| Page Range | 13817-14172 | |
| FR Document |
| Page and Subject | |
|---|---|
| 83 FR 13974 - Free Application for Federal Student Aid (FAFSA®) Information To Be Verified for the 2019-2020 Award Year | |
| 83 FR 14060 - Sunshine Act Meeting | |
| 83 FR 13951 - Swiss-U.S. Privacy Shield; Invitation for Applications for Inclusion on the Supplemental List of Arbitrators | |
| 83 FR 13975 - Higher Education Hurricane and Wildfire Relief Program Application; Reopening of Comment Period | |
| 83 FR 14066 - Sunshine Act Meetings | |
| 83 FR 14106 - Proposed Collection; Comment Request for Forms 12339, 12339-B, 12339-C, and 13775 | |
| 83 FR 13959 - Request for Information Regarding Bureau Guidance and Implementation Support | |
| 83 FR 14025 - Notice of Public Meeting for the Utah Resource Advisory Council/Recreation Resource Advisory Council | |
| 83 FR 14105 - Proposed Collection; Comment Request for Regulation Project | |
| 83 FR 13862 - Extension of Expiration Dates for Two Body System Listings | |
| 83 FR 14108 - Proposed Collection; Comment Request for Form 8892 | |
| 83 FR 14107 - Proposed Collection; Comment Request for Regulation Project | |
| 83 FR 14017 - Meeting of the National Vaccine Advisory Committee | |
| 83 FR 13989 - Agency Information Collection Activities; Submission for OMB Review; Public Comment Request; Older American Act Title III and Title VII (Chapters 3 and 4) Annual State Program Reporting (Annual Performance Data Collection); This is a Revision to the Existing State Program Report (OMB Approval 0985-0008) | |
| 83 FR 14073 - Submission for OMB Review; Comment Request | |
| 83 FR 14099 - Renewal of Cultural Property Advisory Committee Charter | |
| 83 FR 13878 - Approval and Promulgation of Air Quality Implementation Plans; State of Maryland; Control of Emissions From Existing Commercial and Industrial Solid Waste Incinerator Units | |
| 83 FR 14020 - Current List of HHS-Certified Laboratories and Instrumented Initial Testing Facilities Which Meet Minimum Standards To Engage in Urine Drug Testing for Federal Agencies | |
| 83 FR 14017 - National Advisory Committee on Rural Health and Human Services | |
| 83 FR 13976 - CCPS Transportation, LLC; Notice of Petition for Declaratory Order | |
| 83 FR 13985 - Texas Gas Transmission, LLC; Notice of Application | |
| 83 FR 13975 - Gerald and Glenda Ohs, Gerald Ohs; Notice of Application for Partial Transfer of License and Soliciting Comments, Motions To Intervene, and Protests | |
| 83 FR 13983 - Green River Devco LP; Notice of Request for Temporary Waiver | |
| 83 FR 13988 - Agency Information Collection Activities: Proposed Collection; Comment Request | |
| 83 FR 14063 - Advisory Committee on Reactor Safeguards (ACRS); Meeting of the ACRS Subcommittee on Planning and Procedures; Notice of Meeting | |
| 83 FR 14065 - New Postal Product | |
| 83 FR 14099 - Data Collection Available for Public Comments | |
| 83 FR 14099 - Reporting and Recordkeeping Requirements Under OMB Review | |
| 83 FR 14101 - Notice of Final Federal Agency Actions on Proposed Highway in California | |
| 83 FR 13974 - Agency Information Collection Activities; Comment Request; Income Driven Repayment Plan Request for the William D. Ford Federal Direct Loans and Federal Family Education Loan Programs | |
| 83 FR 13947 - Polyethylene Terephthalate Film, Sheet, and Strip From the People's Republic of China: Rescission of Antidumping Duty Administrative Review; 2016-2017 | |
| 83 FR 13974 - Agency Information Collection Activities; Comment Request; Federal Student Loan Program: Internship/Residency and Loan Debt Burden Forbearance Forms | |
| 83 FR 13973 - Agency Information Collection Activities; Comment Request; Federal Student Loan Program Deferment Request Forms | |
| 83 FR 14101 - Petition for Waiver of Compliance | |
| 83 FR 13977 - Delta Solar II, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
| 83 FR 13975 - Delta Solar I, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
| 83 FR 13979 - Imperial Valley Solar 2, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
| 83 FR 13980 - Combined Notice of Filings #2 | |
| 83 FR 13978 - Combined Notice of Filings #1 | |
| 83 FR 13978 - Trishe Wind Ohio, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
| 83 FR 13981 - Walleye Energy, LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
| 83 FR 13983 - Combined Notice of Filings #1 | |
| 83 FR 13976 - Combined Notice of Filings #1 | |
| 83 FR 13983 - NRG Cottonwood Tenant LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization | |
| 83 FR 14043 - Angela L. Lorenzo, P.A.: Decision and Order | |
| 83 FR 14028 - Bernard Wilberforce Shelton, M.D.; Decision and Order | |
| 83 FR 13943 - Notice of Intent To Renew Information Collection | |
| 83 FR 14102 - Agency Information Collection; Activity Under OMB Review; Report of Financial and Operating Statistics for Small Aircraft Operators | |
| 83 FR 14023 - Endangered and Threatened Wildlife and Plants; Draft Recovery Plan for Four Invertebrate Species of the Pecos River Valley | |
| 83 FR 14065 - Submission for Review: Standard Form 2800-Application for Death Benefits Under the Civil Service Retirement System (CSRS); Standard Form 2800A-Documentation and Elections in Support of Application for Death Benefits When Deceased Was an Employee at the Time of Death (CSRS) | |
| 83 FR 14100 - Town Hall Meeting on Modernizing the Columbia River Treaty Regime | |
| 83 FR 13955 - Programmatic Environmental Impact Statement (PEIS) for the Marine Mammal Health and Stranding Response Program | |
| 83 FR 13948 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Advance Notification of Sunset Review | |
| 83 FR 13949 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review | |
| 83 FR 14025 - National Register of Historic Places; Notification of Pending Nominations and Related Actions | |
| 83 FR 13952 - 1-Hydroxyethylidene-1, 1-Diphosphonic Acid From the People's Republic of China; Cold-Rolled Steel Flat Products From Japan; Hydrofluorocarbon Blends From the People's Republic of China; Light-Walled Rectangular Pipe and Tube From the People's Republic of China: Opening of Scope Segments and Opportunity To Comment | |
| 83 FR 14100 - Release of Waybill Data | |
| 83 FR 13957 - Proposed Information Collection; Comment Request; Office of National Marine Sanctuaries Visitor Centers Survey | |
| 83 FR 13958 - Submission for OMB Review; Comment Request | |
| 83 FR 13986 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
| 83 FR 13986 - Notice of Proposals To Engage in or to Acquire Companies Engaged in Permissible Nonbanking Activities | |
| 83 FR 14100 - Fourteenth RTCA SC-230 Airborne Weather Detection Systems Plenary | |
| 83 FR 13903 - Elimination of Obligation To File Broadcast Mid-Term Report (Form 397) Under Section 73.2080(f)(2) | |
| 83 FR 13944 - Information Collection Request; Assignment of Payment and Joint Payment Authorization | |
| 83 FR 13946 - Large Diameter Welded Pipe From India, the People's Republic of China, the Republic of Korea, and the Republic of Turkey: Postponement of Preliminary Determinations in the Countervailing Duty Investigations | |
| 83 FR 13992 - Agency Information Collection Activities; Proposed Collection; Comment Request; Regulations Under the Federal Import Milk Act | |
| 83 FR 14064 - Information Collection: Requests to Non-Agreement States for Information | |
| 83 FR 14028 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Extension without Change of a Currently Approved Collection; Records of Acquisition and Disposition, Registered Importers of Arms, Ammunition & Implements of War on the U.S. Munitions Import List | |
| 83 FR 13885 - Airworthiness Directives; Airbus Airplanes | |
| 83 FR 14021 - Agency Information Collection Activities: Submission for OMB Review; Comment Request; Crisis Counseling Assistance and Training Program | |
| 83 FR 14062 - Agency Information Collection Activities: Proposed Collection; Comment Request; Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery | |
| 83 FR 14100 - Research, Engineering and Development Advisory Committee Meeting | |
| 83 FR 13849 - Implementation of the February 2017 Australia Group (AG) Intersessional Decisions and the June 2017 AG Plenary Understandings; Addition of India to the AG | |
| 83 FR 14104 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Procedures To Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies Under Section 312 of the Fair and Accurate Credit Transactions Act | |
| 83 FR 14016 - Mallinckrodt Inc. et al.; Withdrawal of Approval of Five New Drug Applications | |
| 83 FR 13982 - Notice of Commission Staff Attendance | |
| 83 FR 13979 - Notice of Preliminary Permit Application Accepted for Filing and Soliciting Comments, Motions To Intervene, and Competing Applications; RAMM Power Group, LLC | |
| 83 FR 13981 - Combined Notice of Filings | |
| 83 FR 13984 - Combined Notice of Filings #1 | |
| 83 FR 14103 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Guidance on Stress Testing for Banking Organizations With More Than $10 Billion in Total Consolidated Assets | |
| 83 FR 14018 - Proposed Collection; 60-Day Comment Request; The Genetic Testing Registry | |
| 83 FR 13919 - Endangered and Threatened Wildlife and Plants; Reclassifying the Hawaiian Goose From Endangered to Threatened With a 4(d) Rule | |
| 83 FR 14096 - Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Concerning an Affiliation Between the Exchange and Cboe Trading and To Adopt Rules To Permit Inbound Routing by Cboe Trading | |
| 83 FR 14066 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Approving a Proposed Rule Change To Amend Rules Related to the Complex Order Book | |
| 83 FR 14074 - Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing of Proposed Rule Change To Establish a New Optional Listing Category on the Exchange, “LTSE Listings on IEX” | |
| 83 FR 14068 - Aberdeen Asset Management Inc., et al. | |
| 83 FR 13969 - Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces; Notice of Federal Advisory Committee Meeting | |
| 83 FR 14026 - Uncoated Groundwood Paper From Canada Scheduling of the Final Phase of Countervailing Duty and Anti-Dumping Duty Investigations | |
| 83 FR 14022 - 60-Day Notice of Proposed Information Collection: HUD Acquisition Regulation (HUDAR) (48 CFR 24) | |
| 83 FR 13865 - Drawbridge Operation Regulation; Lake Washington Ship Canal, Seattle, WA | |
| 83 FR 13866 - Drawbridge Operation Regulation; Willamette River at Portland, OR | |
| 83 FR 13972 - Agency Information Collection Activities; Comment Request; U.S. Department of Education Grant Performance Report Form (ED 524B) | |
| 83 FR 13869 - Approval of California Air Plan Revisions, San Diego County Air Pollution Control District | |
| 83 FR 13867 - Approval of California Air Plan Revisions, Yolo-Solano Air Quality Management District | |
| 83 FR 13872 - Air Plan Approval; KY: Removal of Reliance on Reformulated Gasoline in the Kentucky Portion of the Cincinnati-Hamilton Area | |
| 83 FR 14019 - National Library of Medicine Notice of Closed Meetings | |
| 83 FR 14019 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meetings | |
| 83 FR 14018 - National Eye Institute; Notice of Closed Meeting | |
| 83 FR 13904 - Civil Penalties | |
| 83 FR 14045 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Mine Safety and Health Administration Grant Performance Reports Office of the Secretary | |
| 83 FR 13986 - CDC/HRSA Advisory Committee on HIV, Viral Hepatitis and STD Prevention and Treatment (CHACHSPT) | |
| 83 FR 13987 - Board of Scientific Counselors, Office of Public Health Preparedness and Response, (BSC, OPHPR) | |
| 83 FR 13987 - Board of Scientific Counselors, Office of Infectious Diseases (BSC, OID) | |
| 83 FR 13875 - Air Plan Approval; Florida; Stationary Sources Emissions Monitoring | |
| 83 FR 13865 - Drawbridge Operation Regulation; Hackensack River, Jersey City, New Jersey | |
| 83 FR 13871 - Approval of California Air Plan Revisions, Northern Sierra Air Quality Management District | |
| 83 FR 13994 - Prescription Polyethylene Glycol 3350; Denial of a Hearing and Order Withdrawing Approval of Abbreviated New Drug Applications | |
| 83 FR 13866 - Drawbridge Operation Regulation; Sacramento River, Sacramento, CA | |
| 83 FR 13970 - Arms Sales Notification | |
| 83 FR 13867 - Drawbridge Operation Regulation; Willamette River, Portland, OR | |
| 83 FR 14047 - Notice of Revisions to Performance Area Four of LSC's Performance Criteria | |
| 83 FR 13990 - Food and Drug Administration Prescription Drug User Fee Act VI Benefit-Risk Implementation Plan; Request for Comments | |
| 83 FR 13967 - Arms Sales Notification | |
| 83 FR 13965 - Arms Sales Notification | |
| 83 FR 13826 - Civil Monetary Penalty Adjustments for Inflation | |
| 83 FR 13947 - President's Advisory Council on Doing Business In Africa (PAC-DBIA) | |
| 83 FR 13883 - Airworthiness Directives; Airbus Helicopters Deutschland GmbH (Previously Eurocopter Deutschland GmbH) Helicopters | |
| 83 FR 13817 - Government Accountability Office, Administrative Practice and Procedure, Bid Protest Regulations, Government Contracts | |
| 83 FR 13863 - Medical Devices; Technical Amendment | |
| 83 FR 13888 - Spectrum Horizons | |
| 83 FR 13945 - Emergency Food Assistance Program; Availability of Foods for Fiscal Year 2018 | |
| 83 FR 14110 - Milk in California; Proposal To Establish a Federal Milk Marketing Order | |
| 83 FR 13843 - Removal of Transferred OTS Regulations Regarding Consumer Protection in Sales of Insurance | |
| 83 FR 13880 - Annual Stress Test-Applicability Transition for Covered Banks With $50 Billion or More in Assets; Technical and Conforming Changes | |
| 83 FR 13839 - Removal of Transferred OTS Regulations Regarding Minimum Security Procedures Amendments to FDIC Regulations | |
| 83 FR 14046 - Division of Coal Mine Workers' Compensation; Proposed Collection; Comment Request: Request To Be Selected as Payee (CM-910) |
Agricultural Marketing Service
Agricultural Research Service
Commodity Credit Corporation
Farm Service Agency
Food and Nutrition Service
Industry and Security Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
Federal Energy Regulatory Commission
Centers for Disease Control and Prevention
Centers for Medicare & Medicaid Services
Community Living Administration
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Substance Abuse and Mental Health Services Administration
Coast Guard
Federal Emergency Management Agency
Transportation Security Administration
Fish and Wildlife Service
Land Management Bureau
National Park Service
Alcohol, Tobacco, Firearms, and Explosives Bureau
Drug Enforcement Administration
Workers Compensation Programs Office
Federal Aviation Administration
Federal Highway Administration
Federal Railroad Administration
National Highway Traffic Safety Administration
Transportation Statistics Bureau
Comptroller of the Currency
Internal Revenue Service
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Government Accountability Office.
Final rule.
This document amends the Government Accountability Office's (GAO) Bid Protest Regulations, promulgated in accordance with the Competition in Contracting Act of 1984 (CICA), to implement the requirements in sec. 1501 of the Consolidated Appropriations Act for Fiscal Year 2014, which was enacted on January 14, 2014. These amendments implement the legislation's direction to establish and operate an electronic filing and document dissemination system for the filing of bid protests with GAO. The amendments also include administrative changes to reflect current practice, to streamline the bid protest process, and to make clerical corrections.
This rule is effective: May 1, 2018.
Ralph O. White (Managing Associate General Counsel,
On April 16, 2016, GAO published a proposed rule (81 FR 22197) to amend its Bid Protest Regulations. The supplementary information included with the proposed rule explained that the proposed revisions to GAO's Bid Protest Regulations were promulgated in accordance with CICA, as the result of a statutory requirement imposed by the Consolidated Appropriations Act for 2014, Public Law 113-76, 128 Stat. 5 (Jan. 14, 2014). Section 1501 of this act directs GAO to establish and operate an electronic filing and document dissemination system, “under which, in accordance with procedures prescribed by the Comptroller General—(A) a person filing a protest under this subchapter may file the protest through electronic means; and (B) all documents and information required with respect to the protest may be disseminated and made available to the parties to the protest through electronic means.” Public Law 113-76, div. I, title I, sec. 1501, 128 Stat. 5, 433-34 (Jan. 17, 2014). The proposed rule advised that GAO was developing the system, which is called the Electronic Protest Docketing System (EPDS). As of the effective date of this final rule, EPDS will be the sole means for filing a bid protest at GAO (with the exception of protests containing classified information) and will enable parties to a bid protest and GAO to file and receive documents. Additional guidance for the use of EPDS is provided by GAO in the EPDS Instructions, which are available at
In addition to directing GAO to establish and operate an electronic filing and document dissemination system, sec. 1501 of the Consolidated Appropriations Act for 2014 authorizes GAO to “require each person who files a protest under this subchapter to pay a fee to support the establishment and operation of the electronic system under this subsection.” Public Law 113-76, div. I, title I, sec. 1501, 128 Stat. 5, 434 (Jan. 17, 2014). The proposed rule advised that GAO will require persons filing a protest to pay a fee to file a protest through EPDS, and that GAO anticipates that the fee will be $350. Additional guidance regarding procedures for payment of the fee is available in the EPDS Instructions.
Finally, the proposed rule addressed other administrative changes to reflect current practice and to streamline the bid protest process.
GAO received a total of 34 timely comments by the closing date of May 16, 2016. GAO received 6 comments from federal agencies; 11 comments from businesses (including 2 comments from the same business on different dates), all of which were identified as small businesses; 2 comments from professional associations; 3 comments from law firms and consulting firms; and 12 comments from individuals or anonymous commentators. In adopting this final rule, GAO has carefully considered all comments received.
Seven commentators requested additional information as to how EPDS will function. For example, the commentators asked for information concerning how the implementation of EPDS will occur, how to pay the fee, how documents will be uploaded and distributed through EPDS, how agencies will be notified by GAO of the filing of a protest, and the security provisions for EPDS.
GAO proposed to revise redesignated paragraph (g) of 4 CFR 21.1 to clarify how a document is “filed” under GAO's Bid Protest Regulations by specifying that EPDS will be the sole method for filing a document with GAO for a bid protest—with the exception of protests containing classified material, as explained in a sentence added to the revised paragraph (h) of 4 CFR 21.1. The revisions throughout this final rule reflect that all filings are presumed to be made through EPDS (with the exception of protests containing classified material), which will enable the parties and GAO to file and receive documents.
Two commentators suggested that the proposed rule at paragraph (h) of 4 CFR 21.1, which states that classified documents “may not” be filed through EPDS, should be revised to use more expressly prohibitive language.
One commentator requested that GAO clarify that the prohibition on filing documents containing “classified” material does not refer to proprietary or source-selection sensitive information.
One commentator requested that we revise the rules to provide for alternative filing procedures for documents that contain classified material.
One commentator opposed the proposed rule in redesignated paragraph (g) of 4 CFR 21.1 that EPDS will be the sole means for filing documents in a bid protest. The commentator expressed concern that some documents may be unsuitable due to size or other formatting issues for electronic submission.
The final rule makes additional minor corrections to paragraphs (c), (f), and (h) of 4 CFR 21.3 to reflect that documents must be filed through EPDS.
The proposed rule advised that GAO anticipates requiring persons filing a protest to pay a fee to file a protest through EPDS, which, as discussed above, will be the sole means for filing a bid protest at GAO. GAO advised that the anticipated fee will be $350. The EPDS Instructions address how persons filing a protest must pay the fee, and the circumstances under which the fee will apply. A fee will be required for filing a protest. At this time, additional fees will not be required for supplemental protests, requests for reconsideration, requests for recommendation for reimbursement of costs, or requests for recommendation on the amount of costs.
GAO received six comments in favor of the proposed fee.
Five commentators advocated for a higher fee. One commentator proposed requiring an additional, potentially higher fee for each supplemental protest, because, in the commentator's view, protesters routinely supplement their protests with more arguments in an attempt to circumvent timeliness or engage in “gamesmanship.” One commentator proposed requiring protesters to file fees based on a graduated scale to discourage what the commentator viewed as “serial” or frequent protesters. Under the proposed graduated scale, a protester would be required to file higher fees if it files multiple protests during the course of a year,
One commentator suggested that a fee of up to $1,000 would be appropriate, and that the overall goal of the fee should be the reduction of GAO's caseload, which would in turn permit GAO to issue decisions in fewer days. The same commentator suggested that a fee that was based on a percentage of the value of the procurement could be appropriate.
One commentator supported the fee and expressed the view that a fee could discourage “frivolous” protests.
Fifteen commentators opposed the proposed fee. All of the commentators opposed to the fee recommended that GAO either establish a lower fee for small businesses or waive the fee for small businesses.
Fourteen commentators opposed the fee on the basis that the fee creates a barrier to filing protests for small businesses, some of which stated that they lack the resources to pay the fee. In particular, one commentator argued that a $350 fee would make a protest economically infeasible for small businesses seeking the award of very small contracts.
Two commentators argued that because GAO is funded through appropriated funds a separate fee for bid protests is not warranted.
One commentator argued that a fee is not justified because GAO's bid protest forum is not staffed by judges, and that a fee should not be imposed in a manner similar to that imposed by a court. Another commentator argued that a fee is not justified because GAO does not have the same authority to enforce its decisions as a court.
One commentator argued that the fee is an attempt by GAO to discourage bid protests and thereby limit oversight over improper contracting actions by agencies. The commentator opposed the fee based on what the commentator views as GAO's failure to be an effective forum for the resolution of protests concerning small businesses, veteran-owned small businesses, and service-disabled veteran-owned small businesses. The commentator also opposed the fee on the basis that GAO failed to conduct adequate outreach to service-disabled veteran-owned small businesses—in particular, the commentator.
One commentator, while not expressly opposed to the fee, proposed a periodic reassessment of the fee to consider its impact on small business.
As discussed in the proposed rule, sec. 1501 of the Consolidated Appropriations Act for 2014 directs GAO to establish and operate an electronic filing and document dissemination system, and authorizes GAO to “require each person who files a protest under this subchapter to pay a fee to support the establishment and operation of the electronic system under this subsection.” Public Law 113-76, div. I, title I, sec. 1501, 128 Stat. 5, 434 (Jan. 17, 2014). GAO derived the $350 fee using a methodology that took into account development costs for EPDS, estimates of hosting and maintenance costs, estimates of future bid protest filings, and a recovery period for development costs of approximately seven years.
GAO does not intend for the fee to discourage or reduce the number of protests. Rather, the proposed fee will cover the costs of establishing and operating EPDS. GAO does not agree with the proposals to charge a fee that
GAO will monitor the fee to ensure that it is properly calibrated to recover the costs of establishing and maintaining the system. Any adjustment to the fee based on the review will reflect changes in the costs of EPDS, as is consistent with the statutory direction.
In addition to the comments regarding the requirement for a fee and the amount of the fee, GAO received six additional comments.
One commentator proposed that the requirement to pay a fee be expressly incorporated into 4 CFR 21.1, and that the regulation specify that failure to pay the fee will result in dismissal of a protest.
Three commentators recommended that protesters be automatically refunded or reimbursed the fee if GAO sustains a protest.
Two commentators proposed that protesters be automatically refunded or reimbursed the fee if an agency takes corrective action in response to a protest.
One commentator asked whether, in light of the requirement to file all documents with GAO through EPDS, protesters will continue to be required to provide a copy of the protest to the contracting officer, as required by paragraph (e) of 4 CFR 21.1.
One commentator requested that redacted versions of protests should be posted in EPDS in a manner that is available to the public.
GAO proposed to revise paragraph (a) of 4 CFR 21.2 to clarify that where a basis for challenging a solicitation becomes known after the solicitation's closing date, but the solicitation does not establish a new closing date, the protest must be filed within 10 days of when the protester knew or should have known of that basis—regardless of whether the time period for filing other protest claims was “tolled” because a required debriefing had been requested. The revision was proposed to address a conflict as to which of our timeliness rules—21.2(a)(1) or 21.2(a)(2)—takes precedence where a solicitation impropriety becomes apparent after proposals have been submitted, but there is no opportunity to submit revised proposals. Our Office addressed this issue in two decisions:
One commentator opposed the proposed revision to paragraph (a)(2) of 4 CFR 21.2 and argued that the policy established in the two decisions should be reversed. The commentator argued that allowing protests concerning this type of solicitation impropriety to be “tolled” until after a required and requested debriefing has been provided would avoid the possibility of a protester with “mixed” protest claims (
GAO proposed to revise paragraph (a) of 4 CFR 21.3 to require that parties to a protest provide copies of all protest communications “to the agency and to other participating parties” either through EPDS or email.
Three commentators expressed concern that the proposed revision would require parties to copy all other parties on all exchanges concerning the protest, including strategy or settlement communications.
Two commentators requested clarification as to how GAO will communicate with parties after the implementation of EPDS.
GAO proposed to revise paragraph (c) of 4 CFR 21.3 to clarify that if the fifth day for filing the agency's required response to a protester's request for documents falls on a weekend or federal holiday, the response shall be filed on the last business day that precedes the weekend or federal holiday.
One commentator expressed support for the revision to paragraph (c) because it avoids a potential ambiguity as to the due date for the agency's response.
