health Services facilities.

    § 90.14 Judicial notification requirement

    (a) To be eligible for funding under this program, a State must meet the requirements of 42 U.S.C. 3796gg-4(e) with regard to judicial notification to domestic violence offenders of federal prohibitions on their possession of a firearm or ammunition in 18 U.S.C. 922(g)(8) and (9) and any applicable related Federal, State, or local laws.

    (b) A unit of local government shall not be eligible for subgrants from the State unless it complies with the requirements of 42 U.S.C. 3796gg-4(e) with respect to its judicial administrative policies and practices.

    § 90.15 Costs for criminal charges and protection orders

    (a) To be eligible for funding under this program, a State must meet the requirements of 42 U.S.C. 3796gg-5 with regard to not requiring victims to bear the costs for criminal charges and protection orders in cases of domestic violence, dating violence, sexual assault, or stalking.

    (b) An Indian tribal government, unit of local government, or court shall not be eligible for subgrants from the State unless it complies with the requirements of 42 U.S.C. 3796gg-5 with respect to its laws, policies, and practices not requiring victims to bear the costs for criminal charges and protection orders in cases of domestic violence, dating violence, sexual assault, or stalking.

    § 90.16 Polygraph testing prohibition

    (a) To be eligible for funding under this program, a State must meet the requirements of 42 U.S.C. 3796gg-8 with regard to restricting polygraph testing of sexual assault victims.

    (b) An Indian tribal government or unit of local government shall not be eligible for subgrants from the State unless it complies with the requirements of 42 U.S.C. 3796gg-8 with respect to its laws, policies, or practices restricting polygraph testing of sexual assault victims.

    § 90.17 Subgranting of funds

    (a) In general. Funds granted to qualified States are to be further subgranted by the State to agencies, offices, and programs including, but not limited to, State agencies and offices; State and local courts; units of local government; public agencies; Indian tribal governments; victim service providers; community-based organizations; and legal services programs to carry out programs and projects to develop and strengthen effective law enforcement and prosecution strategies to combat violent crimes against women, and to develop and strengthen victim services in cases involving violent crimes against women, and specifically for the purposes listed in 42 U.S.C. 3796gg(b) and according to the allocations specified in 42 U.S.C. 3796gg-1(c)(4) for law enforcement, prosecution, victim services, and courts.

    (b) Administrative Costs. States are allowed to use up to ten percent of the award amount for each allocation category under 42 U.S.C. 3796gg-1(c)(4) (law enforcement, prosecution, courts, victim services, and discretionary) to support the State's administrative costs. Amounts not used for administrative costs should be used to support subgrants.

    § 90.18 Matching funds

    (a) In general. Subject to certain exclusions, States are required to provide a 25 percent non-Federal match. This does not apply to territories. This 25 percent match may be cash or in-kind services. States are expected to submit written documentation that identifies the source of the match. Funds awarded to victim service providers for victim services or to tribes are excluded from the total award amount for purposes of calculating match.

    (b) In-kind match. In-kind match may include donations of expendable equipment; office supplies; workshop or education and training materials; work space; or the monetary value of time contributed by professional and technical personnel and other skilled and unskilled labor, if the services provided are an integral and necessary part of a funded project. Value for in-kind match is guided by 2 CFR 200.306. The value placed on loaned equipment may not exceed its fair rental value. The value placed on donated services must be consistent with the rate of compensation paid for similar work in the organization or the labor market. Fringe benefits may be included in the valuation. Volunteer services must be documented and, to the extent feasible, supported by the same valuation methods used by the recipient organization for its own employees. The value of donated space may not exceed the fair rental value of comparable space, as established by an independent appraisal of comparable space and facilities in a privately owned building in the same locality. The value for donated supplies shall be reasonable and not exceed the fair market value at the time of the donation. The basis for determining the value of personal services, materials, equipment, and space must be documented.

    (c) Tribes and victim services providers. States may not require match to be provided in subgrants for Indian tribes or victim services providers.

    (d) Waiver. States may petition the Office on Violence Against Women for a waiver of match if they are able to adequately demonstrate financial need.

    (1) State match waiver. States may apply for full or partial waivers of match by submitting specific documentation of financial need. Documentation must include the following:

    (i) The sources of non-Federal funds available to the State for match and the amount available from each source, including in-kind match and match provided by subgrantees or other entities;

    (B) Efforts made by the State to obtain the matching funds, including, if applicable, letters from other State agencies stating that the funds available from such agencies may not be used for match;

    (C) The specific dollar amount or percentage waiver that is requested;

    (D) Cause and extent of the constraints on projected ability to raise violence against women program matching funds and changed circumstances that make past sources of match unavailable; and

    (E) If applicable, specific evidence of economic distress, such as documentation of double-digit unemployment rates or designation as a Federal Emergency Management Agency-designated disaster area.

    (F) In a request for a partial waiver of match for a particular allocation, the State could provide letters from the entities under that allocation attesting to their financial hardship.

    (2) The State must demonstrate how the submitted documentation affects the State's ability to provide violence against women matching funds. For example, if a State shows that across the board budget cuts have directly reduced violence against women funding by 20 percent, that State would be considered for a 20 percent waiver, not a full waiver. Reductions in Federal funds are not relevant to State match unless the State can show that the reduced Federal funding directly reduced available State violence against women funds.

    (e) Accountability. All funds designated as match are restricted to the same uses as the program funds as set forth in 42 U.S.C. 3796gg(b) and must be expended within the grant period. The State must ensure that match is identified in a manner that guarantees its accountability during an audit.

    § 90.19 Application content.

    (a) Format. Applications from the States for the STOP Violence Against Women Formula Grant Program must be submitted as described in the annual solicitation. The Office on Violence Against Women will notify each State office as designated pursuant to section 90.11 when the annual solicitation is available. The solicitation will include guidance on how to prepare and submit an application for grants under this subpart.

    (b) The application shall include all information required under 42 U.S.C. 3796gg-1(d).

    § 90.20 [Reserved]
    § 90.21 Evaluation.

    (a) Recipients of funds under this subpart must agree to cooperate with Federally-sponsored evaluations of their projects.

    (b) Recipients of STOP Violence Against Women Formula Grant Program funds are strongly encouraged to develop a local evaluation strategy to assess the impact and effectiveness of the program funded under the STOP program. Funds may not be used for conducting research or evaluations. Applicants should consider entering into partnerships with research organizations that are submitting simultaneous grant applications to the National Institute of Justice for this purpose.

    § 90.22 Review of State applications.

    (a) The provisions of Part T of the Omnibus Crime Control and Safe Streets Act of 1968, 42 U.S.C. 3796gg et seq., and of these regulations provide the basis for review and approval or disapproval of State applications and amendments.

    (b) Intergovernmental review. This program is covered by Executive Order 12372 (Intergovernmental Review of Federal Programs) and implementing regulations at 28 CFR part 30. A copy of the application submitted to the Office on Violence Against Women should also be submitted at the same time to the State's Single Point of Contact, if there is a Single Point of Contact.

    § 90.23 Annual grantee and subgrantee reporting.

    Subgrantees shall complete annual progress reports and submit them to the State, which shall review them and submit them to the Office on Violence Against Women. In addition, the State shall complete an annual progress report, including an assessment of whether or not annual goals and objectives were achieved.

    § 90.24 Activities that may compromise victim safety and recovery.

    Because of the overall purpose of the program to enhance victim safety and offender accountability, grant funds may not be used to support activities that compromise victim safety and recovery. The grant program solicitation each year will provide examples of such activities.

    § 90.25 Reallocation of funds.

    As described in 42 U.S.C. 3796gg-1(j), States may reallocate funds returned to the State or if the State does not receive sufficient eligible applications to award the full funding under the allocations in 42 U.S.C. 3796gg-1(c)(4). An “eligible” application is one that is from an eligible entity that has the capacity to perform the proposed services, proposes activities within the scope of the program, and does not propose significant activities that compromise victim safety. States should have the following information on file to document the lack of sufficient eligible applications:

    (1) A copy of their solicitation;

    (2) Documentation on how the solicitation was distributed, including all outreach efforts to entities from the allocation in question;

    (3) An explanation of their selection process;

    (4) A list of who participated in the selection process (name, title, and employer);

    (5) Number of applications that were received for the specific allocation category;

    (6) Information about the applications received, such as who they were from, how much money they were requesting, and any reasons the applications were not funded;

    (7) Letters from any relevant State-wide body explaining the lack of applications. For example, if the State is seeking to reallocate money from courts, they should have a letter from the State Court Administrator;

    (8) For the culturally specific allocation, demographic statistics of the relevant racial and ethnic minority groups within the State and documentation that the State has reached out to relevant organizations within the State or national organizations.

    Dated: April 20, 2016. Bea Hanson, Principal Deputy Director.
    [FR Doc. 2016-10564 Filed 5-10-16; 8:45 am] BILLING CODE 4410-FX-P
    DEPARTMENT OF DEFENSE Department of the Army 32 CFR Part 553 [Docket No. USA-2015-HQ-0046] RIN 0702-AA60 Army National Military Cemeteries AGENCY:

    Department of the Army, DoD.

    ACTION:

    Proposed rule.

    SUMMARY:

    The Department of the Army (Army) proposes to amend its regulation for the development, operation, maintenance, and administration of the Army National Cemeteries to reflect their statutory name change to the Army National Military Cemeteries and changes in the management structure, to adopt modifications suggested by the Department of the Army Inspector General, and to implement changes in interment eligibility.

    DATES:

    Consideration will be given to all comments received by July 11, 2016.

    ADDRESSES:

    You may submit comments, identified by 32 CFR part 553, Docket No. USA-2015-HQ-0046 and or by Regulatory Information Number (RIN) 0720-AA60 by any of the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

    Mail: Department of Defense, Office of the Deputy Chief Management Officer, Directorate of Oversight and Compliance, 4800 Mark Center Drive, Mailbox #24, Alexandria, VA 22350-1700.

    Instructions: All submissions received must include the agency name and docket number or RIN for this Federal Register document. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing on the Internet at http://www.regulations.gov as they are received without change, including any personal identifiers or contact information.

    FOR FURTHER INFORMATION CONTACT:

    Mr. Robert Quackenbush, Army National Military Cemeteries, 703-614-7150.

    SUPPLEMENTARY INFORMATION:

    The revisions to this rule will be reported in future status updates as part of DoD's retrospective plan under Executive Order 13563 completed in August 2011. DoD's full plan can be accessed at: http://www.regulations.gov/#!docketDetail;D=DOD-2011-OS-0036.