One commentator objected to the revision to paragraph (c) because it results in less time for agencies to prepare their responses to document requests and allows protesters more time to object to an agency's list of documents to be filed.
One commentator suggested that the requirement to file an agency's response “on the last business day . . .”, should be revised to require filing “by the last business day . . .”, to reflect an agency may file its response earlier.
One commentator expressed the view that paragraph (d) of 4 CFR 21.3, which requires the agency report to “include” a contracting officer's statement, inadvertently suggests that the memorandum of law is part of the contracting officer's statement.
One commentator objected to the revision to paragraph (d) of 4 CFR 21.3, which currently requires the agency report to include a copy of the protest. The commentator argued that the protest is a relevant document that should be included in the report.
GAO proposed to redesignate paragraph (b) of 4 CFR 21.4 as paragraph (c), redesignate paragraph (c) as paragraph (d), redesignate paragraph (d) as paragraph (e), and add a new paragraph (b). New paragraph (b) provides that when parties file documents that are covered by a protective order, the parties must provide copies of proposed redacted versions of the document to the other parties within 1 day after the protected version is filed. Proposed redacted versions of documents should not be filed through EPDS; rather, the party responsible for preparing the proposed redacted version of the document should provide the document to the other parties by email or facsimile. New paragraph (b) provides that, where appropriate, the exhibits to the agency report or other documents may be proposed for redaction in their entirety. Additionally, new paragraph (b) provides that the party that files the protected document must file through EPDS within 5 days a final, agreed-to redacted version of the document. New paragraph (b) also directs the parties to seek GAO's resolution of any disputes concerning redacted documents.
Five commentators expressed concern that requirements to prepare and review proposed and final redacted versions of documents will place a burden on parties because of the resources required to prepare and approve the redactions. One commentator argued that a requirement to prepare redacted versions of all documents filed under a protective order would be inconsistent with GAO's statutory mandate under CICA to provide for the inexpensive resolution of bid protests.
Two commentators expressed the view that the “current practice” for parties filing protected documents is for the parties to negotiate among themselves as to which documents should remain under the protective order in their entirety and which documents should be redacted for release outside the protective order. These commentators suggested that the proposed rule in new paragraph (b) be revised to allow the parties “flexibility” in deciding which documents to redact. One commentator expressed concern that the requirement that the agency prepare redacted versions that inform pro se parties will be burdensome. Another commentator expressed specific concern with regard to pro se intervenors where there is a protester represented by counsel admitted to a protective order.
One commentator requested that new paragraph (b) of 4 CFR 21.4 expressly permit party-specific redactions, for example, redactions that may be released only to either the protester or intervenor.
One commentator noted that the proposed rule stated that “Proposed redacted versions of documents should not be filed through EPDS; rather, the party responsible for preparing the proposed redacted version of the document should provide the document to the other parties by email or facsimile.” The commentator suggested that there is no reason to limit the non-EPDS exchanges between the parties to email or facsimile.
GAO proposed to add paragraph (l) of 4 CFR 21.5 to reference the provisions of 10 U.S.C. 2304c(e)(1) and 41 U.S.C. 4106(f)(1), which limit GAO's jurisdiction to hear protests in connection with the issuance or proposed issuance of a task or delivery order issued under indefinite-delivery, indefinite-quantity contracts where the order is valued at dollar thresholds established by the statutory provisions, unless it is alleged that the order increases the scope, period, or maximum value of the contract under which the order was issued.
One commentator proposed that paragraph (l) of 4 CFR 21.5 be revised to clarify that GAO has jurisdiction to hear protests concerning orders issued under the Federal Supply Schedule (FSS).
GAO proposed to add paragraph (m) to 4 CFR 21.5 to clarify that GAO has the authority to review protests that an agency is improperly using a non-procurement instrument.
One commentator proposed that we clarify that our review of protests alleging that an agency is improperly using a non-procurement instrument is limited to whether an agency is improperly using the non-procurement instrument to procure goods or services.
GAO proposed to revise 4 CFR 21.6 to require agencies to file a notification in instances where it overrides a requirement to withhold award or suspend contract performance, and to file a copy of any issued determination and finding.
One commentator questioned why GAO proposed to require this information, in light of the statement in the same paragraph that “GAO does not administer the requirements to stay award or suspend contract performance under CICA at 31 U.S.C. 3553(c) and (d).”
One commentator objected to the requirement to file the override decision, and proposed that agencies be required to advise GAO whether an override decision was based on the “best interests of the United States,” or “urgent and compelling circumstances.”
One commentator proposed revising the proposed rule to state that the decision must be filed “unless classified.”
GAO proposed revising paragraph (e) of 4 CFR 21.8 to provide that a protester must file comments on an agency's response to a request for a recommendation for reimbursement of costs within 10 days and to further provide that GAO will dismiss the request if the protester fails to file comments within 10 days.
One commentator opposed this proposed revision, arguing that GAO should consider requests even where the protester does not file comments on
One commentator expressed concern that the requirement in paragraph (e) of 4 CFR 21.8 that agencies respond to a request for a recommendation for reimbursement of costs within 15 days will require agencies to address requests for costs that are contained in the initial protest—thus requiring the agency to address requests for costs within 15 days of a protest's initial filing, that is, before the due date for filing the agency report as required by paragraph (c) of 4 CFR 21.3.
One commentator proposed that we revise paragraph (e) to state that GAO will not recommend reimbursement of costs where an agency takes corrective action in response to a protest prior to providing the agency report. Another commentator proposed that we revise paragraph (e) to state that GAO will not recommend reimbursement of costs unless the agency has unreasonably delayed taking corrective action.
One commentator requested that we incorporate a reference to the legislative history concerning the statutory provision at 31 U.S.C. 3554(c), which provides that although reimbursement for a protester's legal fees shall be capped at $150 per hour, small businesses are not subject to this limitation. The commentator noted that the conference committee's report on FASA, which imposed the $150 per hour cap, stated as follows: “The conferees expect the Comptroller General to be vigilant in reviewing attorneys' fees to ensure that they are reasonable. The cap placed on attorneys' fees for businesses other than small business constitutes a benchmark as to what constitutes a `reasonable' level for attorneys' fees for small businesses.” H. Rept. 103-712, section 1403 (Aug. 21, 1994), as reprinted in 1994 U.S.C.C.A.N. 2607, 2621-22.
GAO proposed to revise 4 CFR 21.10 to reflect the requirement to file documents through EPDS.
One commentator proposed that we revise the flexible schedule procedures in 4 CFR 21.10 to provide that GAO will seek the “concurrence” of the parties before using an alternate schedule. The commentator notes that the flexible schedule procedures, in particular the express option schedule, may change the parties' filing dates and reduce the amount of time for filings.
Although not addressed in our proposed rule, GAO will revise 4 CFR 21.13(b) to clarify that certain provisions of 4 CFR do not apply to nonstatutory protests. The rule currently states that GAO will not issue recommendations for the payment of costs associated with nonstatutory protests, as otherwise provided for in 4 CFR 21.8(d). The revised rule clarifies that GAO will also not issue recommendations for the payment of costs when an agency takes corrective action in response to a nonstatutory protest, as otherwise provided for in 4 CFR 21.8(e). The revised rule also clarifies that 4 CFR 21.6, which pertains to the withholding of award and the suspension of contract performance pursuant to 31 U.S.C. 3553(c) and (d), does not apply to nonstatutory protests.
Administrative practice and procedure, Appeals, Bid protest regulations, Government contracts.
For the reasons set out in the preamble, title 4, chapter I, subchapter B, part 21 of the Code of Federal Regulations is amended as follows:
31 U.S.C. 3551-3557.
The addition and revision read as follows:
(f)
(g) A document is
(b) Protests must be filed through the EPDS.
(c) * * *
(1) Include the name, street address, email address, and telephone and facsimile numbers of the protester,
(g) * * * This information must be identified wherever it appears, and within 1 day after the filing of its protest, the protester must file a final redacted copy of the protest which omits the information.
(h) Protests and other documents containing classified information shall not be filed through the EPDS. * * *
(a)(1) * * * If no closing time has been established, or if no further submissions are anticipated, any alleged solicitation improprieties must be protested within 10 days of when the alleged impropriety was known or should have been known.
(2) * * * In such cases, with respect to any protest basis which is known or should have been known either before or as a result of the debriefing, and which does not involve an alleged solicitation impropriety covered by paragraph (a)(1) of this section, the initial protest shall not be filed before the debriefing date offered to the protester, but shall be filed not later than 10 days after the date on which the debriefing is held.
(3) If a timely agency-level protest was previously filed, any subsequent protest to GAO must be filed within 10 days of actual or constructive knowledge of initial adverse agency action, provided the agency-level protest was filed in accordance with paragraphs (a)(1) and (2) of this section, unless the agency imposes a more stringent time for filing, in which case the agency's time for filing will control. * * *
(a) GAO shall notify the agency within 1 day after the filing of a protest, and, unless the protest is dismissed under this part, shall promptly provide a written confirmation to the agency and an acknowledgment to the protester. The agency shall immediately give notice of the protest to the awardee if award has been made or, if no award has been made, to all bidders or offerors who appear to have a substantial prospect of receiving an award. The agency shall provide copies of the protest submissions to those parties, except where disclosure of the information is prohibited by law, with instructions to communicate further directly with GAO. All parties shall provide copies of all communications with GAO to the agency and to other participating parties either through EPDS or by email. GAO's website [
(c) The agency shall file a report on the protest within 30 days after receiving notice of the protest from GAO. The report need not contain documents which the agency has previously provided or otherwise made available to the parties in response to the protest. At least 5 days prior to the filing of the report, in cases in which the protester has filed a request for specific documents, the agency shall file a response to the request for documents. If the fifth day prior to the filing of the report falls on a weekend or Federal holiday, the response shall be filed by the last business day that precedes the weekend or holiday. The agency's response shall, at a minimum, identify whether the requested documents exist, which of the requested documents or portions thereof the agency intends to produce, which of the requested documents or portions thereof the agency intends to withhold, and the basis for not producing any of the requested documents or portions thereof. Any objection to the scope of the agency's proposed disclosure or nondisclosure of documents must be filed within 2 days of receipt of this response.
(d) The report shall include the contracting officer's statement of the relevant facts (including a best estimate of the contract value), a memorandum of law, and a list and a copy of all relevant documents, or portions of documents, not previously produced, including, as appropriate: the bid or proposal submitted by the protester; the bid or proposal of the firm which is being considered for award, or whose bid or proposal is being protested; all evaluation documents; the solicitation, including the specifications; the abstract of bids or offers; and any other relevant documents. In appropriate cases, a party may file a request that another party produce relevant documents, or portions of documents, that are not in the agency's possession.
(e) Where a protester or intervenor does not have counsel admitted to a protective order and documents are withheld from the protester or intervenor on that basis, the agency shall file redacted documents that adequately inform the protester and/or intervenor of the basis of the agency's arguments in response to the protest. GAO's website [
(f) The agency may file a request for an extension of time for the submission of the response to be filed by the agency
(g) The protester may file a request for additional documents after receipt of the agency report when their existence or relevance first becomes evident. Except when authorized by GAO, any request for additional documents must be filed not later than 2 days after their existence or relevance is known or should have been known, whichever is earlier. The agency shall file the requested documents, or portions of documents, within 2 days or explain why it is not required to produce the documents.
(h) Upon a request filed by a party, GAO will decide whether the agency must file any withheld documents, or portions of documents, and whether this should be done under a protective order. * * *
(i)(1) Comments on the agency report shall be filed within 10 days after the agency has filed the report, except where GAO has granted an extension of time, or where GAO has established a shorter period for filing of comments. Extensions will be granted on a case-by-case basis.
(2) The protest shall be dismissed unless the protester files comments within the period of time established in § 21.3(i)(1).
(3) GAO will dismiss any protest allegation or argument where the agency's report responds to the allegation or argument, but the protester's comments fail to address that response.
The addition and revisions read as follows:
(a) * * * GAO generally does not issue a protective order where an intervenor retains counsel, but the protester does not.
(b) Any agency or party filing a document that the agency or party believes to contain protected material shall, if requested by another party, provide to the other parties (unless they are not admitted to the protective order) an initial proposed redacted version of the document within 2 days of the request. Where appropriate, the exhibits to the agency report or other documents may be proposed for redaction in their entirety. The party that authored the document shall file the final redacted version of the document that has been agreed to by all of the parties. Only the final agreed-to version of a redacted document must be filed. If the parties are unable to reach an agreement regarding redactions, the objecting party may submit the matter to GAO for resolution. Until GAO resolves the matter, the disputed information must be treated as protected.
(c) If no protective order has been issued, or a protester or intervenor does not have counsel admitted to a protective order, the agency may withhold from the parties those portions of its report that would ordinarily be subject to a protective order, provided that the requirements of § 21.3(e) are met. * * *
(d) After a protective order has been issued, counsel or consultants retained by counsel appearing on behalf of a party may apply for admission under the order by filing an application. * * * Objections to an applicant's admission shall be filed within 2 days after the application is filed, although GAO may consider objections filed after that time.
The revisions and additions read as follows:
(b)
(2)
(3)
(h)
(l)
(m)
When a protest is filed, the agency may be required to withhold award and to suspend contract performance. The requirements for the withholding of award and the suspension of contract performance are set forth in 31 U.S.C. 3553(c) and (d); GAO does not administer the requirements to withhold award or suspend contract performance. An agency shall file a notification in
(a) Upon a request filed by a party or on its own initiative, GAO may conduct a hearing in connection with a protest. * * *
(e) GAO does not provide for hearing transcripts. If the parties wish to have a hearing transcribed, they may do so at their own expense, so long as a copy of the transcript is provided to GAO at the parties' expense.
(e)
(f)
(2) The agency shall issue a decision on the claim for costs as soon as practicable after the claim is filed.
(3) If the protester and the agency cannot reach agreement regarding the amount of costs within a reasonable time, the protester may file a request that GAO recommend the amount of costs to be paid, but such request shall be filed within 10 days of when the agency advises the protester that the agency will not participate in further discussions regarding the amount of costs.
(4) Within 15 days after receipt of the request that GAO recommend the amount of costs to be paid, the agency shall file a response. The protester shall file comments on the agency response within 10 days of receipt of the response. GAO shall dismiss the request unless the protester files comments within the 10-day period, except where GAO has granted an extension or established a shorter period.
(5) In accordance with 31 U.S.C. 3554(c), GAO may recommend the amount of costs the agency should pay. In such cases, GAO may also recommend that the agency pay the protester the costs of pursuing the claim for costs before GAO.
(6) Within 60 days after GAO recommends the amount of costs the agency should pay the protester, the agency shall file a notification of the action the agency took in response to the recommendation.
(a) GAO shall issue a decision on a protest within 100 days after it is filed. GAO will attempt to resolve a request for recommendation for reimbursement of protest costs under § 21.8(e), a request for recommendation on the amount of protest costs under § 21.8(f), or a request for reconsideration under § 21.14 within 100 days after the request is filed.
(a) Upon a request filed by a party or on its own initiative, GAO may decide a protest using an express option.
(c) Requests for the express option shall be filed not later than 5 days after the protest or supplemental/amended protest is filed. * * *
(d) * * *
(1) The agency shall file a complete report within 20 days after it receives notice from GAO that the express option will be used.
(2) Comments on the agency report shall be filed within 5 days after receipt of the report.
(e) GAO, on its own initiative or upon a request filed by the parties, may use flexible alternative procedures to promptly and fairly resolve a protest, including alternative dispute resolution, establishing an accelerated schedule, and/or issuing a summary decision.
(a) A protester must immediately advise GAO of any court proceeding which involves the subject matter of a pending protest and must file copies of all relevant court documents.
(b) Decisions will be distributed to the parties through the EPDS.
(b) The provisions of this part shall apply to nonstatutory protests except for:
(1) Section 21.8(d) and (e) pertaining to recommendations for the payment of costs; and
(2) Section 21.6 pertaining to the withholding of award and the suspension of contract performance pursuant to 31 U.S.C. 3553(c) and (d).
(b) A request for reconsideration of a bid protest decision shall be filed not later than 10 days after the basis for reconsideration is known or should have been known, whichever is earlier.
(c) * * * To obtain reconsideration, the requesting party must show that GAO's prior decision contains errors of either fact or law, or must present information not previously considered that warrants reversal or modification of the decision; GAO will not consider a request for reconsideration based on
Department of Homeland Security.
Final rule.
In this final rule, the Department of Homeland Security's (DHS) is making the 2018 annual inflation adjustment to its civil monetary penalties. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act) was signed into law on November 2, 2015. Pursuant to the 2015 Act, all agencies must adjust civil monetary penalties annually and publish the adjustment in the
This rule is effective on April 2, 2018.
Megan Westmoreland, Attorney-Advisor, Office of the General Counsel, U.S. Department of Homeland Security. Phone: 202-447-4384.
On November 2, 2015, the President signed into law the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74 section 701 (Nov. 2, 2105)) (2015 Act).
For the subsequent annual adjustments, the 2015 Act requires agencies to increase the penalty amounts by a cost-of-living adjustment. The 2015 Act directs OMB to provide guidance to agencies each year to assist agencies in making the annual adjustments. The 2015 Act requires agencies to make the annual adjustments no later than January 15 of each year and to publish the adjustments in the
Pursuant to the 2015 Act, DHS undertook a review of the civil penalties that DHS and its components administer.
This final rule makes the 2018 annual inflation adjustments to civil monetary penalties pursuant to the 2015 Act and pursuant to guidance OMB issued to agencies on December 15, 2017.
The adjusted penalty amounts will apply to penalties assessed after the effective date of this final rule. We discuss civil penalties by DHS component in Section III below. For each component identified in Section III, below, we briefly describe the relevant civil penalty (or penalties), and we provide a table showing the increase in the penalties for 2018. In the table for each component, we show (1) the penalty name, (2) the penalty statutory and/or regulatory citation, (3) the penalty amount as adjusted in the 2017 final rule, (4) the cost-of-living adjustment multiplier for 2018 that OMB provided in its December 15, 2017 guidance, and (5) the new 2018 adjusted penalty. The 2015 Act instructs agencies to round penalties to the nearest $1. For a more complete discussion of the method used for calculating the initial “catch-up” inflation adjustments and a component-by-component breakdown to the nature of the civil penalties and relevant legal authorities, please see the IFR preamble at 81 FR 42987-43000.
In the following sections, we briefly describe the civil penalties that DHS and its components assess. We include tables at the end of each section, which list the individual adjustments for each penalty.
The National Protection and Programs Directorate (NPPD) administers only one civil penalty that the 2015 Act affects. That penalty assesses fines for violations of the Chemical Facility Anti-Terrorism Standards (CFATS). CFATS is a program that regulates the security of chemical facilities that, in the discretion of the Secretary, present high levels of security risk. DHS established the CFATS program in 2007 pursuant to section 550 of the Department of Homeland Security Appropriations Act of 2007 (Pub. L. 109-295).
U.S. Customs and Border Protection (CBP) assesses civil monetary penalties under various titles of the United States Code and the CFR. These include penalties for certain violations of title 8 of the CFR regarding the Immigration and Nationality Act of 1952 (Pub. L. 82-414, as amended) (INA). The INA contains provisions that impose penalties on persons, including carriers and aliens, who violate specified provisions of the INA. The relevant penalty provisions are located in numerous sections of the INA, however CBP has enumerated these penalties in regulation in one location—in 8 CFR 280.53. For a complete list of the INA sections for which penalties are assessed, in addition to a brief description of each violation, see the IFR preamble at 81 FR 42989-42990.
On December 8, 2017, CBP adjusted three non-INA penalties inadvertently left out of the IFR and 2017 final rule.
Below is a table showing the 2018 adjustment for the penalties that CBP administers.
U.S. Immigration and Customs Enforcement (ICE) assesses civil monetary penalties for certain employment-related violations arising from the INA. ICE's civil penalties are located in title 8 of the CFR.
There are three different sections in the INA that impose civil monetary penalties for violations of the laws that relate to employment actions: Sections 274A, 274B, and 274C. ICE has primary enforcement responsibilities for two of these civil penalty provisions (sections 274A and 274C), and the Department of Justice (DOJ) has enforcement responsibilities for one of these civil penalty provisions (section 274B). The INA, in sections 274A and 274C, provides for imposition of civil penalties for various specified unlawful acts pertaining to the employment eligibility verification process (Form I-9, Employment Eligibility Verification) and the employment of unauthorized aliens.
Because both DHS and DOJ implement the three employment-related penalty sections in the INA, both Departments' implementing regulations reflect the civil penalty amounts. For a complete description of the civil money penalties assessed and a discussion of DHS's and DOJ's efforts to update the penalties in years past, see the IFR preamble at 81 FR 42991. Below is a table showing the 2018 adjustment for the penalties that ICE administers.
The Coast Guard is authorized to assess close to 150 penalties involving maritime safety and security and environmental stewardship that are critical to the continued success of Coast Guard missions. Various statutes in titles 14, 16, 19, 33, 42, 46, and 49 of the United States Code authorize these penalties. Titles 33 and 46 authorize the vast majority of these penalties as these statutes deal with navigation, navigable waters, and shipping. Beyond titles 33 and 46, the Coast Guard is also authorized to collect civil monetary penalties related to the organization and management of the Coast Guard, aquatic species conservation, obstruction of revenue, and hazardous substances and materials. For a complete discussion of the civil monetary penalties assessed by the Coast Guard, see the IFR preamble at 81 FR 42992.
The Coast Guard has identified the penalties it administers, adjusted those penalties for inflation, and is listing those new penalties in a table located in the CFR—specifically, Table 1 in 33 CFR 27.3. Table 1 in 33 CFR 27.3 identifies the statutes that provide the Coast Guard with civil monetary penalty authority and sets out the inflation-adjusted maximum penalty that the Coast Guard may impose pursuant to each statutory provision. Table 1 in 33 CFR 27.3 provides the current maximum penalty for violations that occurred after November 2, 2015. The applicable civil penalty amounts for violations occurring on or before November 2, 2015 are set forth in previously published regulations amending 33 CFR part 27. To find the applicable penalty amount for a violation that occurred on or before November 2, 2015, look to the prior versions of the CFR that pertain to the date on which the violation occurred. Table 4 below shows the 2018 adjustment for the penalties that the Coast Guard administers.
The Transportation Security Administration (TSA) is updating its civil penalties regulation in accordance with the 2015 Act. Pursuant to its statutory authority in 49 U.S.C. 46301(a)(1) and (4) and 49 U.S.C. 114(v),
DHS is promulgating this final rule to ensure that the amount of civil penalties that DHS assesses or enforces reflects the statutorily mandated ranges as adjusted for inflation. The 2015 Act provides a clear formula for adjustment of the civil penalties, leaving DHS and its components with little room for discretion. DHS and its components have been charged only with performing ministerial computations to determine the amounts of adjustments for inflation to civil monetary penalties. In these annual adjustments DHS is merely updating the penalty amounts by applying the cost-of-living adjustment multiplier that OMB has provided to agencies. Furthermore, the 2015 Act specifically instructed that agencies make the required annual adjustments notwithstanding section 553 of title 5 of the United States Code. Thus, as specified in the 2015 Act, the prior public notice-and-comment procedures and delayed effective date requirements of the Administrative Procedure Act (APA) do not apply to this rule.
Executive Orders 12866 and 13563 direct agencies to assess the costs and
This final rule makes nondiscretionary adjustments to existing civil monetary penalties in accordance with the 2015 Act and OMB guidance.
The Regulatory Flexibility Act applies only to rules for which an agency publishes a notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). See 5 U.S.C. 601-612. The Regulatory Flexibility Act does not apply to this final rule, because a notice of proposed rulemaking was not required for the reasons stated above.
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. This final rule will not result in such an expenditure.
The provisions of the Paperwork Reduction Act of 1995, 44 U.S.C. chapter 35, and its implementing regulations, 5 CFR part 1320, do not apply to this final rule, because this final rule does not trigger any new or revised recordkeeping or reporting.
Reporting and recordkeeping requirements, Security measures.
Administrative practice and procedure, Aliens, Employment, Fraud, Penalties.
Administrative practice and procedure, Aliens, Employment, Penalties, Reporting and recordkeeping requirements.
Administrative practice and procedure, Immigration, Penalties.
Customs duties and inspection, Exports, Freight, Harbors, Maritime carriers, Oil pollution, Reporting and recordkeeping requirements, Vessels.
Administrative practice and procedure, Penalties.
Administrative practice and procedure, Investigations, Law enforcement, Penalties.
Accordingly, for the reasons stated in the preamble, DHS is amending 6 CFR part 27, 8 CFR parts 270, 274a, and 280, 19 CFR part 4, 33 CFR part 27, and 49 CFR part 1503 as follows:
6 U.S.C. 624; Pub. L. 101-410, 104 Stat. 890, as amended by Pub. L. 114-74, 129 Stat. 599.
(b) * * *
(3) Where the Assistant Secretary determines that a facility is in violation of an Order issued pursuant to paragraph (a) of this section and issues an Order Assessing Civil Penalty pursuant to paragraph (b)(1) of this section, a chemical facility is liable to the United States for a civil penalty of not more than $25,000 for each day during which the violation continues, if the violation of the Order occurred on or before November 2, 2015, or $34,013 for each day during which the violation of the Order continues, if the violation occurred after November 2, 2015.
8 U.S.C. 1101, 1103, and 1324c; Pub. L. 101-410, 104 Stat. 890, as amended by Pub. L. 104-134, 110 Stat. 1321 and Pub. L. 114-74, 129 Stat. 599.
(b) * * *
(1) * * *
(ii) * * *
(A)
(B)
(C)
(D)
8 U.S.C. 1101, 1103, 1324a; 48 U.S.C. 1806; 8 CFR part 2; Pub. L. 101-410, 104 Stat. 890, as amended by Pub. L. 114-74, 129 Stat. 599.
(b)
(b) * * *
(1) * * *
(ii) * * *
(A) First offense—not less than $275 and not more than $2,200 for each unauthorized alien with respect to whom the offense occurred before March 27, 2008; not less than $375 and not exceeding $3,200, for each unauthorized alien with respect to whom the offense occurred occurring on or after March 27, 2008 and on or before November 2, 2015; and not less than $559 and not more than $4,473 for each unauthorized alien with respect to whom the offense occurred occurring after November 2, 2015.
(B) Second offense—not less than $2,200 and not more than $5,500 for each unauthorized alien with respect to whom the second offense occurred before March 27, 2008; not less than $3,200 and not more than $6,500, for each unauthorized alien with respect to whom the second offense occurred on or after March 27, 2008 and on or before November 2, 2015; and not less than $4,473 and not more than $11,181 for each unauthorized alien with respect to whom the second offense occurred after November 2, 2015; or
(C) More than two offenses—not less than $3,300 and not more than $11,000 for each unauthorized alien with respect to whom the third or subsequent offense occurred before March 27, 2008; not less than $4,300 and not exceeding $16,000, for each unauthorized alien with respect to whom the third or subsequent offense occurred on or after March 27, 2008 and on or before November 2, 2015; and not less than $6,709 and not more than $22,363 for each unauthorized alien with respect to whom the third or subsequent offense occurred after November 2, 2015; and
(2) A respondent determined by the Service (if a respondent fails to request a hearing) or by an administrative law judge, to have failed to comply with the employment verification requirements as set forth in § 274a.2(b), shall be subject to a civil penalty in an amount of not less than $100 and not more than $1,000 for each individual with respect to whom such violation occurred before September 29, 1999; not less than $110 and not more than $1,100 for each individual with respect to whom such violation occurred on or after September 29, 1999 and on or before November 2, 2015; and not less than $224 and not more than $2,236 for each individual with respect to whom such violation occurred after November 2, 2015. In determining the amount of the penalty, consideration shall be given to:
8 U.S.C. 1103, 1221, 1223, 1227, 1229, 1253, 1281, 1283, 1284, 1285, 1286, 1322, 1323, 1330; 66 Stat. 173, 195, 197, 201, 203, 212, 219, 221-223, 226, 227, 230; Pub. L. 101-410, 104 Stat. 890, as amended by Pub. L. 114-74, 129 Stat. 599.
(b) * * *
(1) Section 231(g) of the Act, Penalties for non-compliance with arrival and departure manifest requirements for passengers, crewmembers, or occupants transported on commercial vessels or aircraft arriving to or departing from the United States: From $1,333 to $1,360.
(2) Section 234 of the Act, Penalties for non-compliance with landing requirements at designated ports of entry for aircraft transporting aliens: From $3,621 to $3,695.
(3) Section 240B(d) of the Act, Penalties for failure to depart voluntarily: From $1,527 minimum/$7,635 maximum to $1,558 minimum/$7,791 maximum.
(4) Section 243(c)(1)(A) of the Act, Penalties for violations of removal orders relating to aliens transported on vessels or aircraft, under section 241(d) of the Act, or for costs associated with removal under section 241(e) of the Act: From $3,054 to $3,116;
(5) Penalties for failure to remove alien stowaways under section 241(d)(2): From $7,635 to $7,791.
(6) Section 251(d) of the Act, Penalties for failure to report an illegal landing or desertion of alien crewmen, and for each alien not reported on arrival or departure manifest or lists required in accordance with section 251 of the Act: From $362 to $369; and penalties for use of alien crewmen for longshore work in violation of section 251(d) of the Act: From $9,054 to $9,239.
(7) Section 254(a) of the Act, Penalties for failure to control, detain, or remove alien crewmen: From $906 minimum/$5,432 maximum to $924 minimum/$5,543 maximum.
(8) Section 255 of the Act, Penalties for employment on passenger vessels of aliens afflicted with certain disabilities: From $1,811 to $1,848.
(9) Section 256 of the Act, Penalties for discharge of alien crewmen: From
(10) Section 257 of the Act, Penalties for bringing into the United States alien crewmen with intent to evade immigration laws: From $18,107 maximum to $18,477 maximum.
(11) Section 271(a) of the Act, Penalties for failure to prevent the unauthorized landing of aliens: From $5,432 to $5,543.
(12) Section 272(a) of the Act, Penalties for bringing to the United States aliens subject to denial of admission on a health-related ground: From $5,432 to $5,543.
(13) Section 273(b) of the Act, Penalties for bringing to the United States aliens without required documentation: From $5,432 to $5,543.
(14) Section 274D of the Act, Penalties for failure to depart: From $763 to $779, for each day the alien is in violation.
(15) Section 275(b) of the Act, Penalties for improper entry: From $76 minimum/$382 maximum to $78 minimum/$390 maximum, for each entry or attempted entry.
5 U.S.C. 301; 19 U.S.C. 66, 1431, 1433, 1434, 1624, 2071 note; 46 U.S.C. 501, 60105.
Sections 4.80, 4.80a, and 4.80b also issued under 19 U.S.C. 1706a; 28 U.S.C. 2461 note; 46 U.S.C. 12112, 12117, 12118, 50501-55106, 55107, 55108, 55110, 55114, 55115, 55116, 55117, 55119, 56101, 55121, 56101, 57109; Pub. L. 108-7, Division B, Title II, § 211;
Section 4.92 also issued under 28 U.S.C. 2461 note; 46 U.S.C. 55111;
(b) * * *
(2) The penalty imposed for the unlawful transportation of passengers between coastwise points is $300 for each passenger so transported and landed on or before November 2, 2015, and $778 for each passenger so transported and landed after November 2, 2015 (46 U.S.C. 55103, as adjusted by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015).
* * * The penalties for violation of this provision occurring on or before November 2, 2015, are a fine of from $350 to $1,100 against the owner or master of the towing vessel and a further penalty against the towing vessel of $60 per ton of the towed vessel. The penalties for violation of this provision occurring after November 2, 2015, are a fine of from $907 to $2,852 against the owner or master of the towing vessel and a further penalty against the towing vessel of $155 per ton of the towed vessel (46 U.S.C. 55111, as adjusted by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015).
Secs. 1-6, Pub. L. 101-410, 104 Stat. 890, as amended by Sec. 31001(s)(1), Pub. L. 104-134, 110 Stat. 1321 (28 U.S.C. 2461 note); Department of Homeland Security Delegation No. 0170.1, sec. 2 (106).
* * * The adjusted civil penalty amounts listed in Table 1 are applicable for penalty assessments issued after April 2, 2018, with respect to violations occurring after November 2, 2015. * * *
6 U.S.C. 1142; 18 U.S.C. 6002; 28 U.S.C. 2461 (note); 49 U.S.C. 114, 20109, 31105, 40113-40114, 40119, 44901-44907, 46101-46107, 46109-46110, 46301, 46305, 46311, 46313-46314; Pub. L. 104-134, as amended by Pub. L. 114-74.
(b) * * *
(1) For violations that occurred on or before November 2, 2015, $10,000 per violation, up to a total of $50,000 per civil penalty action, in the case of an individual or small business concern, as defined in section 3 of the Small Business Act (15 U.S.C. 632). For violations that occurred after November 2, 2015 $11,410 per violation, up to a total of $57,051 per civil penalty action, in the case of an individual or small business concern; and
(2) For violations that occurred on or before November 2, 2015, $10,000 per violation, up to a total of $400,000 per civil penalty action, in the case of any other person. For violations that occurred after November 2, 2015, $11,410 per violation, up to a total of $456,409 per civil penalty action, in the case of any other person.
(c) * * *
(1) For violations that occurred on or before November 2, 2015, $10,000 per violation, up to a total of $50,000 per civil penalty action, in the case of an individual or small business concern, as defined in section 3 of the Small Business Act (15 U.S.C. 632). For violations that occurred after November 2, 2015, $13,333 per violation, up to a total of $66,666 per civil penalty action, in the case of an individual (except an airman serving as an airman), or a small business concern.
(2) For violations that occurred on or before November 2, 2015, $10,000 per violation, up to a total of $400,000 per civil penalty action, in the case of any other person (except an airman serving as an airman) not operating an aircraft for the transportation of passengers or property for compensation. For violations that occurred after November 2, 2015, $13,333 per violation, up to a total of $533,324 per civil penalty action, in the case of any other person (except an airman serving as an airman) not operating an aircraft for the transportation of passengers or property for compensation.
(3) For violations that occurred on or before November 2, 2015, $25,000 per violation, up to a total of $400,000 per civil penalty action, in the case of a person operating an aircraft for the transportation of passengers or property for compensation (except an individual serving as an airman). For violations that occurred after November 2, 2015, $33,333 per violation, up to a total of $533,324 per civil penalty action, in the case of a person (except an individual serving as an airman) operating an aircraft for the transportation of passengers or property for compensation.
Federal Deposit Insurance Corporation.
Final rule.
The Federal Deposit Insurance Corporation (“FDIC”) is adopting a final rule to rescind and remove a part from the Code of Federal Regulations entitled “Security Procedures” and to amend FDIC regulations to make the removed Office of Thrift Supervision (“OTS”) regulations applicable to State savings associations.
The final rule is effective on May 2, 2018.
Lauren Whitaker, Senior Attorney, Consumer Compliance Section, Legal Division (202) 898-3872; Karen Jones Currie, Senior Examination Specialist, Division of Risk Management and Supervision (202) 898-3981.
Part 391, subpart A, was included in the regulations that were transferred to the FDIC from the Office of Thrift Supervision (“OTS”) on July 21, 2011, in connection with the implementation of applicable provisions of title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).
The FDIC is adopting a final rule (“Final Rule”) to rescind in its entirety part 391, subpart A and to modify the scope of part 326 to include State savings associations to conform to and reflect the scope of the FDIC's current supervisory responsibilities as the appropriate Federal banking agency. The FDIC is also adding definitions of “FDIC-supervised insured depository institution or institution” and “State savings association.” Upon removal of part 391, subpart A, the Security Procedures, regulations applicable for all insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency will be found at 12 CFR part 326.
The Dodd-Frank Act provided for a substantial reorganization of the regulation of State and Federal savings associations and their holding companies. Beginning July 21, 2011, the transfer date established by section 311 of the Dodd-Frank Act, codified at 12 U.S.C. 5411, the powers, duties, and functions formerly performed by the OTS were divided among the FDIC, as to State savings associations, the Office of the Comptroller of the Currency (“OCC”), as to Federal savings associations, and the Board of Governors of the Federal Reserve System (“FRB”), as to savings and loan holding companies. Section 316(b) of the Dodd-Frank Act, codified at 12 U.S.C. 5414(b), provides the manner of treatment for all orders, resolutions, determinations, regulations, and advisory materials that had been issued, made, prescribed, or allowed to become effective by the OTS. This section provides that if such materials were in effect on the day before the transfer date, they continue to be in effect and are enforceable by or against the appropriate successor agency until they are modified, terminated, set aside, or superseded in accordance with applicable law by such successor agency, by any court of competent jurisdiction, or by operation of law.
Section 316(c) of the Dodd-Frank Act, codified at 12 U.S.C. 5414(c), further directed the FDIC and the OCC to consult with one another and to publish a list of the continued OTS regulations that would be enforced by the FDIC and
Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act, codified at 12 U.S.C. 5412(b)(2)(B)(i)(II), granted the OCC rulemaking authority relating to both State and Federal savings associations, nothing in the Dodd-Frank Act affected the FDIC's existing authority to issue regulations under the FDI Act and other laws as the “appropriate Federal banking agency” or under similar statutory terminology. Section 312(c) of the Dodd-Frank Act amended the definition of “appropriate Federal banking agency” contained in section 3(q) of the FDI Act, 12 U.S.C. 1813(q), to add State savings associations to the list of entities for which the FDIC is designated as the “appropriate Federal banking agency.” As a result, when the FDIC acts as the designated “appropriate Federal banking agency” (or under similar terminology) for State savings associations, as it does here, the FDIC is authorized to issue, modify, and rescind regulations involving such associations, as well as for State nonmember banks and insured branches of foreign banks.
As noted, on June 14, 2011, pursuant to this authority, the FDIC's Board of Directors reissued and redesignated certain transferring regulations of the former OTS. These transferred OTS regulations were published as new FDIC regulations in the
One of the OTS rules transferred to the FDIC governed OTS oversight of minimum security devices and procedures for State savings associations. The OTS rule, formerly found at 12 CFR part 568, was transferred to the FDIC with only nominal changes, and is now found in the FDIC's rules at part 391, subpart A, entitled “Security Procedures.” Before the transfer of the OTS rules and continuing today, the FDIC's rules contained part 326, subpart A, entitled “Minimum Security Procedures,” a rule governing FDIC oversight of security devices and procedures to discourage burglaries, robberies, and larcenies, and assist law enforcement in the identification and apprehension of those who commit such crimes with respect to insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency. One provision in part 391, subpart A, namely § 391.5, is not contained in part 326, subpart A. It directs savings associations and certain subsidiaries to comply with the
After careful review and comparison of part 391, subpart A, and part 326, the FDIC is adopting a Final Rule to rescind part 391, subpart A, because, as discussed below, it is substantively redundant to existing part 326, and simultaneously finalizes the technical conforming edits to the FDIC's existing rule.
Section 3 of the Bank Protection Act of 1968 directed the appropriate Federal banking agencies and the OTS' predecessor, the Federal Home Loan Bank Board (“FHLBB”), to establish minimum security standards for banks and savings associations, at reasonable cost, to serve as a deterrent to robberies, burglaries, and larcenies, and to assist law enforcement in identifying and prosecuting persons who commit such acts.
In 1991, the minimum security rules were substantially revised to reduce unnecessary specificity, remove obsolete requirements, and place greater responsibility on the boards of directors of insured financial institutions for establishing and ensuring the implementation and maintenance of security programs and procedures. The former FHLBB rules at 12 CFR part 563a were redesignated as 12 CFR part 568 by the OTS. The OTS rules remained substantively the same as the FDIC's rules in part 326, subpart A.
In 2001, the FDIC, other Federal banking agencies, and the OTS issued
Regarding the functions of the former OTS that were transferred to the FDIC, section 316(b)(3) of the Dodd-Frank Act, 12 U.S.C. 5414(b)(3), in pertinent part, provides that the former OTS's regulations will be enforceable by the FDIC until they are modified, terminated, set aside, or superseded in accordance with applicable law. After reviewing the rules currently found in part 391, subpart A, the FDIC issued a Notice of Proposed Rulemaking (“NPR” or “Proposed Rule”), which proposed to
The FDIC issued the NPR with a 60-day comment period, which closed on January 3, 2017. The FDIC received no comments on its Proposed Rule, and consequently the Final Rule is adopted as proposed without any changes.
As discussed in the NPR, with the exception of one provision (§ 391.5), the requirements for State savings associations in part 391, subpart A, are substantively identical to the requirements in the FDIC's 12 CFR part 326 (“part 326”). The one exception directs savings associations to comply with appendix B to subpart B of
Consistent with the Proposed Rule, the Final Rule modifies the scope of part 326, subpart A, to include State savings associations and their subsidiaries to conform to and reflect the scope of FDIC's current supervisory responsibilities as the appropriate Federal banking agency for State savings associations. The Final Rule also deletes the definition of “insured nonmember bank” and replaces it with a definition of “FDIC-supervised insured depository institution or institution,” which means “any State nonmember insured bank or State savings association for which the Federal Deposit Insurance Corporation is the appropriate Federal banking agency pursuant to section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).” Additionally, the Final Rule adds a new subsection (i), which would define “State savings association” as having “the same meaning as in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)) and makes conforming technical edits throughout, including replacing the term “bank” with “FDIC-supervised insured depository institution” or “institution”.
In accordance with the requirements of the Paperwork Reduction Act (“PRA”) of 1995, 44 U.S.C. 3501-3521, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (“OMB”) control number.
The Final Rule would rescind and remove part 391, subpart A, from the FDIC regulations. This rule was transferred with only nominal changes to the FDIC from the OTS when the OTS was abolished by title III of the Dodd-Frank Act. Part 391, subpart A, is substantively similar to the FDIC's existing part 326, subpart A, regarding oversight of minimum security procedures for depository institutions with the exception of one provision at the end of part 391, subpart A, which directs savings associations to comply with
The Final Rule also (1) amends part 326, subpart A to include State savings associations and their subsidiaries within its scope; (2) defines “FDIC-supervised insured depository institution or institution” and “State savings association”; and (3) makes conforming technical edits throughout. These measures clarify that State savings associations, as well as State nonmember banks, are subject to part 326, subpart A. With respect to part 326, subpart A, the Final Rule does not revise any existing, or create any new information collection pursuant to the PRA. Consequently, no submission has been made to the Office of Management and Budget for review.
The Regulatory Flexibility Act requires an agency to consider the impact that a final rule will have on small entities (defined in regulations promulgated by the Small Business Administration to include banking organizations with total assets of less than or equal to $550 million).
As discussed in the NPR, part 391, subpart A, was transferred from OTS part 568, which governed minimum security procedures for depository institutions. The initial minimum security rules, though issued separately by the agencies, were all published in January 1969. The OTS rule, part 568, had been in effect since 1991 and all State savings associations were required to comply with it. Because it is substantially the same as existing part 326, subpart A of the FDIC's rules and therefore redundant, the FDIC is adopting a final rule to rescind and remove the transferred regulation now located in part 391, subpart A. As a result, all FDIC-supervised institutions—including State savings associations and their subsidiaries—would be required to comply with the minimum security procedures in part 326, subpart A. Because all State savings associations and their subsidiaries have
The Office of Management and Budget has determined that the Final Rule is not a “major rule” within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”), 5 U.S.C. 801
Section 722 of the Gramm-Leach- Bliley Act, codified at 12 U.S.C. 4809, requires each Federal banking agency to use plain language in all of its proposed and final rules published after January 1, 2000. In the NPR, the FDIC invited comments on whether the Proposed Rule was clearly stated and effectively organized, and how the FDIC might make it easier to understand. Although the FDIC did not receive any comments, the FDIC sought to present the Final Rule in a simple and straightforward manner.
Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (“EGRPRA”), the FDIC is required to review all of its regulations, at least once every 10 years, in order to identify any outdated or otherwise unnecessary regulations imposed on insured institutions.
The Riegle Community Development and Regulatory Improvement Act of 1994 (RCDRIA) requires the FDIC, 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 and amendments to 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.
Banks, Banking, Minimum security procedures, Savings associations.
Security procedures.
For the reasons stated in the preamble, the Board of Directors of the Federal Deposit Insurance Corporation amends 12 CFR parts 326 and 391 as follows:
12 U.S.C. 1813, 1815, 1817, 1818, 1819 (Tenth), 1881-1883; 31 U.S.C. 5311-5314 and 5316-5332.2.
(a) This part is issued by the Federal Deposit Insurance Corporation (“FDIC”) pursuant to section 3 of the Bank Protection Act of 1968 (12 U.S.C. 1882). It applies to FDIC-supervised insured depository institutions. It requires each institution to adopt appropriate security procedures to discourage robberies, burglaries, and larcenies and to assist in identifying and apprehending persons who commit such acts.
(b) It is the responsibility of the institution's board of directors to comply with this part and ensure that a written security program for the institution's main office and branches is developed and implemented.
For the purposes of this part—
(a) The term
(b) The term
(c) The term
(d) The term
Upon the issuance of Federal deposit insurance, the board of directors of each
(a)
(1) Establish procedures for opening and closing for business and for the safekeeping of all currency, negotiable securities, and similar valuables at all times;
(2) Establish procedures that will assist in identifying persons committing crimes against the institution and that will preserve evidence that may aid in their identification and prosecution; such procedures may include, but are not limited to:
(i) Retaining a record of any robbery, burglary, or larceny committed against the institution;
(ii) Maintaining a camera that records activity in the banking office; and
(iii) Using identification devices, such as prerecorded serial-numbered bills, or chemical and electronic devices;
(3) Provide for initial and periodic training of officers and employees in their responsibilities under the security program and in proper employee conduct during and after a robbery, burglar or larceny; and
(4) Provide for selecting, testing, operating and maintaining appropriate security devices, as specified in paragraph (b) of this section.
(b)
(1) A means of protecting cash or other liquid assets, such as a vault, safe, or other secure space;
(2) A lighting system for illuminating, during the hours of darkness, the area around the vault, if the vault is visible from outside the banking office;
(3) An alarm system or other appropriate device for promptly notifying the nearest responsible law enforcement officers of an attempted or perpetrated robbery or burglary;
(4) Tamper-resistant locks on exterior doors and exterior windows that may be opened; and
(5) Such other devices as the security officer determines to be appropriate, taking into consideration:
(i) The incidence of crimes against financial institutions in the area;
(ii) The amount of currency or other valuables exposed to robbery, burglary, and larceny;
(iii) The distance of the banking office from the nearest responsible law enforcement officers;
(iv) The cost of the security devices;
(v) Other security measures in effect at the banking office; and
(vi) The physical characteristics of the structure of the banking office and its surroundings.
The security officer for each institution shall report at least annually to the institution's board of directors on the implementation, administration, and effectiveness of the security program.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Final rule.
The Federal Deposit Insurance Corporation (“FDIC”) is adopting a final rule to rescind and remove from the Code of Federal Regulations the part entitled “Consumer Protection in Sales of Insurance” and to amend current FDIC regulations to make them applicable to state savings associations.
This final rule is effective on May 2, 2018.
Martha L. Ellett, Counsel, Legal Division, (202) 898-6765; John Jackwood, Senior Policy Analyst, Division of Depositor and Consumer Protection, (202) 898-3991.
Part 390, subpart I was included in the regulations that were transferred to the FDIC from the Office of Thrift Supervision (“OTS”) on July 21, 2011, in connection with the implementation of applicable provisions of title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The requirements for State savings associations in part 390, subpart I are substantively similar to the requirements in the FDIC's 12 CFR part 343 (“part 343”) which is also entitled “Consumer Protection in Sales of Insurance.”
The FDIC is adopting a final rule to rescind in its entirety part 390, subpart I and to modify the scope of part 343 to include State savings associations and their subsidiaries to conform to and reflect the scope of the FDIC's current supervisory responsibilities as the appropriate Federal banking agency. The final rule also defines “FDIC-supervised insured depository institution or institution” and “State savings association.” In the final rule, the FDIC also transfers an anticoercion and antitying provision from part 390, subpart I that is applicable to State savings associations.
Upon removal of part 390, subpart I, the Consumer Protection in Sales of Insurance regulations applicable for all insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency will be found at 12 CFR part 343.
The Dodd-Frank Act
Section 316(c) of the Dodd-Frank Act, codified at 12 U.S.C. 5414(c), further directed the FDIC and the OCC to consult with one another and to publish a list of the continued OTS regulations that would be enforced by the FDIC and the OCC, respectively. On June 14, 2011, the FDIC's Board of Directors approved a “List of OTS Regulations to be enforced by the OCC and the FDIC Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.” This list was published by the FDIC and the OCC as a Joint Notice in the
Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act, codified at 12 U.S.C. 5412(b)(2)(B)(i)(II), granted the OCC rulemaking authority relating to both State and Federal savings associations, nothing in the Dodd-Frank Act affected the FDIC's existing authority to issue regulations under the Federal Deposit Insurance Act (“FDI Act”) and other laws as the “Appropriate Federal Banking Agency” or under similar statutory terminology. Section 312(c) of the Dodd-Frank Act amended the definition of “Appropriate Federal Banking Agency” contained in section 3(q) of the FDI Act, 12 U.S.C. 1813(q), to add State savings associations to the list of entities for which the FDIC is designated as the “appropriate Federal banking agency.” As a result, when the FDIC acts as the designated “Appropriate Federal Banking Agency” (or under similar terminology) for State savings associations, as it does here, the FDIC is authorized to issue, modify and rescind regulations involving such associations, as well as for State nonmember banks and insured branches of foreign banks.
As noted, on June 14, 2011, pursuant to this authority, the FDIC's Board of Directors reissued and redesignated certain transferring regulations of the former OTS. These transferred OTS regulations were published as new FDIC regulations in the
One of the OTS rules transferred to the FDIC governed OTS oversight of consumer protections for depository institution sales of insurance. The OTS rule, formerly found at 12 CFR part 536, was transferred to the FDIC with only nominal changes and is now found in the FDIC's rules at part 390, subpart I, entitled “Consumer Protection in Sales of Insurance.” Before the transfer of the OTS rules and continuing today, the FDIC's rules contained part 343, entitled “Consumer Protection in Sales of Insurance,” a rule governing FDIC oversight of consumer protection regulations that apply to retail sales practices, solicitations, advertising, or offers of any insurance product with respect to insured depository institutions for which the FDIC has been designated the appropriate Federal banking agency.