    A. Executive Summary I. Purpose of the Regulatory Action

    a. This regulatory action modifies the Army's regulation governing Army National Military Cemeteries, which consist of Arlington National Cemetery and the U.S. Soldiers' and Airmen's Home National Cemetery, to reflect changes in the management structure of the Army National Military Cemeteries created by Army General Orders 2014-74 and 2014-75 and the National Defense Authorization Act for Fiscal Year 2012, Pub. L. 112-81, section 591 (2011) (adding chapter 446 to title 10); to adopt modifications suggested by the Department of the Army Inspector General; to implement interment, inurnment, and memorialization eligibility restrictions, including those mandated by 10 U.S.C. 985 and 38 U.S.C. 2411; and to prohibit the reservation of gravesites as mandated by 38 U.S.C. 2410a.

    b. The legal authority for this regulatory action is section 591 of the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81 (2011), which added chapter 446 to title 10. Chapter 446 requires the Secretary of the Army to prescribe regulations and policies as may be necessary to administer the Army National Military Cemeteries, and it codifies the role of the Executive Director as the individual responsible for exercising authority, direction, and control over all aspects of the Army National Military Cemeteries. Throughout part 553, the Army replaces references to the Superintendent of the Cemetery, the Adjutant General, and Commanding General, Military District of Washington, with “Executive Director” to reflect the current command structure, which was implemented through Army General Orders 2014-74 and 2014-75 and codified in the National Defense Authorization Act of 2012.

    II. Summary of the Major Provisions of the Regulatory Action in Question

    The new definition of Army National Military Cemeteries reflects the Army National Military Cemeteries' status as a Secretariat element of Headquarters, Department of the Army. Prior to the National Defense Authorization Act for Fiscal Year 2012, Public Law 112-81, sec. 591 (2011), the Army National Cemeteries were a civil works activity of the Department of the Army. Throughout part 553, the term Army National Military Cemeteries replaces “Army National Cemeteries” to reflect this statutory change.

    Section 553.3 (redesignated as § 553.4), “Scope and applicability,” is amended to focus on the applicability of this part and not on the applicability of a separate internal Army regulation.

    Section 553.4, “Responsibilities,” is removed, and its content is included in proposed § 553.3, “Statutory authorities.”

    Section 553.5, “Federal Jurisdiction,” is removed as 10 U.S.C. chapter 446 provides that the Army National Military Cemeteries shall be under the jurisdiction of Headquarters, Department of the Army.

    Section 553.6, “Donations,” is removed because its subject matter is addressed fully in other statutes and regulations.

    Section 553.7, “Design and layout of Army National Cemeteries,” is renamed “Standards for managing Army National Military Cemeteries” (redesignated as § 553.6).

    Section 553.8 (redesignated as § 553.7), “Arlington Memorial Amphitheater,” makes it easier for the public to understand how the Arlington Memorial Amphitheater is managed.

    Section 553.9, “Power of Arrest,” which addressed the Superintendent's power of arrest in limited circumstances, is removed. This provision is no longer expressly authorized by statute and is not necessary because police and security have been provided for at the Army National Military Cemeteries. However, in proposed § 553.5, the Executive Director is provided the authority to order the removal of and bar from re-entry any person who violates any number of designated statutes or regulations.

    Section 553.10, “Solicitations,” is now addressed in proposed § 553.34, “Soliciting and vending.”

    Section 553.11, “Procurement,” is removed because the information it contains is covered by other laws and regulations and is thus unnecessary.

    Section 553.12, “Encroachments and revocable licenses,” is renamed “Permission to install utilities” (redesignated as § 553.8) and no longer considers encroachments, which are no longer applicable.

    Section 553.13 “Standards of construction, maintenance, and operations,” is renamed “Standards for managing Army National Military Cemeteries” (redesignated as § 553.6) and is proposed to reflect the role of the Executive Director as the individual responsible for exercising authority, direction, and control over all aspects of the Army National Military Cemeteries, as codified in chapter 446 of title 10.

    Section 553.14 “Authority for interments,” is renamed “Statutory authorities” (redesignated as § 553.3) and includes all authorities related to the Army National Military Cemeteries, not just the authority for interments.

    Section 553.15 “Persons eligible for burial in Arlington National Cemetery” is renamed “Eligibility for interment in Arlington National Cemetery” (redesignated as § 553.12) and reflects the difference between primary and derivative eligibility, clarifies which elective offices can create eligibility for interment, allows subsequently remarried spouses to be eligible for interment with the prior spouse under certain circumstances, and gives derivative eligibility to certain otherwise ineligible veterans whose close relatives are primarily eligible.

    Section 553.15a, “Persons eligible for inurnment of cremated remains in Columbarium in Arlington National Cemetery,” is renamed “Eligibility for inurnment in Arlington National Cemetery Columbarium” (redesignated as § 553.13).

    Section 553.16 “Persons eligible for burial in Soldiers' Home National Cemetery,” is renamed “Eligibility for burial in U.S. Soldiers' and Airmen's Home National Cemetery” (redesignated as § 553.18) and clarifies that eligibility is limited to the residents of the Armed Forces Retirement Home.

    Section 553.17, “Persons ineligible for burial in an Army national cemetery,” is renamed “Ineligibility for interment, inurnment or memorialization in an Army National Military Cemetery” (redesignated as § 553.19) and expands upon § 553.17 so that inurnments and memorializations will also be covered under this section. Proposed § 553.19 clarifies the ineligibility of a former spouse whose marriage to the primarily eligible person ended in divorce, clarifies the termination of a spouse's derivative eligibility upon interment in a cemetery other than an Army National Military Cemetery and the remarriage of the primarily eligible spouse, forbids the interment or inurnment of persons convicted of certain crimes, forbids the interment or inurnment of persons who died on active duty under certain circumstances, and governs how animal remains unintentionally comingled with human remains shall be treated.