After careful review and comparison of part 390, subpart I, and part 343, the FDIC is adopting a final rule to rescind part 390, subpart I, because, as discussed below, it is substantively redundant to existing part 343 and simultaneously finalize technical conforming edits to the existing rule.
Section 305 of the Gramm-Leach-Bliley Act (“GLB Act”)
Section 47 of the FDI Act instructs the Federal banking agencies to consult and coordinate with one another and prescribe and publish joint consumer protection regulations that apply to retail sales practices, solicitations, advertising, or offers of insurance products by depository institutions or persons engaged in these activities at an office of the institution or on behalf of the institution.
The scope of part 343 in the FDIC's regulations and of part 390, subpart I in the OTS's regulations is substantively similar. The FDIC regulations apply to any bank
Accordingly, the portions of the OTS regulations that applied to State savings associations, their subsidiaries and their affiliates, originally codified at 12 CFR part 536 and subsequently transferred to FDIC's part 390, subpart I, are substantively similar to the current FDIC regulations codified at 12 CFR part 343. By amending part 343 to encompass State savings associations and rescinding part 390, subpart I, the FDIC will streamline its regulations and reduce redundancy.
Although the former OTS rule and part 390, subpart I, covers savings and loan holding companies that are affiliated with savings associations in addition to savings associations, the FDIC does not supervise savings and loan or bank holding companies for purposes of this rule. Section 312 of the Dodd-Frank Act
After careful comparison of the FDIC's part 343 with the transferred OTS rule in part 390, subpart I, the FDIC has concluded that the transferred OTS rules governing consumer protection in sales of insurance are substantively redundant. Based on the foregoing, the FDIC is adopting a final rule to rescind and remove from the Code of Federal Regulations the transferred OTS rules located at part 390, subpart I, and to make technical and conforming changes to part 343 to incorporate State savings associations.
The functions of the former OTS that were transferred to the FDIC, section 316(b)(3) of the Dodd-Frank Act, 12 U.S.C. 5414(b)(3), in pertinent part, provide that the former OTS's regulations will be enforceable by the FDIC until they are modified, terminated, set aside, or superseded in accordance with applicable law. After reviewing the rules currently found in part 390, subpart I, on November 15, 2016 the FDIC published a Notice of Proposed Rulemaking (“NPR” or “Proposed Rule”) to (1) rescind part 390, subpart I, in its entirety; (2) modify to the scope of part 343 to include State savings associations and their subsidiaries to conform to and reflect the scope of FDIC's current supervisory responsibilities as the appropriate Federal banking agency for State savings associations; (3) delete the definition of “bank” and replace it with a definition of “FDIC-supervised insured depository institution or institution”, which means “any State nonmember insured bank or State savings association for which the Federal Deposit Insurance Corporation is the appropriate Federal banking agency pursuant to section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q));” (4) add a new subsection (i), which would define “State savings association” as having “the same meaning as in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3));” (5) transfer an anticoercion and antitying provision from part 390, subpart I that is applicable to State savings associations to part 343; and (6) make conforming technical edits throughout, including replacing the term “institution” in place of “bank” throughout the rule where necessary.
Under the NPR, oversight of consumer protection in sales of insurance in part 343 would apply to all FDIC-supervised institutions, including State savings associations, and part 390, subpart I, would be removed because it is largely redundant of the rules found in part 343. Rescinding part 390, subpart I, would serve to streamline the FDIC's rules and eliminate unnecessary regulations.
The FDIC issued the NPR with a 60-day comment period which closed on January 20, 2017. The FDIC received no comments on its Proposed Rule. The final rule (“Final Rule”) is adopted as proposed without changes.
As discussed in the NPR, part 390, subpart I is substantively the same as the requirements in part 343 and therefore is redundant. The Final Rule removes and rescinds 12 CFR part 390, subpart I in its entirety. This will serve to streamline the FDIC's rules and eliminate unnecessary regulation.
Consistent with the Proposed Rule, the Final Rule also amends the scope of part 343 to include State savings associations and their subsidiaries. The modified scope conforms to and reflects the scope of FDIC's current supervisory responsibilities as the appropriate Federal banking agency for State savings associations. The Final Rule also deletes the definition of “bank” and replaces it with a definition of “FDIC-supervised insured depository institution or institution” defined as “any State nonmember insured bank or State savings association for which the Federal Deposit Insurance Corporation is the appropriate Federal banking agency pursuant to section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).” As in the Proposed Rule, the Final Rule adds a new subsection (i), which would define “State savings association” as “having the same meaning as in section 3(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)).” The Final Rule, as the NPR, transfers an anticoercion and antitying provision that is applicable to State savings associations from part 390, subpart I, to part 343. As in the
In accordance with the requirements of the Paperwork Reduction Act (“PRA”) of 1995, 44 U.S.C. 3501-3521, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (“OMB”) control number.
The Final Rule would rescind and remove from the FDIC regulations part 390, subpart I. Part 390, subpart I was transferred with only nominal changes to the FDIC from the OTS when the OTS was abolished by title III of the Dodd-Frank Act and is substantively similar to the FDIC's existing part 343 regarding consumer protection in the sales of insurance by depository institutions. The information collections contained in part 343 are cleared by OMB under the FDIC's Insurance Sales Consumer Protections information collection (OMB Control No. 3064-0140). The FDIC reviewed its burden estimates for the collection at the time it assumed responsibility for supervision of State savings associations transferred from the OTS and determined that no changes to the burden estimates were necessary. The Final Rule would not revise the Insurance Sales Consumer Protections information collection under OMB Control No. 3064-0140 or create any new information collection pursuant to the PRA. Consequently, no submission will be made to the Office of Management and Budget for review. In the Proposed Rule, the FDIC requested comment on its conclusion that the NPR did not revise the Insurance Sales Consumer Protections information collection 3064-0140. No comments were received.
The Final Rule, as the Proposed Rule, (1) amends part 343 to include State savings associations and their subsidiaries within its scope; and (2) defines “FDIC-supervised insured depository institution or institution” and “State savings association;” (3) transfers an anticoercion and antitying provision from part 390, subpart I, that is applicable to State savings associations to part 343; and (4) makes conforming technical edits throughout. These measures clarify that State savings associations, as well as State nonmember banks, are subject to part 343. With respect to part 343, the Final Rule does not revise any existing, or create any new information collection pursuant to the PRA. Consequently, no submission will be made to the Office of Management and Budget for review. The FDIC requested comment on its conclusion that this aspect of the NPR did not create a new or revise and existing information collection. No comments on this issue were received.
The Regulatory Flexibility Act (“RFA”), requires that, in connection with a final rulemaking, an agency prepare and make available for public comment a final regulatory flexibility analysis that describes the impact of the proposed rule on small entities (defined in regulations promulgated by the Small Business Administration to include banking organizations with total assets of less than or equal to $550 million).
As discussed in the NPR, Part 390, subpart I, was transferred to the FDIC from OTS part 536, which governed consumer protections for depository institution sales of insurance. OTS part 536 had been in effect since 2001 and all State savings associations were required to comply with it. Because it is substantially the same as existing part 343 of the FDIC's rules and therefore redundant, the FDIC is rescinding and removing the transferred regulation now located in part 390, subpart I, as proposed in the NPR. As a result, all FDIC-supervised institutions—including State savings associations and their subsidiaries—would be required to comply with part 343 if they are selling, soliciting, advertising, or offering any insurance product. Because all State savings associations and their subsidiaries have been required to comply with substantially similar consumer protection rules if they engaged in sales of insurance since 2001,
The OMB has determined that the Final Rule is not a “major rule” within the meaning of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”), 5 U.S.C. 801
Section 722 of the GLB Act, codified at 12 U.S.C. 4809, requires each Federal banking agency to use plain language in all of its proposed and final rules published after January 1, 2000. In the NPR, the FDIC invited comments on whether the NPR was clearly stated and effectively organized, and how the FDIC might make it easier to understand. No comments on this issue were received. Although the FDIC did not receive any comments, the FDIC sought to present the Final Rule in a simple and straightforward manner.
Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (“EGRPRA”), the FDIC is required to review all of its regulations, at least once every 10 years, in order to identify any outdated or otherwise unnecessary regulations imposed on insured institutions.
The Riegle Community Development and Regulatory Improvement Act of
In addition, new regulations and amendments to regulations that impose additional reporting, disclosures or other new requirements on insured depository institutions generally must take effect on the first day of the calendar quarter that begins on or after the date on which the regulations are published in final form.
Banks, banking; Consumer protection in sales of insurance; Savings associations.
Consumer protection in sales of insurance.
For the reasons stated in the preamble, the Board of Directors of the Federal Deposit Insurance Corporation is amending 12 CFR parts 343 and 390 as follows:
12 U.S.C. 1819 (Seventh and Tenth); 12 U.S.C. 1831x.
This part establishes consumer protections in connection with retail sales practices, solicitations, advertising, or offers of any insurance product or annuity to a consumer by:
(a) Any institution; or
(b) Any other person that is engaged in such activities at an office of the institution or on behalf of the institution.
As used in this part:
(1) Attempting to cause or causing or threatening another person physical harm, severe emotional distress, psychological trauma, rape, or sexual assault;
(2) Engaging in a course of conduct or repeatedly committing acts toward another person, including following the person without proper authority, under circumstances that place the person in reasonable fear of bodily injury or physical harm;
(3) Subjecting another person to false imprisonment; or
(4) Attempting to cause or causing damage to property so as to intimidate or attempt to control the behavior of another person.
(i) An institution; or
(ii) Any other person only when the person sells, solicits, advertises, or offers an insurance product or annuity to a consumer at an office of the institution or on behalf of an institution.
(2) For purposes of this definition, activities on behalf of an institution include activities where a person, whether at an office of the institution or at another location sells, solicits, advertises, or offers an insurance product or annuity and at least one of the following applies:
(i) The person represents to a consumer that the sale, solicitation, advertisement, or offer of any insurance product or annuity is by or on behalf of the institution;
(ii) The institution refers a consumer to a seller of insurance products or annuities and the institution has a contractual arrangement to receive commissions or fees derived from a sale of an insurance product or annuity resulting from that referral; or
(iii) Documents evidencing the sale, solicitation, advertising, or offer of an insurance product or annuity identify or refer to the institution.
(a)
(1) The purchase of an insurance product or annuity from the institution or any of its affiliates; or
(2) An agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, an insurance
(b)
(1) The fact that an insurance product or annuity sold or offered for sale by you or any subsidiary of the institution is not backed by the Federal government or the institution, or the fact that the insurance product or annuity is not insured by the Federal Deposit Insurance Corporation;
(2) In the case of an insurance product or annuity that involves investment risk, the fact that there is an investment risk, including the potential that principal may be lost and that the product may decline in value; or
(3) In the case of an institution or subsidiary of the institution at which insurance products or annuities are sold or offered for sale, the fact that:
(i) The approval of an extension of credit to a consumer by the institution or subsidiary may not be conditioned on the purchase of an insurance product or annuity by the consumer from the institution or a subsidiary of the institution; and
(ii) The consumer is free to purchase the insurance product or annuity from another source.
(c)
(a)
(1) The insurance product or annuity is not a deposit or other obligation of, or guaranteed by, the institution or an affiliate of the institution;
(2) The insurance product or annuity is not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency of the United States, the institution, or (if applicable) an affiliate of the institution; and
(3) In the case of an insurance product or annuity that involves an investment risk, there is investment risk associated with the product, including the possible loss of value.
(b)
(1) The consumer's purchase of an insurance product or annuity from the institution or any of its affiliates; or
(2) The consumer's agreement not to obtain, or a prohibition on the consumer from obtaining, an insurance product or annuity from an unaffiliated entity.
(c)
(2)
(3)
(4)
(ii) Any disclosure required by paragraph (a) or (b) of this section that is provided by electronic media is not required to be provided orally.
(5)
(i) “NOT A DEPOSIT”
(ii) “NOT FDIC-INSURED”
(iii) “NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY”
(iv) “NOT GUARANTEED BY THE INSTITUTION”
(v) “MAY GO DOWN IN VALUE”
(6)
(A) A plain-language heading to call attention to the disclosures;
(B) A typeface and type size that are easy to read;
(C) Wide margins and ample line spacing;
(D) Boldface or italics for key words; and
(E) Distinctive type size, style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information.
(ii) You have not provided the disclosures in a meaningful form if you merely state to the consumer that the required disclosures are available in printed material, but do not provide the printed material when required and do not orally disclose the information to the consumer when required.
(iii) With respect to those disclosures made through electronic media for which paper or oral disclosures are not required, the disclosures are not meaningfully provided if the consumer may bypass the visual text of the disclosures before purchasing an insurance product or annuity.
(7)
(i) Obtain an oral acknowledgment of receipt of the disclosures and maintain sufficient documentation to show that the acknowledgment was given; and
(ii) Make reasonable efforts to obtain a written acknowledgment from the consumer.
(d)
(a)
(b)
An institution may not permit any person to sell or offer for sale any insurance product or annuity in any part of its office or on its behalf, unless the person is at all times appropriately qualified and licensed under applicable State insurance licensing standards with regard to the specific products being sold or recommended.
Any consumer who believes that any institution or any other person selling, soliciting, advertising, or offering insurance products or annuities to the consumer at an office of the institution or on behalf of the institution has violated the requirements of this part should contact the Division of Depositor and Consumer Protection, Consumer Response Center, Federal Deposit Insurance Corporation, at the following address: 1100 Walnut Street, Box #11, Kansas City, MO 64106, or telephone 1-877-275-3342, or FDIC Electronic Customer Assistance Form at
12 U.S.C. 1831y.
By order of the Board of Directors.
Bureau of Industry and Security, Commerce.
Final rule.
The Bureau of Industry and Security (BIS) publishes this final rule to amend the Export Administration Regulations (EAR) to implement the recommendations presented at the February 2017 Australia Group (AG) Intersessional Implementation Meeting, and later adopted pursuant to the AG silent approval procedure, and the recommendations made at the June 2017 AG Plenary Implementation Meeting and adopted by the AG Plenary. This rule amends the following Export Control Classification Numbers (ECCNs) on the Commerce Control List (CCL) to reflect the February 2017 Intersessional Implementation Meeting recommendations that were adopted by the AG: ECCN 2B350 (by adding certain prefabricated repair assemblies, and specially designed components therefor, that are designed for attachment to glass-lined reaction vessels, reactors, storage tanks, containers or receivers controlled by this entry); ECCN 2B351 (by clarifying that toxic gas monitoring equipment includes toxic gas monitors and monitoring systems, as well as their dedicated detecting components); and ECCN 2B352 (by adding certain nucleic acid assemblers and synthesizers to this entry and clarifying how the capacity of certain fermenters should be measured for purposes of determining whether they are controlled under this entry).
Consistent with the June 2017 AG Plenary Implementation Meeting recommendations that were adopted by the AG, this rule amends the following ECCNs on the CCL: ECCN 1C353 (to clarify that genetically modified organisms include organisms in which the nucleic acid sequences have been created or altered by deliberate molecular manipulation and that inactivated organisms containing recoverable nucleic acids are considered to be genetic elements) and ECCN 1C350 (by addingN,N-Diisopropylaminoethanethiol hydrochloride). This rule also corrects several typographical errors in a note to ECCN 1C351 and updates the advance notification requirements in the EAR that apply to certain exports of saxitoxin. Finally, this rule amends the EAR to reflect the addition of India as a participating country in the AG.
This rule is effective April 2, 2018.
Richard P. Duncan, Ph.D., Director, Chemical and Biological Controls Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, Telephone: (202) 482-3343, Email:
The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to implement the recommendations presented at the Australia Group (AG) Intersessional Implementation Meeting held in Buenos Aires, Argentina, on February 15, 2017, and adopted pursuant to the AG silent approval procedure in April 2017, and the recommendations presented at the Implementation Meeting of the 2017 AG Plenary held in Paris, France, from June 26-30, 2017, and adopted by the AG Plenary. This rule also amends the EAR to reflect the addition of India as a participating country in the AG, as of January 19, 2018. The AG is a multilateral forum consisting of 42 participating countries and the European Union that maintain export controls on a list of chemicals, biological agents, and related equipment and technology that could be used in a chemical or biological weapons program. The AG periodically reviews items on its control list to enhance the effectiveness of participating governments' national controls and to achieve greater harmonization among these controls.
This final rule amends ECCN 2B350 on the CCL to reflect changes to the AG “Control List of Dual-Use Chemical Manufacturing Facilities and Equipment and Related Technology and Software” based on the February 2017 Intersessional Implementation Meeting recommendations that were adopted by the AG pursuant to its silent approval procedure. Specifically, this rule amends ECCN 2B350 to control prefabricated repair assemblies, and their specially designed components, that: (1) Are designed for mechanical attachment to glass-lined reaction vessels and reactors controlled under 2B350.a or glass-lined storage tanks, containers and receivers controlled under 2B350.c; and (2) have metallic surfaces that are made from tantalum or tantalum alloys and come in direct contact with the chemical(s) being processed. These assemblies and components were added to the AG chemical manufacturing facilities and equipment common control list, because they are capable of being used to prolong the life, or even allow the recommissioning, of glass-lined reactors and storage tanks that are suitable for use in the production of chemical weapons (CW) agents or AG-listed precursor chemicals.
All items controlled under ECCN 2B350 continue to require a license for chemical/biological (CB) reasons to destinations indicated in CB Column 2 on the Commerce Country Chart (see Supplement No. 1 to part 738 of the EAR) and for anti-terrorism (AT) reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.
This final rule amends ECCN 2B351 on the CCL to reflect changes to the AG “Control List of Dual-Use Chemical Manufacturing Facilities and Equipment and Related Technology and Software” based on the February 2017 Intersessional Implementation Meeting recommendations that were adopted by the AG pursuant to its silent approval procedure. Specifically, this rule amends ECCN 2B351 to clarify that this entry controls toxic gas monitors and monitoring systems, and their dedicated detecting components (
All items controlled under ECCN 2B351 continue to require a license for CB reasons to destinations indicated in CB Column 2 on the Commerce Country Chart and for AT reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.
This final rule amends ECCN 2B352 on the CCL to reflect changes to the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software” based on the February 2017 Intersessional Implementation Meeting recommendations that were adopted by the AG pursuant to its silent approval procedure. Specifically, this rule amends ECCN 2B352 to indicate that the “total internal volume” of a fermenter must be measured to determine whether its capacity meets the control level of “20 liters or greater” specified in 2B352.b.1. This clarification was made to ensure that all AG participating countries apply the same criterion to measure capacity for purposes of determining whether a fermenter is subject to control.
This rule also amends ECCN 2B352 by adding a new paragraph .j to control nucleic acid assemblers and synthesizers that are both: (1) Partly or entirely automated; and (2) designed to generate continuous nucleic acids greater than 1.5 kilobases in length with error rates less than 5% in a single run. These items were added to the AG dual-use biological equipment common control list because they are capable of being used to generate pathogens and toxins without the need to acquire controlled genetic elements and organisms.
All items controlled under ECCN 2B352 continue to require a license for CB reasons to destinations indicated in CB Column 2 on the Commerce Country Chart and for AT reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.
This final rule amends ECCN 1C350 to reflect updates to the AG “Chemical Weapons Precursors” control list adopted at the June 2017 AG Plenary meeting. Specifically, this rule amends ECCN 1C350.b by adding the precursor chemical hydrochloride salt (C.A.S. #41480-75-5)N,N-Diisopropylaminoethanethiol hydrochloride. This rule also alphabetically reorders the precursor chemicals listed in ECCN 1C350.b, .c, and .d to facilitate the identification of these chemicals. The precursor chemicals affected by these amendments to ECCN 1C350 are indicated in the following table.
All items controlled under ECCN 1C350 continue to require a license for CB reasons to destinations indicated in CB Column 2 on the Commerce Country Chart and for AT reasons to countries listed in Country Group E:1 (see Supplement No. 1 to part 740 of the EAR). In addition, items controlled under 1C350.b or .c require a license to certain destinations for chemical weapons (CW) reasons, as described in the License Requirements section of ECCN 1C350 and in Section 742.18 of the EAR.
This final rule amends ECCN 1C353 on the CCL to reflect updates to the AG controls on certain genetic elements and genetically modified organisms adopted at the June 2017 AG Plenary meeting. Specifically, this rule amends ECCN 1C353 to control any genetically modified organism that contains, or any genetic element that codes for: (1) Any gene or genes specific to any virus controlled by ECCN 1C351.a or .b or 1C354.c; (2) any gene or genes specific to any bacterium controlled by ECCN 1C351.c or 1C354.a, or any fungus controlled by ECCN 1C351.e or 1C354.b, and which in itself or through its transcribed or translated products represents a significant hazard to human, animal or plant health or could endow or enhance pathogenicity; or (3) any toxins, or their subunits, controlled by ECCN 1C351.d.
In addition, this rule amends the Technical Notes to ECCN 1C353 to clarify that “genetically modified organisms include organisms in which the nucleic acid sequences have been created or altered by deliberate molecular manipulation” (see Technical Note 1 to ECCN 1C353, as amended by this rule) and that inactivated organisms containing recoverable nucleic acids are
This rule also defines the term “endow or enhance pathogenicity,” for purposes of the controls in ECCN 1C353 (see Technical Note 4 to ECCN 1C353, as amended by this rule), as when the insertion or integration of the nucleic acid sequence or sequences is/are likely to enable or increase a recipient organism's ability to be used to deliberately cause disease or death. This might include alterations to, inter alia: virulence, transmissibility, stability, route of infection, host range, reproducibility, ability to evade or suppress host immunity, resistance to medical countermeasures, or detectability.
All items controlled under ECCN 1C353 continue to require a license for CB reasons to destinations indicated in CB Column 1 on the Commerce Country Chart and for AT reasons to destinations indicated in AT Column 1 on the Commerce Country Chart.
This rule makes conforming amendments to the EAR to reflect the addition of India to the AG, as of January 19, 2018. Specifically, this rule amends the entry for India in the Commerce Country Chart (Supplement No. 1 to part 738 of the EAR) by removing the “X” from this entry under the column CB 2. In addition, this rule amends the Country Groups chart (Supplement No. 1 to part 740 of the EAR) by adding an “X” to the entry for India under column A:3, Australia Group.
This final rule amends ECCN 1C351 on the CCL by removing several outdated references to former ECCN 1C352 in the Note that follows 1C351.a.4, which describes avian influenza (AI) viruses subject to control under this ECCN, and adding in their place references to the relevant AI controls described in 1C351.a.4. These corrections do not affect the scope of the items subject to control under this ECCN or the license requirements applicable to these items.
This final rule also corrects the Chemical Weapons Convention (CWC) Schedule 1 chemical advance notification requirements in Section 745.1 of the EAR to reflect the April 27, 2006 (71 FR 24918), amendments to the Chemical Weapons Convention Regulations (CWCR) (15 CFR parts 710-722) that, inter alia, amended the definition of
The changes made by this rule only marginally affect the scope of the EAR controls on chemical weapons precursors, human and animal pathogens/toxins, chemical manufacturing equipment, and equipment capable of use in handling biological materials.
The scope of the CCL-based CB controls on human and animal pathogens and toxins was not affected by the correction to ECCN 1C351 in which outdated references to former ECCN 1C352 were removed from the Note that follows 1C351.a.4 and references to the relevant avian influenza (AI) controls described in 1C351.a.4 were added in their place. In addition, the updates to the controls on genetic elements and genetically modified organisms described in ECCN 1C353 clarified the scope of these controls, but did not actually expand them. In short, neither of these changes is expected to result in an increase in the number of license applications that will have to be submitted to BIS for exports, reexports, or transfers (in-country) of these items.
However, the changes made by this final rule to the CCL entries controlling chemical weapons precursors, chemical manufacturing equipment, and equipment capable of use in handling biological materials are expected to result in a slight increase in the number of license applications that will have to be submitted for these items. Specifically, the addition of the precursor chemical hydrochloride salt N,N-Diisopropylaminoethanethiol hydrochloride (C.A.S. #41480-75-5) to ECCN 1C350.b is expected to result in the submission of one or two additional license applications per year. The addition of controls on certain prefabricated repair assemblies, and their specially designed components, to ECCN 2B350 is expected to result in the submission of four or five additional license applications per year. Specifically listing toxic gas monitors in ECCN 2B351 (to clarify that this entry controls, inter alia, certain portable gas monitors as well as toxic gas monitoring systems) is expected to result in the submission of two or three additional license applications per year. The addition of controls on nucleic acid assemblers and synthesizers to ECCN 2B352 is expected to result in the submission of four or five additional license applications per year.
Therefore, the number of additional license applications that would have to be submitted per year, as a result of the amendments to ECCNs 1C350, 2B350, 2B351 and 2B352 described above, is not expected to exceed fifteen license applications. This total represents a relatively insignificant portion of the overall trade in such items and is well within the scope of the information collection approved by the Office of Management and Budget (OMB) under control number 0694-0088 (see Rulemaking Requirements #2, below).
Shipments of items removed from eligibility for export or reexport under a license exception or without a license (
“Deemed” exports of “technology” and “source code” removed from eligibility for export under a license exception or without a license (under the designator “NLR”) as a result of this regulatory action may continue to be made under the previously available license exception orwithout a license (NLR) before May 17, 2018. Beginning at midnight on May 17, 2018, such “technology” and “source code” may no longer be released, without a license, to a foreign national subject to the “deemed” export controls in the EAR when a license would be required to the home country of the foreign national in accordance with this regulation.
Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 15, 2017 (82 FR 39005 (August 16, 2017)), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act (50 U.S.C. 1701
1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget.
The cost-benefit analysis required pursuant to Executive Orders 13563 and 12866 indicates that this rule is intended to improve national security as its primary direct benefit. Specifically, implementation, in a timely manner, of the AG agreements described herein would enhance the national security of the United States by reducing the risk that global international trade involving dual-use chemical/biological items would contribute to the proliferation of chemical and biological weapons of mass destruction. The first meeting of what subsequently became known as the Australia Group (AG) took place in Brussels in June 1985. At that meeting, the 15 participating countries and the European Commission agreed to explore how existing export controls might be made more effective to prevent the spread of chemical weapons. The AG has met regularly since then, and annual meetings are now held in Paris. The scope of the export controls addressed by the AG has evolved to address emerging threats and challenges. Evidence of the diversion of dual-use materials to biological weapons programs in the early 1990s led to participants' adoption of export controls on specific biological agents. The common control lists developed by the AG have also expanded to include technology and equipment that can be used in the manufacturing or disposal of chemical and biological weapons. The number of countries participating in the AG has grown from 15 in 1985 to 42, plus the European Union. The principal objective of AG participating countries is to use licensing measures to ensure that exports of certain chemicals, biological agents, and dual-use chemical and biological manufacturing facilities and equipment, do not contribute to the proliferation of chemical and biological weapons (CBW) of mass destruction, which has been identified as a threat to domestic and international peace and security. The AG achieves this objective by harmonizing participating countries' national export licensing measures. The AG's activities are especially important given that the international chemical and biotechnology industries are a target for proliferators as a source of materials for CBW programs. In calculating the costs that would be imposed by this rule, Commerce estimates that no more than 15 additional license applications would have to be submitted to BIS, annually, as a result of the implementation of the AG-related amendments described in this rule (see Rulemaking Requirements #2, below). Application of the cost-benefit analysis required under Executive Orders 13563 and 12866 to this rule, as described above, indicates that this rule is intended to improve the national security of the United States as its primary direct benefit. Furthermore, this rule qualifies for a good cause exception under 5 U.S.C. 553(b)(B) of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date—this finding, and a brief statement of the reasons therefor, are described under Rulemaking Requirements #4, below. Accordingly, this rule meets the requirements set forth in the April 5, 2017, OMB guidance implementing E.O. 13771 (82 FR 9339, February 3, 2017), regarding what constitutes a regulation issued “with respect to a national security function of the United States” and it is, therefore, exempt from the requirements of E.O. 13771.
2. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
3. This rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132.
4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date, are inapplicable because this regulation involves a military and foreign affairs function of the United States (see 5 U.S.C. 553(a)(1)). Immediate implementation of these amendments is non-discretionary and fulfills the United States' international obligation to the Australia Group (AG). The AG contributes to international security and regional stability through the harmonization of export controls and seeks to ensure that exports do not contribute to the development of chemical and biological weapons. The AG consists of 42 member countries that act on a consensus basis and the amendments set forth in this rule implement changes made to the AG common control lists (as a result of the adoption of the recommendations made at the February 2017 AG Intersessional Implementation Meeting and the understandings reached at the June 2017 AG Plenary Implementation Meeting) and other changes that are necessary to ensure consistency with the controls maintained by the AG. Because the United States is a significant exporter of the items in this rule, immediate implementation of this provision is necessary for the AG to achieve its purpose.
Although the APA requirements in section 553 are not applicable to this action under the provisions of paragraph (a)(1), this action also falls within two other exceptions in the section. The subsection (b) requirement that agencies publish a notice of proposed rulemaking, which includes information on the public proceedings, does not apply when an agency for good cause finds that the notice and public procedures are impracticable, unnecessary, or contrary to the public interest, and the agency incorporates the finding (and the reasons therefor) in the rule that is issued (5 U.S.C. 553(b)(B)). In addition, the section 553(d) requirement that publication of a rule shall be made not less than 30 days before its effective date can be waived if an agency findsthere is good cause to do so.
The section 553 requirements for notice and public procedures and for a delay in the date of effectiveness do not apply to this rule, as there is good cause to waive such practices. Any delay in implementation will create a disruption in the movement of affected items globally because of disharmony between export control measures implemented by AG members, resulting in tension between member countries. Export controls work best when all countries implement the same export controls in a timely manner. Delaying this rulemaking would prevent the United States from fulfilling its commitment to the AG in a timely manner, would injure the credibility of the United States in this and other multilateral regimes, and may impair the international community's ability to effectively control the export of certain potentially national- and international security-threatening items. Therefore, this regulation is issued in final form, and is effective April 2, 2018.
Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this final rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under the Administrative Procedure Act or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601
Administrative practice and procedure, Exports, Foreign trade.
Administrative practice and procedure, Exports, Reporting and recordkeeping requirements.
Administrative practice and procedure, Chemicals, Exports, Foreign trade, Reporting and recordkeeping requirements.
Exports, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, parts 738, 740, 745 and 774 of the Export Administration Regulations (15 CFR parts 730-774) are amended as follows:
50 U.S.C. 4601
50 U.S.C. 4601
50 U.S.C. 1701
(a)
50 U.S.C. 4601
CW applies to 1C350 .b, and .c. The Commerce Country Chart is not designed to determine licensing requirements for items controlled for CW reasons. A license is required, for CW reasons, to export or reexport Schedule 2 chemicals and mixtures identified in 1C350.b to States not Party to the CWC (destinations not listed in Supplement No. 2 to part 745 of the EAR). A license is required, for CW reasons, to export Schedule 3 chemicals and mixtures identified in 1C350.c to States not Party to the CWC, unless an End-Use Certificate issued by the government of the importing country has been obtained by the exporter prior to export. A license is required, for CW reasons, to reexport Schedule 3 chemicals and mixtures identified in 1C350.c from a State not Party to the CWC to any other State not Party to the CWC. (See § 742.18 of the EAR for license requirements and policies for toxic and precursor chemicals controlled for CW reasons. See § 745.2 of the EAR for End-Use Certificate requirements that apply to exports of Schedule 3 chemicals to countries not listed in Supplement No. 2 to part 745 of the EAR.)
AT applies to entire entry. The Commerce Country Chart is not designed to determine licensing requirements for items controlled for AT reasons in 1C350. A license is required, for AT reasons, to export or reexport items controlled by 1C350 to a country in Country Group E:1 of Supplement No. 1 to part 740 of the EAR. (See part 742 of the EAR for additional information on the AT controls that apply to Iran, North Korea, Sudan, and Syria. See part 746 of the EAR for additional information on sanctions that apply to Iran, North Korea, and Syria.)
a. [Reserved]
b. Australia Group-controlled precursor chemicals also identified as Schedule 2 chemicals under the CWC, as follows, and mixtures in which at least one of the following chemicals constitutes 30 percent or more of the weight of the mixture:
b.1. (C.A.S. #7784-34-1) Arsenic trichloride;
b.2. (C.A.S. #76-93-7) Benzilic acid;
b.3. (C.A.S. #78-38-6) Diethyl ethylphosphonate;
b.4. (C.A.S. #683-08-9) Diethyl methylphosphonate;
b.5. (C.A.S. #15715-41-0) Diethyl methylphosphonite;
b.6. (C.A.S. #2404-03-7) Diethyl-N,N-dimethylphosphoroamidate;
b.7. (C.A.S. #41480-75-5) N,N-Diisopropylaminoethanethiol hydrochloride;
b.8. (C.A.S. #5842-07-9) N,N-Diisopropyl-beta-aminoethane thiol;
b.9. (C.A.S. #96-80-0) N,N-Diisopropyl-beta-aminoethanol;
b.10. (C.A.S. #96-79-7), N,N-Diisopropyl-beta-aminoethyl chloride;
b.11. (C.A.S. #4261-68-1) N,N-Diisopropyl-beta-aminoethyl chloride hydrochloride;
b.12. (C.A.S. #6163-75-3) Dimethyl ethylphosphonate;
b.13. (C.A.S. #756-79-6) Dimethyl methylphosphonate;
b.14. (C.A.S. #677-43-0) N,N-Dimethylamino-phosphoryl dichloride;
b.15. (C.A.S. #1498-40-4) Ethyl phosphonous dichloride [Ethyl phosphinyl dichloride];
b.16. (C.A.S. #430-78-4) Ethyl phosphonus difluoride [Ethyl phosphinyl difluoride];
b.17. (C.A.S. #1066-50-8) Ethyl phosphonyl dichloride;
b.18. (C.A.S. #993-13-5) Methylphosphonic acid;
b.19. (C.A.S. #676-98-2) Methylphos-phonothioic dichloride;
b.20. (C.A.S. #464-07-3) Pinacolyl alcohol;
b.21. (C.A.S. #1619-34-7) 3-Quinuclidinol;
b.22. (C.A.S. #111-48-8) Thiodiglycol.
c. Australia Group-controlled precursor chemicals also identified as Schedule 3 chemicals under the CWC, as follows, and mixtures in which at least one of the following chemicals constitutes 30 percent or more of the weight of the mixture:
c.1. (C.A.S. #762-04-9) Diethyl phosphite;
c.2. (C.A.S. #868-85-9) Dimethyl phosphite (dimethyl hydrogen phosphite);
c.3. (C.A.S. #139-87-7) Ethyldiethanolamine;
c.4. (C.A.S. #10025-87-3) Phosphorus oxychloride;
c.5. (C.A.S. #10026-13-8) Phosphorus pentachloride;
c.6. (C.A.S. #7719-12-2) Phosphorus trichloride;
c.7. (C.A.S. #10545-99-0) Sulfur dichloride;
c.8. (C.A.S. #10025-67-9) Sulfur monochloride;
c.9. (C.A.S. #7719-09-7) Thionyl chloride;
c.10. (C.A.S. #102-71-6) Triethanolamine;
c.11. (C.A.S. #122-52-1) Triethyl phosphite;
c.12. (C.A.S. #121-45-9) Trimethyl phosphite.
d. Other Australia Group-controlled precursor chemicals not also identified as Schedule 1, 2, or 3 chemicals under the CWC, as follows, and mixtures in which at least one of the following chemicals constitutes 30 percent or more of the weight of the mixture:
d.1. (C.A.S. #1341-49-7) Ammonium hydrogen fluoride;
d.2. (C.A.S. #107-07-3) 2-Chloroethanol;
d.3. (C.A.S. #109-89-7) Diethylamine;
d.4. (C.A.S. #100-37-8) N,N-Diethylaminoethanol;
d.5. (C.A.S. #298-06-6) O,O-Diethyl phosphorodithioate;
d.6. (C.A.S. #2465-65-8) O,O-Diethyl phosphorothioate;
d.7. (C.A.S. #108-18-9) Di-isopropylamine;
d.8. (C.A.S. #124-40-3) Dimethylamine;
d.9. (C.A.S. #506-59-2) Dimethylamine hydrochloride;
d.10. (C.A.S. #7664-39-3) Hydrogen fluoride;
d.11. (C.A.S. #3554-74-3) 3-Hydroxyl-1-methylpiperidine;
d.12. (C.A.S. #76-89-1) Methyl benzilate;
d.13. (C.A.S. #1314-80-3) Phosphorus pentasulfide;
d.14. (C.A.S. #75-97-8) Pinacolone;
d.15. (C.A.S. #7789-29-9) Potassium bifluoride;
d.16. (C.A.S. #151-50-8) Potassium cyanide;
d.17. (C.A.S. #7789-23-3) Potassium fluoride;
d.18. (C.A.S. #3731-38-2) 3-Quinuclidone;
d.19. (C.A.S. #1333-83-1) Sodium bifluoride;
d.20. (C.A.S. #143-33-9) Sodium cyanide;
d.21. (C.A.S. #7681-49-4) Sodium fluoride;
d.22. (C.A.S. #16893-85-9) Sodium hexafluorosilicate;
d.23. (C.A.S. #1313-82-2) Sodium sulfide;
d.24. (C.A.S. #637-39-8) Triethanolamine hydrochloride;
d.25. (C.A.S. #116-17-6) Tri-isopropyl phosphite.
CW applies to 1C351.d.11 and d.12 and a license is required for CW reasons for all destinations, including Canada, as follows: CW applies to 1C351.d.11 for ricin in the form of (1) Ricinus Communis AgglutininII (RCAII), also known as ricin D or Ricinus Communis LectinIII (RCLIII) and (2) Ricinus Communis LectinIV (RCLIV), also known as ricin E. CW applies to 1C351.d.12 for saxitoxin identified by C.A.S. #35523-89-8. See § 742.18 of the EAR for licensing information pertaining to chemicals subject to restriction pursuant to the Chemical Weapons Convention (CWC). The Commerce Country Chart is not designed to determine licensing requirements for items controlled for CW reasons.
a. Viruses identified on the Australia Group (AG) “List of Human and Animal Pathogens and Toxins for Export Control,” as follows:
a.1. African horse sickness virus;
a.2. African swine fever virus;
a.3. Andes virus;
a.4. Avian influenza (AI) viruses identified as having high pathogenicity (HP), as follows:
a.4.a. AI viruses that have an intravenous pathogenicity index (IVPI) in 6-week-old chickens greater than 1.2; or
a.4.b. AI viruses that cause at least 75% mortality in 4- to 8-week-old chickens infected intravenously.
a.5. Bluetongue virus;
a.6. Chapare virus;
a.7. Chikungunya virus;
a.8. Choclo virus;
a.9. Classical swine fever virus (Hog cholera virus);
a.10. Crimean-Congo hemorrhagic fever virus;
a.11. Dobrava-Belgrade virus;
a.12. Eastern equine encephalitis virus;
a.13. Ebolavirus (includes all members of the Ebolavirus genus);
a.14. Foot-and-mouth disease virus;
a.15. Goatpox virus;
a.16. Guanarito virus;
a.17. Hantaan virus;
a.18. Hendra virus (Equine morbillivirus);
a.19. Japanese encephalitis virus;
a.20. Junin virus;
a.21. Kyasanur Forest disease virus;
a.22. Laguna Negra virus;
a.23. Lassa virus;
a.24. Louping ill virus;
a.25. Lujo virus;
a.26. Lumpy skin disease virus;
a.27. Lymphocytic choriomeningitis virus;
a.28. Machupo virus;
a.29. Marburgvirus (includes all members of the Marburgvirus genus);
a.30. Monkeypox virus;
a.31. Murray Valley encephalitis virus;
a.32. Newcastle disease virus;
a.33. Nipah virus;
a.34. Omsk hemorrhagic fever virus;
a.35. Oropouche virus;
a.36. Peste-des-petits ruminants virus;
a.37. Porcine Teschovirus;
a.38. Powassan virus;
a.39. Rabies virus and all other members of the Lyssavirus genus;
a.40. Reconstructed 1918 influenza virus;
a.41. Rift Valley fever virus;
a.42. Rinderpest virus;
a.43. Rocio virus;
a.44. Sabia virus;
a.45. Seoul virus;
a.46. Severe acute respiratory syndrome-related coronavirus (SARS-related coronavirus);
a.47. Sheeppox virus;
a.48. Sin Nombre virus;
a.49. St. Louis encephalitis virus;
a.50. Suid herpesvirus 1 (Pseudorabies virus; Aujeszky's disease);
a.51. Swine vesicular disease virus;
a.52. Tick-borne encephalitis virus (Far Eastern subtype, formerly known as Russian Spring-Summer encephalitis virus—see 1C351.b.3 for Siberian subtype);
a.53. Variola virus;
a.54. Venezuelan equine encephalitis virus;
a.55. Vesicular stomatitis virus;
a.56. Western equine encephalitis virus;
a.57. Yellow fever virus.
b. Viruses identified on the APHIS/CDC “select agents” lists (see Related Controls paragraph #2 for this ECCN), but not identified on the Australia Group (AG) “List of Human and Animal Pathogens and Toxins for Export Control,” as follows:
b.1. [Reserved];
b.2. [Reserved];
b.3. Tick-borne encephalitis virus (Siberian subtype, formerly West Siberian virus—see 1C351.a.52 for Far Eastern subtype).
c. Bacteria identified on the Australia Group (AG) “List of Human and Animal Pathogens and Toxins for Export Control,” as follows:
c.1. Bacillus anthracis;
c.2. Brucella abortus;
c.3. Brucella melitensis;
c.4. Brucella suis;
c.5. Burkholderia mallei (Pseudomonas mallei);
c.6. Burkholderia pseudomallei (Pseudomonas pseudomallei);
c.7. Chlamydia psittaci (Chlamydophila psittaci);
c.8. Clostriduim argentinense (formerly known as Clostridium botulinum Type G), botulinum neurotoxin producing strains;
c.9. Clostridium baratii, botulinum neurotoxin producing strains;
c.10. Clostridium botulinum;
c.11. Clostridium butyricum, botulinum neurotoxin producing strains;
c.12. Clostridium perfringens, epsilon toxin producing types;
c.13. Coxiella burnetii;
c.14. Francisella tularensis;
c.15. Mycoplasma capricolum subspecies capripneumoniae (“strain F38”);
c.16. Mycoplasma mycoides subspecies mycoides SC (small colony) (a.k.a. contagious bovine pleuropneumonia);
c.17. Rickettsia prowazekii;
c.18. Salmonella enterica subspecies enterica serovar Typhi (Salmonella typhi);
c.19. Shiga toxin producing Escherichia coli (STEC) of serogroups O26, O45, O103, O104, O111, O121, O145, O157, and other shiga toxin producing serogroups;
c.20. Shigella dysenteriae;
c.21. Vibrio cholerae;
c.22. Yersinia pestis.
d. “Toxins” identified on the Australia Group (AG) “List of Human and Animal Pathogens and Toxins for Export Control,” as follows, and “subunits” thereof:
d.1. Abrin;
d.2. Aflatoxins;
d.3. Botulinum toxins;
d.4. Cholera toxin;
d.5. Clostridium perfringens alpha, beta 1, beta 2, epsilon and iota toxins;
d.6. Conotoxins;
d.7. Diacetoxyscirpenol;
d.8. HT-2 toxin;
d.9. Microcystins (Cyanginosins);
d.10. Modeccin;
d.11. Ricin;
d.12. Saxitoxin;
d.13. Shiga toxins (shiga-like toxins, verotoxins, and verocytotoxins);
d.14. Staphylococcus aureus enterotoxins, hemolysin alpha toxin, and toxic shock syndrome toxin (formerly known as Staphylococcus enterotoxin F);
d.15. T-2 toxin;
d.16. Tetrodotoxin;
d.17. Viscumin (Viscum album lectin 1);
d.18. Volkensin.
e. “Fungi”, as follows:
e.1. Coccidioides immitis;
e.2. Coccidioides posadasii.
a. Any genetically modified organism that contains, or any genetic element that codes for, any of the following:
a.1. Any gene or genes specific to any virus controlled by 1C351.a or .b or 1C354.c;
a.2. Any gene or genes specific to any bacterium controlled by 1C351.c or 1C354.a, or any fungus controlled by 1C351.e or 1C354.b, and which;
a.2.a. In itself or through its transcribed or translated products represents a significant hazard to human, animal or plant health;
a.2.b. Could endow or enhance pathogenicity;
a.3. Any toxins, or their subunits, controlled by 1C351.d.
b. [Reserved].
a. Reaction vessels, reactors and prefabricated repair assemblies therefor, as follows:
a.1. Reaction vessels or reactors, with or without agitators, with total internal (geometric) volume greater than 0.1 m
a.1.a Alloys with more than 25% nickel and 20% chromium by weight;
a.1.b. Nickel or alloys with more than 40% nickel by weight;
a.1.c. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
a.1.d. Glass (including vitrified or enameled coating or glass lining);
a.1.e. Tantalum or tantalum alloys;
a.1.f. Titanium or titanium alloys;
a.1.g. Zirconium or zirconium alloys;
a.1.h. Niobium (columbium) or niobium alloys;
a.2. Prefabricated repair assemblies, and their specially designed components, that:
a.2.a. Are designed for mechanical attachment to glass-lined reaction vessels or reactors described in 2B350.a.1;
a.2.b. Have metallic surfaces that are made from tantalum or tantalum alloys and come in direct contact with the chemical(s) being processed.
b. Agitators designed for use in reaction vessels or reactors described in 2B350.a.1, and impellers, blades or shafts designed for such agitators, where all surfaces that come in direct contact with the chemical(s) being processed or contained are made from any of the following materials:
b.1. Alloys with more than 25% nickel and 20% chromium by weight;
b.2. Nickel or alloys with more than 40% nickel by weight;
b.3. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
b.4. Glass (including vitrified or enameled coatings or glass lining);
b.5. Tantalum or tantalum alloys;
b.6. Titanium or titanium alloys;
b.7. Zirconium or zirconium alloys;
b.8. Niobium (columbium) or niobium alloys.
c. Storage tanks, containers, receivers and prefabricated repair assemblies therefor, as follows:
c.1. Storage tanks, containers or receivers with a total internal (geometric) volume greater than 0.1 m
c.1.a. Alloys with more than 25% nickel and 20% chromium by weight;
c.1.b. Nickel or alloys with more than 40% nickel by weight;
c.1.c. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
c.1.d. Glass (including vitrified or enameled coatings or glass lining);
c.1.e. Tantalum or tantalum alloys;
c.1.f. Titanium or titanium alloys;
c.1.g. Zirconium or zirconium alloys;
c.1.h. Niobium (columbium) or niobium alloys;
c.2. Prefabricated repair assemblies, and their specially designed components, that:
c.2.a. Are designed for mechanical attachment to glass-lined storage tanks, containers or receivers described in 2B350.c.1;
c.2.b. Have metallic surfaces that are made from tantalum or tantalum alloys and come in direct contact with the chemical(s) being processed.
d. Heat exchangers or condensers with a heat transfer surface area of less than 20 m
d.1. Alloys with more than 25% nickel and 20% chromium by weight;
d.2. Nickel or alloys with more than 40% nickel by weight;
d.3. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
d.4. Glass (including vitrified or enameled coatings or glass lining);
d.5. Tantalum or tantalum alloys;
d.6. Titanium or titanium alloys;
d.7. Zirconium or zirconium alloys;
d.8. Niobium (columbium) or niobium alloys;
d.9. Graphite or carbon-graphite;
d.10. Silicon carbide;
d.11. Titanium carbide.
e. Distillation or absorption columns of internal diameter greater than 0.1 m, and liquid distributors, vapor distributors or liquid collectors designed for such distillation or absorption columns, where all surfaces that come in direct contact with the chemical(s) being processed are made from any of the following materials:
e.1. Alloys with more than 25% nickel and 20% chromium by weight;
e.2. Nickel or alloys with more than 40% nickel by weight;
e.3. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
e.4. Glass (including vitrified or enameled coatings or glass lining);
e.5. Tantalum or tantalum alloys;
e.6. Titanium or titanium alloys;
e.7. Zirconium or zirconium alloys;
e.8. Niobium (columbium) or niobium alloys;
e.9. Graphite or carbon-graphite.
f. Remotely operated filling equipment in which all surfaces that come in direct contact with the chemical(s) being processed are made from any of the following materials:
f.1. Alloys with more than 25% nickel and 20% chromium by weight;
f.2. Nickel or alloys with more than 40% nickel by weight.
g. Valves, as follows:
g.1. Valves having both of the following characteristics:
g.1.a. A nominal size greater than 1.0 cm (
g.1.b. All surfaces that come in direct contact with the chemical(s) being produced, processed, or contained are made from materials identified in Technical Note 1 to 2B350.g.
g.2. Valves, except for valves controlled by 2B350.g.1, having all of the following characteristics:
g.2.a. A nominal size equal to or greater than 2.54 cm (1 inch) and equal to or less than 10.16 cm (4 inches);
g.2.b. Casings (valve bodies) or preformed casing liners controlled by 2B350.g.3, in which all surfaces that come in direct contact with the chemical(s) being produced,
g.2.c. A closure element designed to be interchangeable.
g.3. Casings (valve bodies) and preformed casing liners having both of the following characteristics:
g.3.a. Designed for valves in 2B350.g.1 or .g.2;
g.3.b. All surfaces that come in direct contact with the chemical(s) being produced, processed, or contained are made from materials identified in Technical Note 1 to 2B350.g.
Technical Note 2 to 2B350.g:
h. Multi-walled piping incorporating a leak detection port, in which all surfaces that come in direct contact with the chemical(s) being processed or contained are made from any of the following materials:
h.1. Alloys with more than 25% nickel and 20% chromium by weight;
h.2. Nickel or alloys with more than 40% nickel by weight;
h.3. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
h.4. Glass (including vitrified or enameled coatings or glass lining);
h.5. Tantalum or tantalum alloys;
h.6. Titanium or titanium alloys;
h.7. Zirconium or zirconium alloys;
h.8. Niobium (columbium) or niobium alloys;
h.9. Graphite or carbon-graphite.
i. Multiple-seal and seal-less pumps with manufacturer's specified maximum flow-rate greater than 0.6 m
i.1. Alloys with more than 25% nickel and 20% chromium by weight;
i.2. Nickel or alloys with more than 40% nickel by weight;
i.3. Fluoropolymers (polymeric or elastomeric materials with more than 35% fluorine by weight);
i.4. Glass (including vitrified or enameled coatings or glass lining);
i.5. Tantalum or tantalum alloys;
i.6. Titanium or titanium alloys;
i.7. Zirconium or zirconium alloys;
i.8. Niobium (columbium) or niobium alloys.
i.9. Graphite or carbon-graphite;
i.10. Ceramics;
i.11. Ferrosilicon (high silicon iron alloys).
j. Incinerators designed to destroy chemical warfare agents, chemical weapons precursors controlled by 1C350, or chemical munitions having “specially designed” waste supply systems, special handling facilities and an average combustion chamber temperature greater than 1000 °C in which all surfaces in the waste supply system that come into direct contact with the waste products are made from or lined with any of the following materials:
j.1. Alloys with more than 25% nickel and 20% chromium by weight;
j.2. Nickel or alloys with more than 40% nickel by weight;
j.3. Ceramics.