    Section 553.18, “Assignment of gravesites,” is renamed “Assignment of gravesites or niches” (redesignated as § 553.9) so the assignment of niches will also be covered under this section. Proposed § 553.9 would also implement 38 U.S.C. 2410a, which prohibits the reservation of a gravesite at Arlington National Cemetery prior an individual's death, absent a waiver from the President of the United States, and imposes the limit of one gravesite per family. Proposed § 553.9 explains the one-gravesite-per-family policy, explains how previously made reservations will be treated, and gives the Executive Director the authority to cancel reservations under certain circumstances.

    Section 553.19, “Disinterments,” is renamed “Disinterments and disurnments of remains” (redesignated as § 553.25) so the disurnment of remains will also be covered under this section. Proposed § 553.25 explains the disinterment and disurnment process and governs disinterment from group burial sites.

    Section 553.20, “Headstones and markers,” is renamed “Design of Government-furnished headstones, niche covers, and memorial markers” (proposed § 553.26) and includes niche covers, removes a repealed citation, and notifies the public that the Executive Director shall approve the design of headstones and memorial markers erected for group burials.

    Section 553.21, “Monuments and inscriptions at private expense,” is renamed “Private headstones and markers” (redesignated as § 553.28) and makes clear that the design and inscription of a private headstone or marker must be approved by the Executive Director prior to its construction and placement. Proposed § 553.28 more fully explains the treatment of private headstones at Army National Military Cemeteries.

    Section 553.22, “Visitors' Rules for the Arlington National Cemetery,” is renamed “Visitors rules for Army National Military Cemeteries” (redesignated as § 553.33) and simplifies the regulation and prohibits dogs, cats, or other animals (except for service animals or military working dogs) from an Army National Military Cemetery.

    Proposed § 553.1, “Definitions,” provides the definitions of terms used throughout the proposed rule.

    Proposed § 553.2, “Purpose,” explains that this part specifies the authorities and assigns the responsibilities for the development, operation, maintenance, and administration of the Army National Military Cemeteries.

    Proposed § 553.5, “Maintaining order,” notifies the public of the Executive Director's authority to order the removal from and bar the re-entry onto the Army National Military Cemeteries of any person who acts in violation of any regulation, including this part, covered by 50 U.S.C. 797.

    Proposed § 553.10, “Proof of eligibility,” provides a list of the official documents used to establish a decedent's eligibility for interment or inurnment in the Army National Military Cemeteries, including the requirement of certification that 100% of the cremated remains will be interred or inurned in the Army National Military Cemeteries, with an exception for producing commemorative items if authorized by the Executive Director.

    Proposed § 553.11, “General rules governing eligibility for interment, inurnment, and memorialization at Arlington National Cemetery,” clarifies the eligibility guidelines, in particular the distinction between a person who is primarily eligible and a person who is derivatively eligible for interment or inurnment.

    Proposed § 553.14, “Eligibility for interment of cremated remains in the Arlington National Cemetery Unmarked Area,” implements 38 U.S.C § 2410, which authorizes the Secretary of the Army to set aside land at Arlington National Cemetery for the interment under such rules as the Secretary may prescribe, of unmarked cremated remains of persons eligible for interment at Arlington National Cemetery.

    Proposed § 553.15, “Eligibility for group burial at Arlington National Cemetery,” regulates the interment of unidentifiable co-mingled human remains of which at least one person is eligible for interment at Arlington National Cemetery.

    Proposed § 553.16, “Eligibility for memorialization in an Arlington National Cemetery Memorial Area,” supplements § 553.21(b), “Monuments and inscriptions at private expense,” and explains to the public how Arlington National Cemetery will treat memorial markers.

    Proposed § 553.17, “Arlington National Cemetery internment/inurnment agreement,” guarantees that when a derivatively eligible person predeceases a primarily eligible person and is interred or inurned at Arlington National Cemetery, the primarily eligible person will eventually be buried in the same gravesite or inurned in the same niche.

    Proposed § 553.20, “Prohibition of interment, inurnment, or memorialization in an Army National Military Cemetery of persons who have committed certain crimes,” implements 10 U.S.C. 985 and 38 U.S.C. 2411, which prohibit the interment, inurnment, or memorialization in any Army National Military Cemetery of an individual who has been convicted of a federal or state capital crime, who committed a federal or state capital crime but was not convicted of such crime because the person was not available for trial due to death or flight to avoid prosecution, or who has been convicted of a Federal or State crime causing the person to be a Tier III sex offender for purposes of the Sex Offender Registration and Notification Act and who is sentenced to a minimum of life imprisonment. Definitions of the terms federal capital crime and state capital crime have been included in proposed § 553.1 to implement these regulations.

    Proposed § 553.21, “Findings concerning the commission of certain crimes where a person has not been convicted due to death or flight to avoid prosecution,” implements 10 U.S.C. 985 and 38 U.S.C. 241, which prohibit the interment, inurnment, or memorialization in any Army National Military Cemetery of an individual who has been convicted of a federal or state capital crime, or who committed a federal or state capital crime but was not convicted of such crime because the person was not available for trial due to death or flight to avoid prosecution.

    Proposed § 553.22, “Exceptions to policies for interment or inurnment at Arlington National Cemetery” implements 10 U.S.C. 4722, which authorizes the Secretary of the Army to establish policies and procedures for reviewing and determining requests for exception to the interment and inurnment eligibility policies. Proposed § 553.22 notifies the public as to how exceptions will be processed.

    Proposed § 553.23, “Placement of cremated remains at Army National Military Cemeteries,” clarifies the requirement that all cremated remains shall be interred or inurned and that the burial of symbolic containers is prohibited in the Army National Military Cemeteries.

    Proposed § 553.24, “Subsequently recovered remains,” provides that the subsequently recovered identified remains of a decedent shall be reunited in one gravesite or urn or as part of a group interment either in an Army National Military Cemetery or other cemetery.

    Proposed § 553.29, “Permission to construct private headstones and markers,” explains how a headstone firm may obtain permission to construct private headstones and markers at Army National Military Cemeteries.

    Proposed § 553.30, “Inscriptions on private headstones and markers,” provides guidelines for inscriptions on private headstones and markers.

    Proposed § 553.31, “Memorial and commemorative monuments (other than private headstones or markers),” governs the placement of memorials or commemorative monuments in Arlington National Cemetery in accordance with 38 U.S.C. 2409(b).

    Proposed § 553.32, “Conduct of memorial services and ceremonies,” explains the manner in which the Army National Military Cemeteries ensures the sanctity of public and private memorial and ceremonial events.

    Proposed § 553.35, “Media,” provides that all officials and staff of the media are subject to the visitors rules and shall comply with the Department of the Army's media policy.

    B. Regulatory Flexibility Act

    The Army has determined that the Regulatory Flexibility Act does not apply because the rule does not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612.

    C. Unfunded Mandates Reform Act

    The Army has determined that the Unfunded Mandates Reform Act does not apply because the rule does not include a mandate that may result in estimated costs to State, local, or tribal governments in the aggregate, or the private sector, of $100 million or more.

    D. National Environmental Policy Act

    Neither an environmental analysis nor an environmental impact statement under the National Environmental Policy Act is required. The changes made to the prior regulation by this amendment reflect existing policies and do not significantly alter ongoing activities, nor does this amendment constitute a new use of the property.

    E. Paperwork Reduction Act

    The Army has determined that this rule does not impose reporting or recordkeeping requirements under the Paperwork Reduction Act of 1995.

    F. Executive Order 12630 (Government Actions and Interference With Constitutionally Protected Property Rights)

    The Army has determined that E.O. 12630 does not apply because the rule does not impair private property rights.

    G. Executive Order 12866 (Regulatory Planning and Review) and E.O. 13563 (Improving Regulation and Regulatory Review)

    Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distribute impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget.” (OMB).

    H. Executive Order 13045 (Protection of Children From Environmental Health Risk and Safety Risks)

    The Army has determined that according to the criteria defined in E.O. 13045, the requirements of that Order do not apply to this rule.

    I. Executive Order 13132 (Federalism)

    The Army has determined that, according to the criteria defined in E.O. 13132, the requirements of that Order do not apply to this rule because the rule will not have a substantial effect on the States, on the relationship between the Federal government and the States, or on the distribution of power and responsibilities among the various levels of government.

    Patrick K. Hallinan, Executive Director. List of Subjects in 32 CFR Part 553

    Armed forces, Armed forces reserves, Military personnel, Monuments and memorials, Veterans.

    For the reasons stated in the preamble, the Department of the Army proposes to revise part 553 to read as follows:

    PART 553—ARMY NATIONAL MILITARY CEMETERIES Sec. 553.1 Definitions. 553.2 Purpose. 553.3 Statutory authorities. 553.4 Scope and applicability. 553.5 Maintaining order. 553.6 Standards for managing Army National Military Cemeteries. 553.7 Arlington Memorial Amphitheater. 553.8 Permission to install utilities. 553.9 Assignment of gravesites or niches. 553.10 Proof of eligibility. 553.11 General rules governing eligibility for interment, inurnment, and memorialization at Arlington National Cemetery. 553.12 Eligibility for interment in Arlington National Cemetery. 553.13 Eligibility for inurnment in Arlington National Cemetery Columbarium. 553.14 Eligibility for interment of cremated remains in the Arlington National Cemetery Unmarked Area. 553.15 Eligibility for group burial in Arlington National Cemetery. 553.16 Eligibility for memorialization in an Arlington National Cemetery memorial area. 553.17 Arlington National Cemetery interment/inurnment agreement. 553.18 Eligibility for burial in U.S. Soldiers' and Airmen's Home National Cemetery. 553.19 Ineligibility for interment, inurnment, or memorialization in an Army National Military Cemetery. 553.20 Prohibition of interment, inurnment, or memorialization in an Army National Military Cemetery of persons who have committed certain crimes. 553.21 Findings concerning the commission of certain crimes where a person has not been convicted due to death or flight to avoid prosecution. 553.22 Exceptions to policies for interment or inurnment at Arlington National Cemetery. 553.23 Placement of cremated remains at Army National Military Cemeteries. 553.24 Subsequently recovered remains. 553.25 Disinterments and disinurnments of remains. 553.26 Design of Government-furnished headstones, niche covers, and memorial markers. 553.27 Inscriptions on Government-furnished headstones, niche covers, and memorial markers. 553.28 Private headstones and markers. 553.29 Permission to construct private headstones and markers. 553.30 Inscriptions on private headstones and markers. 553.31 Memorial and commemorative monuments (other than private headstones or markers). 553.32 Conduct of memorial services and ceremonies. 553.33 Visitors rules for Army National Military Cemeteries. 553.34 Soliciting and vending. 553.35 Media. Authority:

    10 U.S.C. 985, 1128, 1481, 1482, 3013, 4721-4726; 24 U.S.C. 295a, 412; 38 U.S.C. 2402 note, 2409-2411, 2413; 40 U.S.C. 9102.