T
a. Designed for continuous operation and usable for the detection of chemical warfare agents or precursor chemicals controlled by 1C350 at concentrations of less than 0.3 mg/m
b. Designed for the detection of cholinesterase-inhibiting activity.
a. Containment facilities and related equipment, as follows:
a.1. Complete containment facilities at P3 or P4 containment level.
a.2. Equipment designed for fixed installation in containment facilities specified in paragraph a.1 of this ECCN, as follows:
a.2.a. Double-door pass-through decontamination autoclaves;
a.2.b. Breathing air suit decontamination showers;
a.2.c. Mechanical-seal or inflatable-seal walkthrough doors.
b. Fermenters and components as follows:
b.1. Fermenters capable of cultivation of micro-organisms or of live cells for the production of viruses or toxins, without the propagation of aerosols, having a total internal volume of 20 liters or greater.
b.2. Components designed for such fermenters, as follows:
b.2.a. Cultivation chambers designed to be sterilized or disinfected in situ;
b.2.b. Cultivation chamber holding devices;
b.2.c. Process control units capable of simultaneously monitoring and controlling two or more fermentation system parameters (
c. Centrifugal separators capable of the continuous separation of pathogenic microorganisms, without the propagation of aerosols, and having all of the following characteristics:
c.1. One or more sealing joints within the steam containment area;
c.2. A flow rate greater than 100 liters per hour;
c.3. “Parts” or “components” of polished stainless steel or titanium;
c.4. Capable of in-situ steam sterilization in a closed state.
d. Cross (tangential) flow filtration equipment and “accessories”, as follows:
d.1. Cross (tangential) flow filtration equipment capable of separation of microorganisms, viruses, toxins or cell cultures having all of the following characteristics:
d.1.a. A total filtration area equal to or greater than 1 square meter (1 m
d.1.b. Having any of the following characteristics:
d.1.b.1. Capable of being sterilized or disinfected in-situ;
d.1.b.2. Using disposable or single-use filtration “parts” or “components”.
N.B.:
d.2. Cross (tangential) flow filtration “parts” or “components” (
e. Steam, gas or vapor sterilizable freeze-drying equipment with a condenser capacity of 10 kg of ice or greater in 24 hours (10 liters of water or greater in 24 hours) and less than 1000 kg of ice in 24 hours (less than 1,000 liters of water in 24 hours).
f. Spray-drying equipment capable of drying toxins or pathogenic microorganisms having all of the following characteristics:
f.1. A water evaporation capacity of ≥0.4 kg/h and ≤400 kg/h;
f.2. The ability to generate a typical mean product particle size of ≤10 micrometers with existing fittings or by minimal modification of the spray-dryer with atomization nozzles enabling generation of the required particle size;
f.3. Capable of being sterilized or disinfected in situ.
g. Protective and containment equipment, as follows:
g.1. Protective full or half suits, or hoods dependant upon a tethered external air supply and operating under positive pressure.
g.2. Biocontainment chambers, isolators, or biological safety cabinets having all of the following characteristics, for normal operation:
g.2.a. Fully enclosed workspace where the operator is separated from the work by a physical barrier;
g.2.b. Able to operate at negative pressure;
g.2.c. Means to safely manipulate items in the workspace;
g.2.d. Supply and exhaust air to and from the workspace is high-efficiency particulate air (HEPA) filtered.
2B352.g.2 controls class III biosafety cabinets, as specified in the WHO Laboratory Biosafety Manual (3rd edition, Geneva, 2004) or constructed in accordance with national standards, regulations or guidance.
2B352.g.2 does not control isolators “specially designed” for barrier nursing or transportation of infected patients.
h. Aerosol inhalation equipment designed for aerosol challenge testing with microorganisms, viruses or toxins, as follows:
h.1. Whole-body exposure chambers having a capacity of 1 cubic meter or greater;
h.2. Nose-only exposure apparatus utilizing directed aerosol flow and having a capacity for the exposure of 12 or more rodents, or two or more animals other than rodents, and closed animal restraint tubes designed for use with such apparatus.
i. Spraying or fogging systems and “parts” and “components” therefor, as follows:
i.1. Complete spraying or fogging systems, “specially designed” or modified for fitting to aircraft, “lighter than air vehicles,” or “UAVs,” capable of delivering, from a liquid suspension, an initial droplet “VMD” of less than 50 microns at a flow rate of greater than 2 liters per minute;
i.2. Spray booms or arrays of aerosol generating units, “specially designed” or modified for fitting to aircraft, “lighter than air vehicles,” or “UAVs,” capable of delivering, from a liquid suspension, an initial droplet “VMD” of less than 50 microns at a flow rate of greater than 2 liters per minute;
i.3. Aerosol generating units “specially designed” for fitting to the systems as specified in paragraphs i.1 and i.2 of this ECCN.
j. Nucleic acid assemblers and synthesizers that are both:
j.1 Partly or entirely automated;
j.2. Designed to generate continuous nucleic acids greater than 1.5 kilobases in length with error rates less than 5% in a single run.
Social Security Administration.
Final rule.
We are extending the expiration dates of the following body systems in the Listing of Impairments (listings) in our regulations: Special Senses and Speech and Congenital Disorders That Affect Multiple Body Systems. We are making no other revisions to these body systems in this final rule. This extension ensures that we will continue to have the criteria we need to evaluate impairments in the affected body systems at step three of the sequential evaluation processes for initial claims and continuing disability reviews.
This final rule is effective on April 2, 2018.
Cheryl A. Williams, Director, Office of Medical Policy, 6401 Security Boulevard, Baltimore, MD 21235-6401, (410) 965-1020. 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
We use the listings in appendix 1 to subpart P of part 404 of 20 CFR at the third step of the sequential evaluation process to evaluate claims filed by adults and children for benefits based on disability under the title II and title XVI programs.
In this final rule, we are extending the dates on which the listings for the following two body systems will no longer be effective as set out in the following chart:
We continue to revise and update the listings on a regular basis, including those body systems not affected by this final rule.
We follow the Administrative Procedure Act (APA) rulemaking procedures specified in 5 U.S.C. 553 in promulgating regulations. Section 702(a)(5) of the Social Security Act, 42 U.S.C. 902(a)(5). Generally, the APA requires that an agency provide prior notice and opportunity for public comment before issuing a final regulation. The APA provides exceptions to the notice-and-comment requirements when an agency finds there is good cause for dispensing with such procedures because they are impracticable, unnecessary, or contrary to the public interest.
We have determined that good cause exists for dispensing with the notice and public comment procedures. 5 U.S.C. 553(b)(B). This final rule only extends the date on which two body system listings will no longer be effective. It makes no substantive changes to our rules. Our current regulations
In addition, for the reasons cited above, we find good cause for dispensing with the 30-day delay in the effective date of this final rule. 5 U.S.C. 553(d)(3). We are not making any substantive changes to the listings in these body systems. Without an extension of the expiration dates for these listings, we will not have the criteria we need to assess medical impairments in these two body systems at step three of the sequential evaluation processes. We therefore find it is in the public interest to make this final rule effective on the publication date.
We consulted with the Office of Management and Budget (OMB) and determined that this final rule does not meet the requirements for a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563. Therefore, OMB did not review it. We also determined that this final rule meets the plain language requirement of Executive Order 12866.
We certify that this final rule does not have a significant economic impact on a substantial number of small entities because it affects only individuals. Therefore, a regulatory flexibility analysis is not required under the Regulatory Flexibility Act, as amended.
This final rule does not create any new or affect any existing collections and, therefore, it does not require OMB's approval under the Paperwork Reduction Act.
Administrative practice and procedure, Blind, Disability benefits, Old-age, Survivors and Disability Insurance, Reporting and recordkeeping requirements, Social Security.
For the reasons set out in the preamble, we are amending appendix 1 to subpart P of part 404 of chapter III of title 20 of the Code of Federal Regulations as set forth below.
Secs. 202, 205(a)-(b) and (d)-(h), 216(i), 221(a) and (h)-(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) and (h)-(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).
3. Special Senses and Speech (2.00 and 102.00): April 24, 2020.
11. Congenital Disorders That Affect Multiple Body Systems (10.00 and 110.00): April 3, 2020.
Food and Drug Administration; HHS.
Final rule; technical amendment.
The Food and Drug Administration (FDA or Agency) is amending certain medical device regulations. This action is editorial in nature to correct typographical errors and to ensure accuracy and clarity in the Agency's regulations.
This rule is effective April 2, 2018.
Karen Fikes, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 5244, Silver Spring, MD 20993-0002, 301-796-9603.
FDA is amending our regulations in 21 CFR parts 890, 900, 1020, and 1040 to correct typographical errors and to update addresses, office titles, and wording to ensure accuracy and clarity in the Agency's medical device regulations.
FDA is making nonsubstantive changes to the following regulations:
1. FDA is revising § 890.5525(b)(2)(i)(A) by replacing “Testing using a drug approved for iontophoretic delivery, or a solution, if identified in the labeling, to demonstrate safe use of the device as intended” with “Testing using a drug approved for iontophoretic delivery, or a solution if identified in the labeling, to demonstrate safe use of the device as intended”.
2. FDA is revising § 900.3(b)(1) by replacing “Division of Mammography Quality and Radiation Programs (DMQRP), Center for Devices and Radiology Health (HFZ-240), Food and Drug Administration, 1350 Piccard Dr., Rockville, MD 20850, marked Attn: Mammography Standards Branch” with “Division of Mammography Quality Standards, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4445, Silver Spring, MD 20993, Attn: Program Management Branch”.
3. FDA is revising § 900.11(b)(2)(i) by replacing “42 U.S.C. 263b(c)(2)” with “42 U.S.C. 263b(c)(4)”.
4. FDA is revising § 1020.30(c) by replacing “Director of the Office of Communication, Education, and Radiation Programs of the Center for Devices and Radiological Health” with “Director, Center for Devices and Radiological Health”.
5. FDA is revising § 1040.10(a)(3)(i) by replacing “Food and Drug Administration, Center for Devices and Radiological Health, Director, Office of Compliance, 10903 New Hampshire Ave., Bldg. 66, Rm. 3521, Silver Spring, MD 20993-0002” with “Director, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Silver Spring, MD 20993-0002”.
6. FDA is revising § 1040.10(f)(6)(ii) by replacing “Director, Office of
7. FDA is revising § 1040.10(g)(10) by replacing “Director, Office of Compliance (HFZ-300), Center for Devices and Radiological Health” with “Director, Center for Devices and Radiological Health”.
8. FDA is revising § 1040.20(d)(3)(iii) by replacing “Director, Office of Communication, Education, and Radiation Programs 10903 New Hampshire Ave., Bldg. 66, Rm. 4312, Silver Spring, MD 20993-0002, Center for Devices and Radiological Health” with “Director, Center for Devices and Radiological Health”.
9. FDA is revising § 1040.20(d)(3)(iv) by replacing “manfacturer” with “manufacturer,” and replacing “Director, Office of Compliance (HFZ-300), Center for Devices and Radiological Health” with “Director, Center for Devices and Radiological Health”.
Medical devices, Physical medicine devices.
Electronic products, Health facilities, Medical devices, Radiation protection, Reporting and recordkeeping requirements, X-rays.
Electronic products, Medical devices, Radiation protection, Reporting and recordkeeping requirements, Television, X-rays.
Electronic funds transfers, Incorporation by reference, Labeling, Lasers, Medical devices, Radiation protection, 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 parts 890, 900, 1020, and 1040 are amended as follows:
21 U.S.C. 351, 360, 360c, 360e, 360j, 360
(b) * * *
(2) * * *
(i) * * *
(A) Testing using a drug approved for iontophoretic delivery, or a solution if identified in the labeling, to demonstrate safe use of the device as intended;
21 U.S.C. 360i, 360nn, 374(e), 42 U.S.C. 263b.
(b) * * *
(1) An applicant seeking initial FDA approval as an accreditation body shall inform the Division of Mammography Quality Standards, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4445, Silver Spring, MD 20993, Attn: Program Management Branch, of its desire to be approved as an accreditation body and of its requested scope of authority.
(b) * * *
(2) * * *
(i) A new facility beginning operation after October 1, 1994, is eligible to apply for a provisional certificate. The provisional certificate will enable the facility to perform mammography and to obtain the clinical images needed to complete the accreditation process. To apply for and receive a provisional certificate, a facility must meet the requirements of 42 U.S.C. 263b(c)(4) and submit the necessary information to an approved accreditation body or other entity designated by FDA.
21 U.S.C. 351, 352, 360e-360j, 360hh-360ss, 371, 381.
(c)
21 U.S.C. 351, 352, 360, 360e-360j, 360hh-360ss, 371, 381.
(a) * * *
(3) * * *
(i) Registers, and provides a listing by type of such laser products manufactured that includes the product name, model number, and laser medium or emitted wavelength(s), and the name and address of the manufacturer. The manufacturer must submit the registration and listing to the Director, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Silver Spring, MD 20993-0002.
(f) * * *
(6) * * *
(ii) If the configuration, design, or function of the laser product would make unnecessary compliance with the requirement in paragraph (f)(6)(i) of this section, the Director, Center for Devices and Radiological Health, may, upon written application by the manufacturer, approve alternate means to accomplish
(g) * * *
(10)
(d) * * *
(3) * * *
(iii) If the size, configuration, design, or function of the sunlamp product or ultraviolet lamp would preclude compliance with the requirements for any required label or would render the required wording of such label inappropriate or ineffective, or would render the required label unnecessary, the Director, Center for Devices and Radiological Health, on the center's own initiative or upon written application by the manufacturer, may approve alternate means of providing such label(s), alternate wording for such label(s), or deletion, as applicable.
(iv) In lieu of permanently affixing or inscribing tags or labels on the ultraviolet lamp as required by §§ 1010.2(b) and 1010.3(a), the manufacturer of the ultraviolet lamp may permanently affix or inscribe such required tags or labels on the lamp packaging uniquely associated with the lamp, if the name of the manufacturer and month and year of manufacture are permanently affixed or inscribed on the exterior surface of the ultraviolet lamp so as to be legible and readily accessible to view. The name of the manufacturer and month and year of manufacture affixed or inscribed on the exterior surface of the lamp may be expressed in code or symbols, if the manufacturer has previously supplied the Director, Center for Devices and Radiological Health, with the key to such code or symbols and the location of the coded information or symbols on the ultraviolet lamp. The label or tag affixed or inscribed on the lamp packaging may provide either the month and year of manufacture without abbreviation, or information to allow the date to be readily decoded.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the PATH Bridge across the Hackensack River, mile 3.0, at Jersey City, New Jersey. This temporary deviation is necessary to allow the bridge to remain in the closed-to-navigation position to facilitate the replacement of rails and timbers across the length of the span of the bridge.
This deviation is effective from 12:01 a.m. on March 31, 2018, to 12:01 a.m. on September 26, 2018.
The docket for this deviation, USCG-2018-0110 is available at
If you have questions on this temporary deviation, call or email Judy Leung-Yee, Project Officer, First Coast Guard District, telephone 212-514-4330, email
The Port Authority Trans-Hudson Corporation, the owner of the bridge, requested a temporary deviation from the normal operating schedule to facilitate the replacement of rails and timbers across the length of the span of the bridge. The PATH Bridge across the Hackensack River, mile 3.0, has a vertical clearance in the closed position of 40 feet at mean high water and 45 feet at mean low water. The existing bridge operating regulations are listed at 33 CFR 117.723(b).
Under this temporary deviation, the PATH Bridge shall remain in the closed position between 12:01 a.m. Saturday and 12:01 a.m. Monday as follows: March 31-April 2, 2018; April 7-9, 14-16, 21-23, and 28-30, 2018; May 5-7, 12-14, and 19-21, 2018; June 2-4, 9-11, 16-18, 23-25, and 30-July 2, 2018; July 7-9, 14-16, 21-23, and 28-30, 2018; August 4-6, 11-13, 18-20, and 25-27, 2018; September 8-10, 15-17, 22-24, 2018.
The waterway is transited by commercial and recreational traffic. The Coast Guard notified known companies of the commercial vessels that transit the area, including the Sandy Hook Pilots and the local Tug/Tow Committee; there were no objections to this temporary deviation. Vessels able to pass under the bridge in the closed position may do so at any time. The bridge will not be able to open for emergencies and there is no immediate alternate route for vessels to pass.
The Coast Guard will inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessel operations can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Fremont Bridge, mile 2.6, and the University Bridge, mile 4.3, both crossing the Lake Washington Ship Canal at Seattle, WA. The deviation is necessary to accommodate the Tenacious Ten run event. This deviation allows the bridges to remain in the closed-to-navigation position to allow for the safe movement of event participants.
This deviation is effective from 8 a.m. to 10:15 a.m. on April 21, 2018.
The docket for this deviation, USCG-2018-0253 is available at
If you have questions on this temporary deviation, call or email Mr. Steven Fischer, Bridge Administrator, Thirteenth Coast Guard District; telephone 206-220-7282, email
The Seattle Department of Transportation, bridge owner, requested a temporary deviation from the operating schedule for the Fremont Bridge, mile 2.6, and the University Bridge, mile 4.3, both crossing the Lake Washington Ship Canal at Seattle, WA, to facilitate safe passage of participants in the Tenacious Ten run event. The Fremont Bridge provides a vertical clearance of 14 feet (31 feet of vertical clearance for the center 36 horizontal feet) in the closed-to-navigation position. The University Bridge provides a vertical clearance of 30 feet in the closed-to-navigation position. Both bridge clearances are referenced to the mean water elevation of Lake Washington. The normal operating schedule for both the Fremont Bridge and the University Bridge is in 33 CFR 117.1051. During this deviation period, the Fremont Bridge need not open to marine vessels from 8:15 a.m. to 10:15 a.m. on April 21, 2018, and the University Bridge need not open to marine vessel from 8 a.m. to 8:30 a.m. on April 21, 2018. Waterway usage on the Lake Washington Ship Canal ranges from commercial tug and barge to small pleasure craft.
Vessels able to pass through the bridges in the closed-to-navigation positions may do so at any time. Both bridges will be able to open for emergencies, and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterway through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), both drawbridges must return to their regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the Hawthorne Bridge across the Willamette River, mile 13.1, at Portland, OR. The deviation is necessary to accommodate the Walk MS Portland event. This deviation authorizes the bridge to remain in the closed-to-navigation position to allow safe roadway movement of event participants.
This deviation is effective from 9 a.m. to 11:30 a.m. on April 7, 2018.
The docket for this deviation, USCG-2018-0195 is available at
If you have questions on this temporary deviation, call or email Mr. Steven Fischer, Bridge Administrator, Thirteenth Coast Guard District; telephone 206-220-7282, email
Multnomah County, the bridge owner, has requested a temporary deviation from the operating schedule for the Hawthorne Bridge across the Willamette River, mile 13.1, at Portland, OR. The requested deviation is to accommodate the Walk MS Portland event. To facilitate this event, the draw of the subject bridge will be allowed to remain in the closed-to-navigation position and need not open to marine traffic from 7 a.m. to 11:30 on April 7, 2018. The Hawthorne Bridge provides a vertical clearance of 49 feet in the closed-to-navigation position referenced to the vertical clearance above Columbia River Datum 0.0. The normal operating schedule is in 33 CFR 117.897(c)(3(v). Waterway usage on this part of the Willamette River includes vessels ranging from commercial tug and barge to small pleasure craft. The Coast Guard requested objections to this deviation from local mariners via the Local Notice Mariners, and email. No objections were submitted to the Coast Guard.
Vessels able to pass through the bridge in the closed-to-navigation position may do so at any time. The bridge will be able to open for emergencies, and there is no immediate alternate route for vessels to pass. The Coast Guard will inform the users of the waterway, through our Local and Broadcast Notices to Mariners, of the change in operating schedule for the bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating
This deviation is effective from 5 a.m. to 11:30 a.m. on April 8, 2018.
The docket for this deviation, USCG-2018-0122, is available at
If you have questions on this temporary deviation, call or email Carl T. Hausner, Chief, Bridge Section, Eleventh Coast Guard District; telephone 510-437-3516, email
The California Department of Transportation has requested a temporary change to the operation of the Tower Drawbridge, mile 59.0, over the Sacramento River, at Sacramento, CA. The drawbridge navigation span provides a vertical clearance of 30 feet above Mean High Water in the closed-to-navigation position. The draw operates as required by 33 CFR 117.189(a). Navigation on the waterway is commercial and recreational.
The drawspan will be secured in the closed-to-navigation position 5 a.m. to 11:30 a.m. on April 8, 2018, to allow the community to participate in the Sactown Run 10 mile and 5K races. This temporary deviation has been coordinated with the waterway users. No objections to the proposed temporary deviation were raised.
Vessels able to pass through the bridge in the closed position may do so at any time. The bridge will be able to open for emergencies and there is no immediate alternate route for vessels to pass. The Coast Guard will also inform the users of the waterway through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Coast Guard, DHS.
Notice of deviation from drawbridge regulation.
The Coast Guard has issued a temporary deviation from the operating schedule that governs the lower deck of the Steel Bridge across the Willamette River, mile 12.1, in Portland, OR. The deviation is necessary to support the Bridge to Brews run event. This deviation allows the upper lift span of the bridge to remain in the closed-to-navigation position to ensure the safety of event participants.
This deviation is effective from 8:30 a.m. to 10:45 a.m. on April 15, 2018.
The docket for this deviation, USCG-2018-0200, is available at
If you have questions on this temporary deviation, call or email Mr. Steven Fischer, Bridge Administrator, Thirteenth Coast Guard District; telephone 206-220-7282, email
Union Pacific Railroad Company (UPRR) owns and operates the Steel Bridge across the Willamette River, at mile 12.1, in Portland, OR. UPRR has requested a temporary deviation from the operating schedule for the Steel Bridge upper lift span. The deviation is necessary to accommodate the annual Bridge to Brews run event. The Steel Bridge is a double-deck lift bridge, and the lower lift span operates independent of the upper lift span. To facilitate this temporary deviation request, the upper lift span is authorized to remain in the closed-to-navigation position, and need not open to marine vessels from 8:30 a.m. to 10:45 a.m. on April 15, 2018. When the lower span is in the closed-to-navigation position, the bridge provides 26 feet of vertical clearance above Columbia River Datum 0.0. When the upper span is in the closed-to-navigation position, and the lower span is in the open-to-navigation position, the vertical clearance is 71 feet above Columbia River Datum 0.0. The lower lift span of the Steel Bridge operates in accordance with 33 CFR 117.5.
Waterway usage on this part of the Willamette River includes vessels ranging from commercial tug and barge to small pleasure craft. Vessels able to pass through the subject bridge with the lower deck in the closed-to-navigation position, or in the open-to-navigation position may do so at any time. The lower and upper lift of the Steel Bridge will be able to open for emergencies, and there is no immediate alternate route for vessels to pass. The Coast Guard requested objections to this deviation be submitted to the Local Notice to Mariners. We have not received any objections to this temporary deviation from the operating schedule. The Coast Guard will also inform the users of the waterway through our Local and Broadcast Notices to Mariners of the change in operating schedule for the subject bridge so that vessel operators can arrange their transits to minimize any impact caused by the temporary deviation.
In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to
This rule will be effective on May 2, 2018.
The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2017-0680. All documents in the docket are listed on the
Rebecca Newhouse, EPA Region IX, (415) 972-3004,
Throughout this document, “we,” “us” and “our” refer to the EPA.
On January 9, 2018 (83 FR 1001), the EPA proposed to approve the following rule into the California SIP.
We proposed to approve this rule based on a determination that it satisfies the applicable CAA requirements. Our proposed action contains more information on the rule and our evaluation.
The EPA's proposed action provided a 30-day public comment period. During this period, we received one public comment that fails to identify any specific issue that is germane to our action on the rule. The comment letter is available in the docket for this rulemaking.
No comments were submitted that change our assessment of the rule as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, the EPA is fully approving this rule into the California SIP.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the YSAQMD rule described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 1, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(c) * * *
(342) * * *
(i) * * *
(A) * * *
(
(497) * * *
(i) * * *
(D) Yolo-Solano Air Quality Management District.
(
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to approve revisions to the San Diego County Air Pollution Control District (SDCAPCD) portion of the California State Implementation Plan (SIP). These revisions concern volatile organic compound (VOC) emissions from polyester resin operations. We are approving a local rule to regulate these emission sources, as well as a rule rescission, under the Clean Air Act (CAA or “the Act”).
This rule will be effective on May 2, 2018.
The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2017-0140. All documents in the docket are listed on the
Arnold Lazarus, EPA Region IX, (415) 972-3024,
Throughout this document, “we,” “us” and “our” refer to the EPA.