    § 553.1 Definitions.

    As used in this part, the following terms have these meanings:

    Active duty. Full-time duty in the active military service of the United States.

    (1) This includes:

    (i) Active Reserve component duty performed pursuant to title 10, United States Code.

    (ii) Service as a cadet or midshipman currently on the rolls at the U.S. Military, U.S. Naval, U.S. Air Force, or U.S. Coast Guard Academies.

    (iii) Active duty for operational support.

    (2) This does not include:

    (i) Full-time duty performed under title 32, United States Code.

    (ii) Active duty for training, initial entry training, annual training duty, or inactive-duty training for members of the Reserve components.

    Active duty for operational support (formerly active duty for special work). A tour of active duty for Reserve personnel authorized from military or Reserve personnel appropriations for work on Active component or Reserve component programs. The purpose of active duty for operational support is to provide the necessary skilled manpower assets to support existing or emerging requirements and may include training.

    Active duty for training. A category of active duty used to provide structured individual and/or unit training, including on-the-job training, or educational courses to Reserve component members. Included in the active duty for training category are annual training, initial active duty for training, or any other training duty.

    Annual training. The minimum period of active duty for training that Reserve members must perform each year to satisfy the training requirements associated with their Reserve component assignment.

    Armed Forces. The U.S. Army, Navy, Marine Corps, Coast Guard, Air Force and their Reserve components.

    Army National Military Cemeteries. Arlington National Cemetery and the U.S. Soldiers' and Airmen's Home National Cemetery.

    Category 4, 5, or 5+ Posts. Category 4, 5, or 5+ posts, including the equivalent classifications as determined by the Department of State that were used prior to 2004 or may be used subsequently.

    Child, minor child, permanently dependent child, unmarried adult child.

    (1) Child.

    (i) Natural child of a primarily eligible person, born in wedlock;

    (ii) Natural child of a female primarily eligible person, born out of wedlock;

    (iii) Natural child of a male primarily eligible person, who was born out of wedlock and:

    (A) Has been acknowledged in a writing signed by the male primarily eligible person;

    (B) Has been judicially determined to be the male primarily eligible person's child;

    (C) Whom the male primarily eligible person has been judicially ordered to support; or

    (D) Has been otherwise proved, by evidence satisfactory to the Executive Director, to be the child of the male primarily eligible person

    (iv) Adopted child of a primarily eligible person; or

    (v) Stepchild who was part of the primarily eligible person's household at the time of death of the individual who is to be interred or inurned.

    (2) Minor child. A child of the primarily eligible person who

    (i) Is unmarried;

    (ii) Has no dependents; and

    (iii) Is under the age of twenty-one years, or is under the age of twenty-three years and is taking a full-time course of instruction at an educational institution which the U.S. Department of Education acknowledges as an accredited educational institution.

    (3) Permanently dependent child. A child of the primarily eligible person who

    (i) Is unmarried;

    (ii) Has no dependents; and

    (iii) Is permanently and fully dependent on one or both of the child's parents because of a physical or mental disability incurred before attaining the age of twenty-one years or before the age of twenty-three years while taking a full-time course of instruction at an educational institution which the U.S. Department of Education acknowledges as an accredited educational institution.

    (4) Unmarried adult child. A child of the primarily eligible person who

    (i) Is unmarried;

    (ii) Has no dependents; and

    (iii) Has attained the age of twenty-one years.

    Close relative. The spouse, parents, adult brothers and sisters, adult natural children, adult stepchildren, and adult adopted children of a decedent.

    Commemorative monuments. Monuments or other structures or landscape features that serve to honor events in history, units of the Armed Forces, individuals, or groups of individuals that served in the Armed Forces, and that do not contain human remains or mark the location of remains in close proximity. The term does not include memorial markers erected pursuant to § 553.16 of this part.

    Derivatively eligible person. Any person who is entitled to interment or inurnment solely based on his or her relationship to a primarily eligible person, as set forth in §§ 553.12(b) and § 553.13(b) respectively.

    Disinterment. The permanent removal of interred human remains from a particular gravesite.

    Disinurnment. The permanent removal of remains from a particular niche.

    Executive Director. The person statutorily charged with exercising authority, direction, and control over all aspects of Army National Military Cemeteries.

    Federal capital crime. An offense under Federal law for which a sentence of imprisonment for life or the death penalty may be imposed.

    Former prisoner of war. A person who is eligible for or has been awarded the Prisoner of War Medal.

    Former spouse. See spouse.

    Government. The U.S. government and its agencies and instrumentalities.

    Group burial. Interment in one gravesite of one or more service members on active duty killed in the same incident or location where:

    (i) The remains cannot be individually identified; or

    (ii) The person authorized to direct disposition of subsequently identified remains has authorized their interment with the other service members. Group remains may contain incidental remains of civilians and foreign nationals.