On December 20, 2017, the EPA proposed to approve the following rule and rule rescission into the California SIP (82 FR 60348).
Table 1 lists the rules addressed by this action with the date that they were adopted and repealed by the local air agency, and submitted by the California Air Resources Board (CARB).
We proposed to approve this rule and rule rescission because we determined that they comply with the relevant CAA requirements. Our proposed action contains more information on the rule and rule rescission, and our evaluation.
The EPA's proposed action provided a 30-day public comment period. During this period, we received seven comments. Commenters generally raised issues that are outside the scope of this rulemaking, including bird and bat deaths associated with wind and solar facilities, the regulation of wildfire risks and emissions from wildfires, and the study of hydraulic fracturing and drinking water. One commenter supported the regulation of emissions from polyester resin operations, and one
The EPA is required to approve a state submittal if the submittal meets all applicable requirements. 42 U.S.C. 7410(k)(3). The submitted comments either fail to identify any specific issue that is germane to our action, or they do not change our assessment of the SDCAPCD Polyester Resin Operations Rule as described in our proposed action and supporting documents.
No comments were submitted that change our assessment of the rule and rule rescission as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, the EPA is fully approving this rule and rule rescission into the California SIP.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the SDCAPCD rule and rule rescission, described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 1, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Particulate matter, Reporting and recordkeeping requirements, Volatile organic compounds.
Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(c) * * *
(241) * * *
(i) * * *
(A) * * *
(
(488) * * *
(i) * * *
(A) * * *
(
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to approve a revision to the Northern Sierra Air Quality Management District (NSAQMD) portion of the California State Implementation Plan (SIP). This revision concerns emissions of particulate matter (PM) from wood burning devices. We are approving a local measure to reduce emissions from these emission sources under the Clean Air Act (CAA or the Act).
This rule will be effective on May 2, 2018.
The EPA has established a docket for this action under Docket ID No. EPA-R09-OAR-2017-0737. All documents in the docket are listed on the
Rynda Kay, EPA Region IX, (415) 947-4118,
Throughout this document, “we,” “us” and “our” refer to the EPA.
On December 27, 2017 (82 FR 61203), the EPA proposed to approve the following measure into the California SIP.
We proposed to approve this rule based on a determination that it satisfies the applicable CAA requirements. Our proposed action contains more information on the measure and our evaluation.
The EPA's proposed action provided a 30-day public comment period. During this period, we received three public comments that fail to identify any specific issue that is germane to our action on the rule. Two of these comments identify issues that are outside of the scope of this rulemaking, including forest management, wildfire suppression, and greenhouse-gas and other emissions from wildfires. The third comment fails to identify any specific issue. The comment letters are available in the docket for this rulemaking.
No comments were submitted that change our assessment of the rule as described in our proposed action. Therefore, the EPA is fully approving this rule into the California SIP in accordance with section 110(k)(3) of the Act.
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the NSAQMD measure described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents available through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 1, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
Part 52, Chapter I, Title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
(c) * * *
(500) The following plan was submitted on February 28, 2017 by the Governor's designee.
(i)
(
Environmental Protection Agency.
Final rule.
The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted on September 13, 2017, by the Commonwealth of Kentucky, through the Kentucky Division for Air Quality (KDAQ) in support of the Commonwealth's separate petition requesting that EPA remove the federal reformulated gasoline (RFG) requirements for Boone, Campbell, and Kenton counties in the Kentucky portion of the Cincinnati-Hamilton, Ohio-Kentucky-Indiana 2008 8-hr ozone maintenance area (hereinafter referred to as the “Northern Kentucky Area” or “Area”). The SIP revision revises the Commonwealth's maintenance plan emissions inventory and associated motor vehicle emissions budgets (MVEBs), for years 2020 and 2030, to remove reliance on emissions reductions from the federal RFG program requirements, a program that the Commonwealth voluntarily opted into in 1995. The SIP revision also includes a non-interference demonstration evaluating whether removing reliance on the RFG requirements in the Northern Kentucky Area would interfere with the requirements of the Clean Air Act (CAA or Act). EPA is approving this SIP revision and the corresponding non-interference demonstration because EPA determined that the revision is consistent with the applicable provisions of the CAA. Please note that this final rule does not remove the federal RFG requirement. On April 18, 2017, Kentucky's Energy and Environment Cabinet submitted a separate petition to the EPA Administrator requesting to opt-out of the federal RFG program in the Northern Kentucky Area, and the Administrator will act on that petition in the near future.
This rule will be effective April 2, 2018.
EPA has established a docket for this action under Docket Identification No. No. EPA-R04-OAR-2017-0389 at
Dianna Myers, Air Regulatory Management Section, Air Planning and Implementation Branch, Air, Pesticides and Toxics Management Division, Region 4, U.S. Environmental Protection Agency, 61 Forsyth Street, SW, Atlanta, Georgia 30303-8960. Ms. Myers can be reached via telephone at (404) 562-9207 or via electronic mail at
The Northern Kentucky Area was included in the Cincinnati-Hamilton Area, which was originally designated as a moderate nonattainment area for the 1-hour ozone standard on November 6, 1991 (56 FR 56694). In 1995, Kentucky voluntarily opted into the RFG program under Phase I of a two-phase nationwide program to reduce the volatility of commercial gasoline during the summer ozone season. Kentucky elected to stay in the program under Phase II which was more stringent than Phase I.
On July 18, 1997, EPA promulgated a revised 8-hour ozone standard of 0.08 parts per million (ppm). This standard was more stringent than the 1-hour ozone standard. On June 19, 2000 (65 FR 37879), the Cincinnati-Hamilton 1-hour nonattainment Area was redesignated as attainment for the 1-hour ozone NAAQS, and was considered to be a maintenance area subject to a CAA section 175A maintenance plan for the 1-hour ozone NAAQS. On April 30, 2004, EPA designated the Cincinnati-Hamilton OH-KY-IN Area under subpart 1 as a “basic” 1997 8-hour ozone NAAQS nonattainment area (69 FR 23857).
On March 12, 2008, EPA revised both the primary and secondary NAAQS for ozone to a level of 0.075 ppm to provide increased protection of public health and the environment.
Effective July 20, 2012, EPA designated any area that was violating the 2008 8-hour ozone NAAQS based on the three most recent years (2008-2010) of air monitoring data as a nonattainment area.
On August 26, 2016, Kentucky submitted a 2008 8-hour ozone redesignation request and maintenance plan for the Cincinnati-Hamilton Area, which EPA approved on July 5, 2017 (82 FR 30976).
In a September 13, 2017, SIP revision submittal, KDAQ updated the mobile (on-road and non-road) emissions inventory for the August 26, 2016, maintenance plan (including the MVEBs) to reflect Kentucky's petition (see below) to opt-out of the RFG requirements for Boone, Campbell, and Kenton counties in the Northern Kentucky Area. The updates were summarized in KDAQ's submittal. On April 18, 2017, Kentucky's Energy and Environment Cabinet submitted a petition to the EPA Administrator requesting to opt-out of the federal RFG program in the Northern Kentucky Area, and as stated above, the September 13, 2017, SIP revision was submitted in support of that petition (particularly the requirements of 40 CFR 80.72(b)(3) and (4)). Kentucky's opt-out petition will be acted on by the Administrator in a separate action, and if approved in that separate action, will establish the effective date of the opt-out. EPA's RFG regulations require that the opt-out cannot become effective less than 90 days from the effective date of this final action. EPA will also publish a notice in the
In a notice of proposed rulemaking (NPRM) published on February 14, 2018 (83 FR 6496), EPA proposed to approve the September 13, 2017, SIP revision. The Agency did not receive any adverse comments on the NPRM.
EPA is approving the changes in the September 13, 2017, SIP revision which includes updating the 2008 maintenance plan 2020 and 2030 MVEBs. The same criteria used to develop the MVEBs in the August 26, 2016, maintenance SIP are used for this SIP revision. The revised MVEBs for nitrogen oxides (NO
EPA is approving Kentucky's September 13, 2017, SIP revision seeking to revise the maintenance plan emissions inventory and associated MVEBs for years 2020 and 2030 to remove reliance on emissions reductions from the federal RFG program requirements; a program that the Commonwealth voluntarily opted into in 1995. The SIP revision also includes a non-interference demonstration evaluating whether removing reliance on the RFG requirements in the Northern Kentucky Area would interfere with the requirements of the CAA. Within 24 months from this final rule, the transportation partners will need to demonstrate conformity to the new NO
In accordance with 5 U.S.C. 553(d), EPA finds that there is good cause for this action to become effective immediately upon publication. This is because a delayed effective date is unnecessary because this action approves a SIP revision and noninterference demonstration that serves as the basis of a subsequent action to relieve the Area from certain CAA requirements that would otherwise apply to it. The immediate effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rulemaking actions may become effective less than 30 days after publication if the rule grants or recognizes an exemption or relieves a restriction, and section 553(d)(3), which allows an effective date less than 30 days after publication as otherwise provided by the agency for good cause found and published with the rule. The purpose of the 30-day waiting period prescribed in section 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. This rule however, does not create any new regulatory requirements such that affected parties would need time to prepare before the rule takes effect. Rather, this rule will serve as a basis for a subsequent action to relieve the Area from certain CAA requirements. For these reasons, EPA finds good cause under 5 U.S.C. 553(d)(3) for this action to become effective on the date of publication of this action.
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866.
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 1, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
40 CFR part 52 is amended as follows:
42.U.S.C. 7401
(e) * * *
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to approve a portion of a State Implementation Plan (SIP) revision submitted by the State of Florida, through the Florida Department of Environmental Protection (FDEP) on February 1, 2017, for the purpose of revising Florida's requirements and procedures for emissions monitoring at stationary sources. Specifically, Florida's February 1, 2017, SIP submittal includes amendments to three Florida Administrative Code (F.A.C.) rule sections, as well as the removal of one F.A.C. rule section from the Florida SIP, in order to eliminate redundant language and make updates to the requirements for emissions monitoring at stationary sources. Additionally, this action includes a correction to remove an additional F.A.C. rule that was previously approved by EPA for removal from the SIP but was never removed. This action is being taken pursuant to the Clean Air Act (CAA or Act).
This rule is effective May 2, 2018.
EPA has established a docket for this action under Docket Identification No. EPA-R04-OAR-2017-0500. All documents in the docket are listed on the
Andres Febres, Air Regulatory Management Section, Air Planning and Implementation Branch, Pesticides and Toxics Management Division, Region 4, U.S. Environmental Protection Agency, 61 Forsyth Street SW, Atlanta, Georgia 30303-8960. The telephone number is (404) 562-8966. Mr. Febres can also be reached via electronic mail at
On February 1, 2017, FDEP submitted to EPA for approval a SIP revision for the purpose of updating Florida's requirements and procedures for emissions monitoring at stationary sources. Florida's February 1, 2017, SIP revision includes amendments to three F.A.C. rule sections and the removal of one F.A.C. rule section from the Florida SIP. Specifically, these changes to Florida's rules include the amendments of Rule 62-297.310, F.A.C.—“General Emissions Test Requirement;” Rule 62-297.440, F.A.C.—“Supplementary Test Procedures;” and Rule 62-297.450, F.A.C.—“EPA VOC Capture Efficiency Test Procedures.” In addition, Florida's February 1, 2017, SIP submittal includes the removal of one of Florida's rule sections from the SIP. Specifically, Florida requested to remove Rule 62-297.401, F.A.C.—“Compliance Test Methods” from the State's implementation plan because it has been repealed at the state level, and, according to the submittal, the section is unnecessary, obsolete or duplicative of other F.A.C. Rules.
Through this rulemaking, EPA is finalizing approval of the portions of Florida's February 1, 2017, SIP revision regarding amendments to Rule 62-297.440, F.A.C., and Rule 62-297.450, F.A.C., as well as the removal of Rules 62-297.401, F.A.C., from the State's implementation plan. The portion of the SIP regarding Rule 62-297.310 was previously approved in a separate rulemaking, which approved several SIP amendments making administrative and recodification changes to Florida's SIP.
In addition to the removal of Rule 62-297.401, F.A.C., EPA is removing Rule 62-297.400, F.A.C.—“EPA Methods Adopted by Reference” from the Florida SIP. The removal of this rule section was previously approved by EPA, but was never reflected in Florida's SIP-approved rules table in 40 CFR 52.520(c). For more detail on the approval to remove Rule 62-297.400, F.A.C., see the June 16, 1999, rulemaking (64 FR 32346).
On October 13, 2017, EPA published a proposed rulemaking (82 FR 47662), which accompanied a direct final rulemaking (82 FR 47636) published on the same date. The proposed rule proposed to approve the portion of Florida's February 1, 2017 SIP revision described above. It also stated that if EPA received adverse comment on the direct final rule, the direct final rule would be withdrawn and all public comments received would be addressed in a subsequent final rule based on the proposed rule. EPA received 11 comments on the direct final rule, 10 of which were not relevant to the action. However, one of those comments was adverse. As a result, the direct final rule was subsequently withdrawn. After considering the adverse comment, EPA is now taking final action, based on the proposed rule, on the portion of Florida's February 1, 2017 SIP revision described above.
As stated in the proposed rule (82 FR 47662), a detailed rationale for EPA's approval of the above-described portions of Florida's February 1, 2017 SIP revision is set forth in the preamble to the direct final rule (82 FR 47636). In summary, EPA is approving amendments to Rule 62-297.440, F.A.C. that remove several subsections which contain test methods that are either adopted by reference in other rule sections or are now obsolete. EPA is approving amendments to Rule 62-297.450, F.A.C. because the changes clarify and simplify the language in the rule, and are consistent with EPA's VOC capture efficiency test procedure guidelines, as established in the agency's GD-035 guideline. EPA is approving the removal of Rule 62-297.401, F.A.C. from Florida's SIP because the requirements are still in place in other state rules and is unnecessary. Finally, EPA is removing Rule 62-297.400, F.A.C. from Florida's SIP because removal was previously approved by EPA, but was never reflected in Florida's SIP-approved rules table in 40 CFR 52.520(c).
In this rule, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of Rule 62-297.440, F.A.C., entitled “Supplementary Test Procedures” and Rule 62-297.450, F.A.C., entitled “EPA VOC Capture Efficiency Test Procedures,” both state effective on July 19, 2014. EPA has made, and will continue to make, these materials generally available through
EPA is finalizing approval of the above mentioned changes to the Florida SIP, as submitted to us in Florida's February 1, 2017, SIP revision. Specifically, EPA is approving the amendments to Rule 62-297.440, F.A.C., and Rule 62-297.450, F.A.C., both state effective on July 19, 2014, as well as the removal of Rule 62-297.401, F.A.C., from Florida's SIP. In addition, EPA is removing Rule 62-297.400, F.A.C., from Florida's SIP as approved in a previous rulemaking.
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations.
• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735,
• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866.
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under Section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 1, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements.
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
40 CFR part 52 is amended as follows:
42 U.S.C. 7401
(c) * * *
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to approve a negative declaration for existing commercial and industrial solid waste incineration (CISWI) units within the State of Maryland. This negative declaration certifies that CISWI units subject to the requirements of sections 111(d) and 129 of the Clean Air Act (CAA) do not exist within the jurisdictional boundaries of the State of Maryland. EPA is accepting the negative declaration in accordance with the requirements of the CAA.
This rule is effective on May 2, 2018.
EPA has established a docket for this action under Docket ID No. EPA-R03-OAR-2017-0570. All documents in the docket are listed on the
Mike Gordon, (215) 814-2039, or by email at
Sections 111(d) and 129 of the CAA require states to submit plans to control certain pollutants (designated pollutants) at existing solid waste combustor facilities (designated facilities) whenever standards of performance have been established under section 111(b) for new sources of the same type, and EPA has established emission guidelines (EG) for such existing sources. CAA section 129 directs EPA to establish standards of performance for new sources and emissions guidelines for existing sources for each category of solid waste incineration unit. CAA section 129(a) and (b). According to section 129(a)(4) of the CAA, EPA also must specify numerical emissions limitations for particulate matter (total and fine), opacity (as appropriate), sulfur dioxide, hydrogen chloride, oxides of nitrogen, carbon monoxide, lead, cadmium, mercury, and dioxins and dibenzofurans.
If a state fails to submit a satisfactory plan, the CAA provides EPA the authority to prescribe a plan for regulating the designated pollutants at the designated facilities. EPA prescribed plan, also known as a federal plan, is often delegated to states with designated facilities but no EPA approved state-specific plan. If no such designated facilities exist within a state's jurisdiction, a state may submit to the EPA a letter of certification to that effect (referred to as a negative declaration) in lieu of a state plan to satisfy the state's obligation. 40 CFR 60.23(b) and 62.06. A negative declaration exempts the state from the requirement to submit a CAA section 111(d)/section 129 plan for that designated pollutant and source category. 40 CFR 60.23(b).
The Maryland Department of the Environment (MDE) has determined that there are no existing CISWI units subject to the requirements of sections 111(d) and 129 of the CAA in its respective air pollution control jurisdiction. Accordingly, MDE submitted a negative declaration letter to EPA certifying this fact on January 20, 2017. A notice of proposed rulemaking was published in the
In this final action, EPA is approving the negative declaration for CISWI units submitted by MDE on January 20, 2017 and amending part 62 to reflect receipt of the negative declaration and subsequent approval by EPA. EPA is accepting the negative declaration in accordance with the requirements of the CAA and 40 CFR 60.23(b) and 62.06.
Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely notifies the public of EPA receipt of a negative declaration from an air pollution control agency without any existing CISWI units in their jurisdiction. This action imposes no requirements. Accordingly, EPA certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
With regard to negative declarations for designated facilities received by EPA from states, EPA's role is to notify the public of the receipt of such negative declarations and revise 40 CFR part 62 accordingly. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to approve or disapprove a CAA section 111(d)/129 plan negative declaration submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a CAA section 111(d)/129 negative declaration, to use VCS in place of a section 111(d)/129 negative declaration that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by June 1, 2018. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action approving the negative declaration for existing CISWI units within the State of Maryland may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).
Environmental protection, Administrative practice and procedure, Air pollution control, Intergovernmental relations, Reporting and recordkeeping requirements, Waste treatment and disposal.
40 CFR part 62 is amended as follows:
42 U.S.C. 7401
(a) May 12, 2005 Maryland Department of the Environment letter certifying that existing CISWI units, subject to 40 CFR part 60, subpart DDDD, have been permanently shut down and have been dismantled in the state.
(b) Letter from the State of Maryland, Department of the Environment, submitted January 20, 2017, certifying that there are no existing commercial/industrial solid waste incineration units within the State of Maryland that are subject to 40 CFR part 60, subpart DDDD.
Federal Deposit Insurance Corporation.
Proposed rule.
The Federal Deposit Insurance Corporation (FDIC) proposes to make several revisions to its stress testing regulation. Consistent with changes already made by the Board of Governors of the Federal Reserve System (Board) and the Office of the Comptroller of the Currency (OCC) to their respective stress testing regulations, the proposed rule would change the transition process for covered banks that become over $50 billion covered banks. Under the proposed rule, a covered bank that becomes an over $50 billion covered bank on or before September 30 would become subject to the requirements applicable to an over $50 billion covered bank beginning on January 1 of the second calendar year after the covered bank becomes an over $50 billion covered bank. A covered bank that becomes an over $50 billion covered bank after September 30 would become subject to the requirements applicable to an over $50 billion covered bank beginning on January 1 of the third calendar year after the covered bank becomes an over $50 billion covered bank. The proposed rule would also change the range of possible “as-of” dates used in the trading and counterparty position data stress testing component. Lastly, the proposed rule would make certain technical changes to clarify the requirements of the FDIC's stress testing regulation, and to eliminate obsolete provisions.
Comments must be received on or before June 1, 2018.
Interested parties are encouraged to submit written comments. Commenters are encouraged to use the title “Annual Stress Test— Applicability Transition for Covered Banks with $50 Billion or More in Assets; Technical and Conforming Changes” to facilitate the organization and distribution of comments among the Agencies. You may submit comments, identified by RIN number, by any of the following methods:
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Ryan Sheller, Section Chief, (202) 412-4861, Large Bank Supervision, Division of Risk Management Supervision; Annmarie Boyd, Counsel, (202) 898-3714, or Benjamin Klein, Counsel, (202) 898-7027, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC, 20429.
Section 165(i) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Act also requires that the FDIC and other federal financial regulatory agencies issue consistent and comparable regulations to implement the statutory stress testing requirement.
Although 12 CFR part 325, subpart C applies to all covered banks that exceed $10 billion in average total consolidated assets, the regulation differentiates between “$10 billion to $50 billion covered banks” and “over $50 billion covered banks.” The proposed rule would change the defined term “over $50 billion covered bank” to “$50 billion or over covered bank.” This change would not alter the scope of this defined term and would not change the substantive requirements of the regulation. The new defined term would be a more precise description of the entities included within this category, which includes all state nonmember banks and state savings associations “with average total consolidated assets . . . that are not less than $50 billion.”
The proposed rule would also change the transition process for a covered bank that becomes an “over $50 billion covered bank.” On February 3, 2017, the Board published a final rule that provided additional time for bank holding companies that cross the $50 billion asset threshold to comply with the stress testing requirements applicable to bank holding companies of such size.
Under the existing regulation, a $10 billion to $50 billion covered bank that migrates to an over $50 billion covered bank becomes subject to the requirements applicable to over $50 billion covered banks immediately after satisfying the threshold.
The stress testing timeline and transition process for state nonmember banks and state savings associations that become $10 to $50 billion covered banks would remain unchanged.
Under 12 CFR part 325, subpart C, the FDIC may require a covered bank with significant trading activities to include trading and counterparty components in its adverse and severely adverse scenarios. The trading data to be used in this component is as of a date between January 1 and March 1 of a calendar year.
In 2014 the FDIC, in coordination with the Board and OCC, shifted the dates of the annual stress testing cycle by approximately three months, from October 1 to January 1.
The FDIC requests comment on all aspects of the proposal.
Under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3520), the FDIC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid Office of Management and Budget (OMB) control number. This notice of proposed rulemaking amends 12 CFR part 325, which has an approved information collection under the PRA (OMB Control No. 3064-0189). The FDIC has determined that the proposed rule does not create any new or revise any existing collection of information under section 3504(h) of title 44. Accordingly, no Paperwork Reduction Act submission will be made to OMB.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601
The FDIC supervises 3,637 depository institutions,
The FDIC invites any comments that will further inform the FDIC's consideration of RFA.
Section 722 of the Gramm-Leach-Bliley Act requires the Agencies to use plain language in all proposed and final rules published after January 1, 2000. The Agencies invite comment on how to make this proposed rule easier to understand.
For example:
• Has the FDIC organized the material to suit your needs? If not, how could it present the rule more clearly?
• Have we clearly stated the requirements of the rule? If not, how could the rule be more clearly stated?
• Does the rule contain technical jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would make the regulation easier to understand?
• What else could we do to make the regulation easier to understand?
Administrative practice and procedure, Banks, Banking, Reporting and recordkeeping requirements, State savings associations, Stress tests.
For the reasons set forth in the preamble, the FDIC proposes to amend 12 CFR part 325 as follows:
12 U.S.C. 5365(i)(2); 12 U.S.C. 5412(b)(2)(C); 12 U.S.C. 1818, 12 U.S.C. 1819(a) (Tenth), 12 U.S.C. 1831o, and 12 U.S.C. 1831p-1.
(a)
(d) * * *
(2)
(m)
(a)
(b)
(2) Notwithstanding paragraph (b)(1) of this section, a state nonmember bank or state savings association that becomes a $50 billion or over covered bank, whether by migrating from being a $10 billion to $50 billion covered bank or by directly becoming a $50 billion or over covered bank, after September 30 of a calendar year must comply with the requirements applicable to a $50 billion or over covered bank beginning on January 1 of the third calendar year after the state nonmember bank or state savings association becomes a $50 billion or over covered bank, unless that time is extended by the Corporation in writing. A state nonmember bank or state savings association that becomes a $50 billion or over covered bank on or before September 30 of a calendar year must comply with the requirements applicable to a $50 billion or over covered bank beginning on January 1 of the second calendar year after the state nonmember bank or state savings association becomes a $50 billion or over covered bank, unless that time is extended by the Corporation in writing.
(c)
(2) A covered bank that elects to conduct its stress test under paragraph (c)(1) of this section will remain subject to the same timeline requirements of its parent company until otherwise approved by the FDIC.
Each covered bank must conduct the annual stress test under this part subject to the following requirements:
(a)
(b)
(c)
(a)
(2)
(a)
(2)
(i) Unless the Corporation determines otherwise, if the $50 billion or over covered bank is a consolidated subsidiary of a bank holding company or savings and loan holding company subject to supervisory stress tests conducted by the Board of Governors of the Federal Reserve System under 12 CFR part 252, then within the June 15 to July 15 period, such covered bank may not publish the required summary of its annual stress test earlier than the date that the Board of Governors of the Federal Reserve System publishes the supervisory stress test results of the covered bank's parent holding company.