    Inactive-duty training.

    (i) Duty prescribed for members of the Reserve components by the Secretary concerned under 37 U.S.C. 206 or any other provision of law.

    (ii) Special additional duties authorized for members of the Reserve components by an authority designated by the Secretary concerned and performed by them on a voluntary basis in connection with the prescribed training or maintenance activities of the units to which they are assigned.

    (iii) In the case of a member of the Army National Guard or Air National Guard of any State, duty (other than full-time duty) under 32 U.S.C. 316, 502, 503, 504 or 505 or the prior corresponding provisions of law.

    (iv) This term does not include:

    (A) Work or study performed in connection with correspondence courses,

    (B) Attendance at an educational institution in an inactive status, or

    (C) Duty performed as a temporary member of the Coast Guard Reserve.

    Interment. The ground burial of casketed or cremated human remains.

    Inurnment. The placement of cremated human remains in a niche.

    Media. Individuals and agencies that print, broadcast, or gather and transmit news, and their reporters, photographers, and employees.

    Memorial marker. A headstone used to memorialize a service member or veteran whose remains are unavailable for reasons listed in § 553.16 of this part.

    Memorial service or ceremony. Any activity intended to honor the memory of a person or persons interred, inurned, or memorialized in the Army National Military Cemeteries. This term includes private memorial services, public memorial services, public wreath laying ceremonies, and official ceremonies.

    Minor child. See child.

    Niche. An aboveground space constructed specifically for the placement of cremated human remains.

    Official ceremony. A memorial service or ceremony approved by the Executive Director in which the primary participants are representatives of the Government, a State government, a foreign government, or an international organization authorized by the U.S. Department of State to participate in an official capacity.

    Parent. A natural parent, a stepparent, a parent by adoption, or a person who for a period of not less than one year stood in loco parentis, or was granted legal custody by a court decree or statutory provision.

    Permanently dependent child. See child.

    Person authorized to direct disposition. The person primarily entitled to direct disposition of human remains and who elects to exercise that entitlement. Determination of such entitlement shall be made in accordance with applicable law and regulations.

    Personal representative. A person who has legal authority to act on behalf of another through applicable law, order, and regulation.

    Primarily eligible person. Any person who is entitled to interment or inurnment based on his or her service as specified in § 553.12(a) and § 553.13(a) respectively.

    Primary next of kin. In the absence of a valid written document from the decedent identifying the primary next of kin, the order of precedence for designating a decedent's primary next of kin is as follows:

    (1) Spouse, even if a minor;

    (2) Children;

    (3) Parents;

    (4) Siblings, to include half-blood and those acquired through adoption;

    (5) Grandparents;

    (6) Other next of kin, in order of relationship to the decedent as determined by the laws of the decedent's state of domicile.

    Absent a court order or written document from the deceased, the precedence of next of kin with equal relationships to the decedent is governed by seniority (age), older having higher priority than younger. Equal relationship situations include those involving divorced parents of the decedent, children of the decedent, and siblings of the decedent.

    Private headstones or markers. A headstone or individual memorial marker provided at private expense, in lieu of a headstone or individual memorial marker furnished by the Government.

    Private memorial service. A memorial service or ceremony conducted at the decedent's gravesite, memorial headstone, or niche.

    Public memorial service. A ceremony conducted by members of the public at a historic site in an Army National Military Cemetery.

    Public wreath-laying ceremony. A ceremony in which members of the public, assisted by the Tomb Guards, present a wreath or similar memento at the Tomb of the Unknown Soldier.

    Reserve component. The Army Reserve, the Navy Reserve, the Marine Corps Reserve, the Air Force Reserve, the Coast Guard Reserve, the Army National Guard of the United States, and the Air National Guard of the United States.

    Spouse, former spouse, subsequently remarried spouse.

    (1) Spouse. A person who is legally married to another person.

    (2) Former spouse. A person who was legally married to another person at one time but was not legally married to that person at the time of one of their deaths.

    (3) Subsequently remarried spouse. A derivatively eligible spouse who was married to the primarily eligible person at the time of the primarily eligible person's death and who subsequently remarried another person.

    State capital crime. Under State law, the willful, deliberate, or premeditated unlawful killing of another human being for which a sentence of imprisonment for life or the death penalty may be imposed.

    Subsequently recovered remains. Additional remains belonging to the decedent that are recovered or identified after the decedent's interment or inurnment.

    Subsequently remarried spouse. See spouse.

    Unmarried adult child. See child.

    Veteran. A person who served in the U.S. Armed Forces and who was discharged or released under honorable conditions.

    § 553.2 Purpose.

    This part specifies the authorities and assigns the responsibilities for the development, operation, maintenance, and administration of the Army National Military Cemeteries.

    § 553.3 Statutory authorities.

    (a) Historical. Act of July 17, 1862, Sec. 18, 12 Stat. 594, 596; Act of February 22, 1867, Ch. 61, 14 Stat. 399; and the National Cemeteries Act of 1973, Public Law 93-43, 87 Stat. 75 (1973). The National Cemeteries Act established the National Cemetery System, which primarily consists of national cemeteries transferred from the management authority of the Department of the Army to the (now) Department of Veterans Affairs. Section 6(a) of the Act exempted Arlington National Cemetery and the Soldiers' and Airmen's Home National Cemetery from transfer to the National Cemetery System, leaving them under the management authority of the Secretary of the Army.

    (b) Current. Pursuant to 10 U.S.C. 4721(a), the Secretary of the Army shall develop, operate, manage, oversee, and fund the Army National Military Cemeteries. Section 4721(c) provides that the Army National Military Cemeteries are under the jurisdiction of Headquarters, Department of the Army, and 10 U.S.C. 4721(d) provides that the Secretary of the Army shall prescribe such regulations and policies as may be necessary to administer the Army National Military Cemeteries. The responsibilities of Headquarters, Department of the Army with regard to the Army National Military Cemeteries are enumerated in 10 U.S.C. 4721-4726 and Army General Orders 2014-74 and 2014-75.

    § 553.4 Scope and applicability.

    (a) Scope. The development, maintenance, administration, and operation of the Army National Military Cemeteries are governed by this part, Army Regulation 290-5, and Department of the Army Pamphlet 290-5. The development, maintenance, administration, and operation of Army post cemeteries are not covered by this part.

    (b) Applicability. This part is applicable to all persons on, engaging in business with, or seeking access to or benefits from the Army National Military Cemeteries, unless otherwise specified.

    § 553.5 Maintaining order.

    The Executive Director may order the removal from, and bar the re-entry onto, Army National Military Cemeteries of any person who acts in violation of any law or regulation, including but not limited to demonstrations and disturbances as outlined in 38 U.S.C. 2413, and in this part. This authority may not be re-delegated.

    § 553.6 Standards for managing Army National Military Cemeteries.

    (a) The Executive Director is responsible for establishing and maintaining cemetery layout plans, including plans setting forth sections with gravesites, memorial areas with markers, and columbaria with niches, and landscape planting plans.

    (b) New sections or areas may be opened and prepared for interments or for installing memorial markers only with the approval of the Executive Director.

    § 553.7 Arlington Memorial Amphitheater.

    (a) In accordance with 24 U.S.C. 295a:

    (1) No memorial may be erected and no remains may be entombed in the Arlington Memorial Amphitheater unless specifically authorized by Congress; and

    (2) The character, design, or location of any memorial authorized by Congress for placement in the Amphitheater is subject to the approval of the Secretary of Defense or his or her designee.

    (b) The Secretary of Defense or his or her designee will seek the advice of the Commission of Fine Arts in such matters, in accordance with 40 U.S.C. 9102.

    (c) Tributes offered for those interred in the Tomb of the Unknown Soldier for placement in the Arlington Memorial Amphitheater display room are not memorials for purposes of this section.

    § 553.8 Permission to install utilities.

    (a) The installation of utilities in Army National Military Cemeteries, including but not limited to, telephone and fiber optic lines, electric lines, natural gas lines, water pipes, storm drains, and sanitary sewers, must be authorized by the Executive Director.

    (b) Requests for licenses, permits, or easements to install water, gas, or sewer lines, or other utilities or equipment on or across an Army National Military Cemetery or an approach road in which the Government has a right-of-way, fee simple title, or other interest, must be sent to the Executive Director, who will process the request in accordance with Army policy. Requests must include a complete description of the type of license, permit, or easement desired and a map showing the location of the project.

    § 553.9 Assignment of gravesites or niches.

    (a) All eligible persons will be assigned gravesites or niches without discrimination as to race, color, sex, religion, age, or national origin and without preference to military grade or rank.

    (b) The Army National Military Cemeteries will enforce a one-gravesite-per-family policy. Once the initial interment or inurnment is made in a gravesite or niche, each additional interment or inurnment of eligible persons must be made in the same gravesite or niche, except as noted in paragraph (f) of this section. This includes multiple primarily eligible persons if they are married to each other.

    (c) In accordance with 38 U.S.C. 2410A(a)(2) the Secretary of the Army may waive the prohibition in paragraph (b) of this section as the Secretary of the Army deems appropriate.

    (d) A gravesite reservation will be honored if it meets the following requirements, unless it is cancelled by the Executive Director:

    (1) The gravesite was properly reserved by law before January 1, 1962, and

    (2) An eligible person was interred in the reserved gravesite prior to January 1, 2017.

    (e) The Executive Director may cancel a gravesite reservation:

    (1) Upon determination that a derivatively eligible spouse has remarried;

    (2) Upon determination that the reservee's remains have been buried elsewhere or otherwise disposed of;

    (3) Upon determination that the reservee desires to or will be interred in the same gravesite with the predeceased, and doing so is feasible; or

    (4) Upon determination that the reservee would be 120 years of age and there is no record of correspondence with the reservee within the last two decades.

    (f) In cases of reservations meeting the requirements of 38 U.S.C 2410A note, where more than one gravesite was reserved (on the basis of the veteran's eligibility at the time the reservation was made) and no interment has yet been made in any of the sites, the one-gravesite-per-family policy will be enforced, unless waived by the Executive Director. Gravesite reservations will be honored only if the decedents meet the eligibility criteria for interment in Arlington National Cemetery that is in effect at the time of need, and the reserved gravesite is available.

    (g) Where a primarily eligible person has been or will be interred as part of a group burial or has been or will be memorialized in a memorial area at Arlington National Cemetery, the Executive Director will assign a gravesite or niche for interment or inurnment of a derivatively eligible person.

    (h) Gravesites or niches shall not be reserved or assigned prior to the time of need.

    (i) The selection of gravesites and niches is the responsibility of the Executive Director. The selection of specific gravesites or niches by the family or other representatives of the deceased at any time is prohibited.