(ii) If the Board of Governors of the Federal Reserve System publishes the supervisory stress test results of the covered bank's parent holding company prior to June 15, then such covered bank may publish its stress test results prior to June 15, but no later than July 15, through actual publication by the covered bank or through publication by the parent holding company pursuant to paragraph (b) of this section.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to revise Airworthiness Directive (AD) 2013-21-05 for Eurocopter Deutschland GmbH (now Airbus Helicopters Deutschland GmbH) (Airbus Helicopters) Model EC135 P1, P2, P2+, T1, T2, and T2+ helicopters. AD 2013-21-05 requires an initial and repetitive inspections of certain bearings and modifying the floor and a rod. Since we issued AD 2013-21-05, we have determined that modifying the floor and rod removes the unsafe condition. This proposed AD would retain the requirements of AD 2013-21-05 but remove the repetitive inspections. The actions of this proposed AD are intended to prevent an unsafe condition on these products.
We must receive comments on this proposed AD by June 1, 2018.
You may send comments by any of the following methods:
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You may examine the AD docket on the internet at
Matt Fuller, Senior Aviation Safety Engineer, Safety Management Section, Rotorcraft Standards Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110; email
We invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the proposals in this document. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit only one time.
We will file in the docket all comments that we receive, as well as a report summarizing each substantive
We issued AD 2013-21-05, Amendment 39-17629 (78 FR 65169, October 31, 2013) (AD 2013-21-05) for Eurocopter Deutschland GmbH (now Airbus Helicopters) Model EC135 P1, P2, P2+, T1, T2, and T2+ helicopters with bearing part number (P/N) LN9367GE6N2; rod P/N L671M5040205; lever P/N L671M5040101; and floor P/N L533M1014101, L533M1014102, L533M1014103, L533M1014104, L533M1014105 or L533M1014106 installed. AD 2013-21-05 requires inspecting each bearing for freedom of movement within 100 hours time-in-service (TIS) and thereafter at intervals not to exceed 800 hours TIS. AD 2013-21-05 also requires modifying the floor and modifying and re-identifying the rod with a new P/N. AD 2013-21-05 was prompted by an incident involving limited control of a tail rotor because of the binding of a bearing. Those actions are intended to detect and prevent the binding of a bearing, which could lead to loss of helicopter control.
AD 2013-21-05 was also prompted by AD 2006-0318 R1, dated October 27, 2006, issued by EASA, which is the Technical Agent for the Member States of the European Union, issued to correct an unsafe condition for all Eurocopter Model EC 135 helicopters. EASA advised of an incident of impaired control of an EC 135 tail rotor. EASA stated that according to examinations, the bearing of the linear transducer was subject to binding, which limited the control range.
After we issued AD 2013-21-05, EASA determined, based on a review of data and operator feedback, that repetitive inspections are not required for helicopters with the modified rod and floor. EASA accordingly revised its AD and issued AD No. 2006-0318R2, dated April 25, 2017, to remove the repetitive inspections.
Also since we issued AD 2013-21-05, Eurocopter Deutschland GmbH Helicopters changed its name to Airbus Helicopters Deutschland GmbH. This proposed AD reflects that change and updates the contact information to obtain service documentation. Additionally, the FAA's Aircraft Certification Service has changed its organizational structure. The new structure replaces product directorates with functional divisions. We have revised some of the office titles and nomenclature throughout this proposed AD to reflect the new organizational changes. Additional information about the new structure can be found in the Notice published on July 25, 2017 (82 FR 34564).
These helicopters have been approved by the aviation authority of Germany and are approved for operation in the United States. Pursuant to our bilateral agreement with Germany, EASA, its technical representative, has notified us of the unsafe condition described in its AD. We are proposing this AD because we evaluated all known relevant information and determined that an unsafe condition is likely to exist or develop on other products of the same type design.
We reviewed Eurocopter Alert Service Bulletin EC135-67A-012, Revision 1, dated October 18, 2006 (ASB Rev 1), which specifies repetitively inspecting the bearing of the linear transducer for freedom of movement and the lower side of the floor for chafing or damage. If there is binding, ASB Rev 1 specifies replacing the bearing. If there is chafing or damage on the floor, ASB Rev 1 specifies replacing the bearing and repairing the floor. ASB Rev 1 also specifies modifying and re-identifying a certain rod.
This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
We also reviewed Airbus Helicopters Alert Service Bulletin EC135-67A-012, Revision 2, dated April 3, 2017 (ASB Rev 2). ASB Rev 2 states that the repetitive inspection has been added to the helicopter maintenance manual. The repetitive inspection is therefore removed, and ASB Rev 2 requires no action. ASB Rev 1 is attached to ASB Rev 2 as an Appendix.
This proposed AD would remove the repetitive 800-hour TIS bearing inspection that is currently required. This proposed AD would continue to require inspecting each bearing for freedom of movement within 100 hours TIS, and replacing the bearing before further flight if there is binding or rough turning. If there is chafing or damage on the lower side of the floor, this proposed AD would require, before further flight, replacing the bearing and repairing the floor, and thereafter installing a Teflon strip. This proposed AD would also require modifying and re-identifying the rod and lever with a new part number.
The EASA AD sets compliance times from its original effective date of October 20, 2006, and this proposed AD would not. This proposed AD would require modifying each rod within 100 hours TIS, rather than within 800 hours TIS as specified in the EASA AD. This proposed AD would not require contacting Eurocopter customer support, unlike the EASA AD. Finally, this proposed AD would not apply to Airbus Helicopters Model EC635 T1, EC635 P2+, and EC635 T2+ helicopters because they have no FAA type certificate.
We estimate that this proposed AD would affect 304 helicopters of U.S. Registry and that labor costs average $85 a work hour. We estimate it would take about 10 work-hours to inspect the bearing and no parts or materials would be required, for a cost of $850 per helicopter and $258,400 for the U.S. fleet. If necessary, replacing the bearing would require 3 additional work-hours, and parts would cost $50, for a cost of $305 per helicopter. Repairing the floor would require 3 additional work hours and minimal cost for materials, for a cost of $255 per helicopter.
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
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, I certify this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
We prepared an economic evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
This AD applies to Model EC135 P1, P2, P2+, T1, T2, and T2+ helicopters, with bearing, part number (P/N) LN9367GE6N2; rod, P/N L671M5040205; lever, P/N L671M5040101; and floor, P/N L533M1014101, L533M1014102, L533M1014103, L533M1014104, L533M1014105 or L533M1014106, installed, certificated in any category.
This AD defines the unsafe condition as limited control of a tail rotor because of the binding of a bearing. This condition could result in subsequent loss of control of the helicopter.
This AD replaces AD 2013-21-05, Amendment 39-17629 (78 FR 65169, October 31, 2013).
We must receive comments by June 1, 2018.
You are responsible for performing each action required by this AD within the specified compliance time unless it has already been accomplished prior to that time.
(1) Within 100 hours time-in-service (TIS), inspect each bearing for freedom of movement by turning and tilting the bearing as depicted in Figure 2 of Eurocopter Alert Service Bulletin No. EC135-67A-012, Revision 1, dated October 18, 2006 (ASB). During any inspection:
(i) If there is binding or rough turning, before further flight, replace the bearing with an airworthy bearing.
(ii) If there is chafing on the lower side of the floor that does not extend through the panel outer layer, before further flight, replace the bearing with an airworthy bearing.
(iii) If there is damage on the lower side of the floor in the area of the assembly opening that extends through the panel outer layer (revealing an open honeycomb cell or layer), before further flight, replace the bearing with an airworthy bearing and repair the floor.
(2) After performing the actions in paragraphs (f)(1)(i) through (iii) of this AD, before further flight, install a Teflon strip and identify the floor by following the Accomplishment Instructions, paragraphs 3.E.(1) through 3.E.(4), of the ASB.
(3) Within 100 hours TIS, modify and re-identify the rod as depicted in Figure 1 of the ASB and by following the Accomplishment Instructions, paragraphs 3.H.(1) through 3.H.(3)(f), of the ASB.
(1) The Manager, Safety Management Section, FAA, may approve AMOCs for this AD. Send your proposal to: Matt Fuller, Senior Aviation Safety Engineer, Safety Management Section, Rotorcraft Standards Branch, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110; email
(2) For operations conducted under a 14 CFR part 119 operating certificate or under 14 CFR part 91, subpart K, we suggest that you notify your principal inspector, or lacking a principal inspector, the manager of the local flight standards district office or certificate holding district office before operating any aircraft complying with this AD through an AMOC.
(1) Airbus Helicopters Alert Service Bulletin No. EC135-67A-012, Revision 2, dated April 3, 2017, which is not incorporated by reference, contains additional information about the subject of this AD. For service information identified in this AD, contact Airbus Helicopters, 2701 N. Forum Drive, Grand Prairie, TX 75052; telephone (972) 641-0000 or (800) 232-0323; fax (972) 641-3775; or at
(2) The subject of this AD is addressed in European Aviation Safety Agency (EASA) AD No. 2006-0318R2, dated April 25, 2017. You may view the EASA AD on the internet at
Joint Aircraft Service Component (JASC) Code: 6720, Tail Rotor Control System.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for certain Airbus Model A318, A319, and A320 series airplanes, and Model A321-111, -112, -131, -211, -212, -213, -231, -232, -251N, -253N, and -271N airplanes. This proposed AD was prompted by a revision of an airworthiness limitations document that specifies more restrictive maintenance requirements and airworthiness limitations. This proposed AD would require revising the maintenance or inspection program, as applicable, to
We must receive comments on this proposed AD by May 17, 2018.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this NPRM, contact 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
You may examine the AD docket on the internet at
Sanjay Ralhan, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206-231-3223.
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA Airworthiness Directive 2017-0170, dated September 7, 2017 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus Model A318, A319, and A320 series airplanes, and Model A321-111, -112, -131, -211, -212, -213, -231, -232, -251N, -253N, and -271N airplanes. The MCAI states:
The System Equipment Maintenance Requirements (SEMR) for Airbus A320 family aeroplanes, which are approved by EASA, are currently defined and published in the Airbus A318/A319/A320/A321 Airworthiness Limitations Section (ALS) Part 4 document. These instructions have been identified as mandatory for continued airworthiness.
Failure to accomplish these instructions could result in an unsafe condition.
Previously, EASA issued AD 2016-0093 [which corresponds to FAA AD 2017-19-24, Amendment 39-19054 (82 FR 44900, September 27, 2017) (“AD 2017-19-24”)] to require accomplishment of all maintenance tasks as described in ALS Part 4 at Revision 03. ALS Part 4 Revision 04 was not mandated because no significant changes were introduced with this Revision. The new ALS Part 4 Revision 05 (hereafter referred to as `the ALS' in this [EASA] AD) includes new and/or more restrictive requirements and extends the applicability to model A320-251N, A320-271N, A321-251N, A321-253N and A321-271N aeroplanes.
For the reason described above, this [EASA] AD retains the requirements of EASA AD 2016-0093, which is superseded, and requires accomplishment of all tasks as described in the ALS.
You may examine the MCAI in the AD docket on the internet at
This NPRM would not supersede AD 2017-19-24. Rather, we have determined that a stand-alone AD would be more appropriate to address the changes in the MCAI. This NPRM would require revising the maintenance or inspection program to incorporate the new maintenance requirements and airworthiness limitations. Accomplishment of the proposed actions would then terminate all of the requirements of AD 2017-19-24.
Airbus has issued Airbus A318/A319/A320/A321 Airworthiness Limitations Section (ALS) Part 4, “System Equipment Maintenance Requirements (SEMR),” Revision 05, dated April 6, 2017. This service information describes preventive maintenance requirements and includes updated inspections and intervals to be incorporated into the maintenance or inspection program. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the
This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, we have been notified of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all pertinent information and determined an unsafe condition exists and is likely to exist or develop on other products of these same type designs.
This proposed AD would require revisions to certain operator maintenance documents to include new actions (
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.
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 alternative methods of compliance (AMOCs) that allow operators to incorporate the most recent ALS revision into their maintenance/inspection programs, in lieu of the ALS revision required by the AD. This eliminates the conflict and enables the operator to comply with both the AD and the type design.
However, compliance with AMOCs is normally optional, and we recently became aware that some operators choose to retain the AD-mandated ALS revision in their fleet-wide maintenance/inspection programs, including those for new airplanes delivered with later ALS revisions, to help standardize the maintenance of the fleet. To ensure that operators comply with the applicable ALS revision for newly delivered airplanes containing a later revision than that specified in an AD, we plan to limit the applicability of ADs that mandate ALS revisions to those airplanes that are subject to an earlier revision of the ALS, either as part of the type design or as mandated by an earlier AD. This proposed AD therefore would apply to Airbus Model A318, A319, and A320 series airplanes, and Model A321-111, -112, -131, -211, -212, -213, -231, -232, -251N, -253N, and -271N airplanes with an original certificate of airworthiness or original export certificate of airworthiness that was issued on or before the date of approval of the ALS revision identified in this 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.
We estimate that this proposed AD affects 1,133 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
We have determined that revising the maintenance or inspection program takes an average of 90 work-hours per operator, although this figure may vary from operator to operator. In the past, we have estimated that this action takes 1 work-hour per airplane. Since operators incorporate maintenance or inspection program changes for their affected fleet(s), we have determined that a per-operator estimate is more accurate than a per-airplane estimate. Therefore, we estimate the total cost per operator to be $7,650 (90 work-hours × $85 per work-hour).
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
This proposed AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes to the Director of the System Oversight Division.
We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.
For the reasons discussed above, I certify this proposed regulation:
1. Is not a “significant regulatory action” under Executive Order 12866;
2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
3. Will not affect intrastate aviation in Alaska; and
4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by May 17, 2018.
This AD affects AD 2017-19-24, Amendment 39-19054 (82 FR 44900, September 27, 2017) (“AD 2017-19-24”).
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 April 6, 2017.
(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, -216, -231, -232, -233, -251N, and -271N airplanes.
(4) Model A321-111, -112, -131, -211, -212, -213, -231, -232, -251N, -253N, and -271N airplanes.
Air Transport Association (ATA) of America Code 05, Time Limits/Maintenance Checks.
This AD was prompted by a revision of an airworthiness limitations document that specifies more restrictive maintenance requirements and airworthiness limitations. We are issuing this AD to mitigate the risks associated with the effects of aging on airplane systems. Such effects could change system characteristics, leading to an increased potential for failure of certain life-limited parts, and reduced structural integrity or controllability of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Within 90 days after the effective date of this AD, revise the maintenance or inspection program, as applicable, to incorporate Airbus A318/A319/A320/A321 Airworthiness Limitations Section (ALS) Part 4, “System Equipment Maintenance Requirements (SEMR),” Revision 05, dated April 6, 2017. The initial compliance time for doing the revised actions is at the applicable time specified in Airbus A318/A319/A320/A321 Airworthiness Limitations Section (ALS) Part 4, “System Equipment Maintenance Requirements (SEMR),” Revision 05, dated April 6, 2017.
After the maintenance or inspection program has been revised as required by paragraph (g) of this AD, no alternative actions (
Accomplishing the actions required by this AD terminates all requirements of AD 2017-19-24.
The following provisions also apply to this AD:
(1)
(2)
(1) Refer to Mandatory Continuing Airworthiness Information (MCAI) EASA Airworthiness Directive 2017-0170, dated September 7, 2017, for related information. This MCAI may be found in the AD docket on the internet at
(2) For more information about this AD, contact Sanjay Ralhan, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206-231-3223.
(3) For service information identified in this AD, contact Airbus, Airworthiness Office—EIAS, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5 61 93 44 51; email
Federal Communications Commission.
Proposed rule.
In this document, the Federal Communications Commission (Commission) seeks comment on proposed rules to permit licensed fixed point-to-point operations in a total of 102.2 gigahertz of spectrum; on making 15.2 gigahertz of spectrum available for unlicensed use; and on creating a new category of experimental licenses to increase opportunities for entities to develop new services and technologies from 95 GHz to 3 THz with no limits on geography or technology. The Commission also granted, in part, two petitions for rulemaking and denied two requests for waiver.
Comments are due May 2, 2018. Reply comments are due May 17, 2018.
Michael Ha, Office of Engineering and Technology, 202-418-2099,
This is a summary of the Commission's Notice of Proposed Rulemaking, ET Docket No. 18-21, RM-11795, FCC 18-17, adopted February 22, 2018, and released February 28, 2018. The full text of this document is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257), 445 12th Street SW, Washington, DC 20554. The full text may also be downloaded at:
1.
2. Several parties filed comments in the Spectrum Frontiers docket regarding the spectrum above 95 GHz. Commenters nevertheless offered little in the way of specific proposed rules or technical analyses, likely due to the general nature of the questions about these bands posed by the Further Notice. While parties are welcome to reprise their observations and recommendations to the extent that they remain relevant, the Commission also encourages commenters to react to the specific objectives, proposals, and draft rules that the Commission describes in greater detail herein.
3.
4. IEEE-USA submitted a request for the Commission to make a declaratory ruling that any application for use of technology above 95 GHz is presumed to be a “new technology” under section 7 of the Communications Act of 1934, and is thus subject to the one-year timeframe for determining whether the proposal is in the public interest. IEEE-USA also requests that the Commission declare that, if it finds a proposal to use above 95 GHz spectrum is in the public interest, it will adopt rules that enable provisioning of that new technology or service within a one-year period. James Whedbee, in a petition for rulemaking, asks us to create a rule for operation of unlicensed intentional radiator devices in the 95-1,000 GHz band. Whedbee states that his proposed rule is identical in most respects to those used for other Extremely High Frequency (30-300 GHz) bands regulated under part 15. The Commission has yet to take action on these various petitions or waiver requests.
5.
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8. The Commission seeks comment on draft rules for the proposed fixed bands, which would be mostly identical to the rules for the 70/80/90 GHz bands contained in part 101. Briefly summarizing, both sets of rules provide that:
• The Commission will issue non-exclusive nationwide licenses for ten-year terms.
• Each fixed point-to-point link must be registered through a link registration system maintained by a database manager. An interference analysis for the link must be submitted to the database manager when registering the link.
• The licensee must apply to the Commission for coordination of a link if: (1) The link receives a “yellow light” from NTIA's automated mechanism as part of the registration process; (2) it requires an environmental assessment; (3) it requires international coordination; or (4) it operates in a quiet zone.
• An applicant may request a license for any portion of any band.
• Interference protection is granted to the first-in-time registered non-federal link. Existing digital links are protected to a threshold-to-interference ratio (T/I) level of 1.0 dB of degradation to the static threshold. Existing analog links shall not experience more than a 1.0 dB degradation of the baseband signal-to-noise ratio required to produce an acceptable signal in the receiver.
• Construction of links must be completed within 12 months of link registration.
• Transmitters may operate at a maximum Equivalent Isotropically Radiated Power (EIRP) of 25 decibel watts per megahertz (dBW/MHz).
• Transmitters must have a minimum antenna gain of 43 decibels (isotropic) (dBi) with a half-power beamwidth of 1.2 degrees, but the maximum EIRP is reduced by 2 decibels for each decibel the antenna gain is less than 50 dBi.
• Out-of-band emissions are limited as specified in § 101.111 of our rules for signals above 24 GHz with the value of B (bandwidth) set for 500 megahertz.
• Systems using digital modulation must have a minimum bit rate of 0.125 bits/second/Hz.
• Licensees may provide service on either a common carrier or non-common carrier basis and are subject to the eligibility requirements of § 101.7 (foreign ownership).
• Coordination with Mexico or Canada is required for certain stations located near the borders.
9. Certain rules for the 70/80/90 GHz band contained in part 101 are different for the 70/80 GHz bands as opposed to the 90 GHz band. For example, transmitters in the 90 GHz band are required to have an antenna gain of 50 dBi while in the 70/80 GHz band the limit is only 43 dBi. The 90 GHz band also has an additional interference protection requirement that a new link must not decrease an existing link's desired to undesired signal ratio below 36 dB. Digital systems in the 90 GHz band are required to have a bit rate of 1 bit/second/Hz instead of 0.125 bits/second/Hz in the 70/80 GHz bands. In these instances where the current rules vary, the Commission seeks comment on whether to adopt the 70/80 GHz rules
10. Under the 70/80/90 GHz rules, the transmitted power is limited to 55 dBW irrespective of the bandwidth of the signal. Under the Commission's proposal, licensees will be limited to a maximum EIRP of 25 dBW/MHz, which is equivalent to the 75 decibel milliwatts per 100 megahertz (75 dBm/100 MHz) EIRP limit the Commission recently adopted for base stations in our part 30 rules. The Commission seeks comment on this proposal; would another EIRP be more appropriate?
11. Can and should the Commission require or invite the current 70/80/90 GHz database managers to extend their duties to additional bands above 95 GHz or should WTB identify one or more database managers for these bands through an independent process? Is the requirement that licensees submit an interference analysis to the database manager when registering a link necessary to prevent interference given the propagation characteristics above 95 GHz?
12. The Commission seeks comment generally on extending the 70/80/90 GHz service and technical rules to the proposed fixed bands. Should any of the proposed rules be modified for bands above 95 GHz based on licensees' experiences with the 70/80/90 GHz rules or for other reasons? Are modifications to the rules needed to encourage more efficient use of spectrum or to avoid harmful interference? Should a higher EIRP be permitted to compensate for the atmospheric attenuation at these higher frequencies? The Commission notes that Battelle has suggested an EIRP of 70 dBW in their rulemaking petition, which would be 31.25 dBW/MHz if spread evenly across the 102-109.5 GHz band, claiming that the 70/80/90 GHz bands suffers from limited range and operating availability during severe weather and that there will be additional atmospheric attenuation in the 102-109.5 GHz band. Should the Commission segment any of the proposed bands as the Commission did for the 90 GHz band? What segmentation would be appropriate? Would a specific channel plan be appropriate in any of the bands? Do the rules provide a workable framework for protecting radio astronomy facilities and federal operations in the band? Are there any modifications to the proposed rules that would be necessary to address any of the characteristics of the proposed fixed bands?
13. Do the antenna gain requirements for the 70/80/90 GHz bands strike an appropriate balance between facilitating sharing of the spectrum and providing flexibility? Do the proposed rules need to be modified to allow for the use of small planar or phased array antennas?
14. Should the Commission make provisions in the rules for fixed point-to-multipoint systems in addition to point-to-point links? For example, could the Commission allow licensees to register operations in an area around a fixed location instead of requiring registration of individual links as required by the 70/80/90 GHz rules? This would enable a licensee to establish an access point/base station that serves a number of fixed customer locations in the surrounding area. The access point/base station would be permitted to operate with multiple beams where each beam must abide by the power limits the Commission is adopting, but the sum of the power of all the beams could be higher. What are the advantages or disadvantages of such a proposal? The Commission envisions that the area served by an access/point base station would be small. What size area could an access point/base station serve given the propagation properties of these bands? Would allowing such point-to-multipoint systems require a higher degree of coordination with other licensees or Federal operations to prevent harmful interference from occurring? Should the area that is reserved around a particular access point/base station depend on the technical parameters of the access point
15. While the Commission did not include the above 95 GHz bands that are allocated for the FSS or MSS in the above discussion, the Commission notes that satellite services successfully share spectrum with terrestrial services in many bands. Therefore, the Commission seeks comment on extending our above proposal based on the 70/80/90 GHz rules to permit fixed operations in one or more of the following additional bands that are allocated for either the FSS or the MSS in addition to the fixed and mobile services: 158.5-164 GHz, 167-174.5 GHz, 191.8-200 GHz, 209-226 GHz, 232-235 GHz, 238-240 GHz, and 252-275 GHz. What changes, if any, to our proposed rules would be necessary to permit fixed operations in these bands?
16. Alternatively, should the Commission instead adopt the licensing and prior coordination requirement used in many bands subject to our part 101 rules. Under such an approach, links would be individually licensed and the Commission would require that the links be coordinated with the licensee of other potentially affected links prior to application for a license? Are there any other models for licensing that the Commission should consider for these bands?
17.
18.
19.
20. The Commission notes that footnote US246 prohibits all transmissions in a number of bands above 95 GHz to protect passive services such as the RAS and EESS (passive). Footnote US74 specifies that radio astronomy observatories operating in most of the frequency bands listed in US246 will be protected from unwanted emissions from other stations only to the extent the emissions exceed what would be permitted under the technical standards or criteria applicable to the service in which the station operates. However, US74 omits the 182-185 GHz and 226-231.5 GHz bands even though they are included in US246 and have RAS allocations. The Commission seeks comment on whether these two bands should be added to US74.
21.
22.
23. The Commission also seeks comment on how sharing could be accomplished between the FS and FSS in the bands under discussion. Would the use of a narrow-beam antenna requirement in our proposed rules for FS operations avoid harmful interference to the FSS? Sharing
24. The 158.5-164 GHz, 191.8-200 GHz, 232-235 GHz, and 252-265 GHz bands have shared allocations with the MSS. The Commission believes sharing between FS and MSS is technically feasible, and seeks comment on possible sharing mechanisms between these services. The Commission seeks comment on possible sharing mechanisms between the MS and MSS services. Would geographical partitioning between services, for example between urban/rural markets, serve as a possible sharing mechanism? If so, how should such markets be defined? Could dual MS/MSS user equipment, if available, resolve possible interference conditions by switching to terrestrial service when a terrestrial network is detected? Could requiring operators of terrestrial MS networks to adopt a method of registration and tracking of MSS user equipment reduce the possibility of interference by limiting emissions in the direction of MSS user equipment?
25. The 122.25-123 GHz, 130-134 GHz, 167-174.8 GHz, and 191.8-200 GHz bands have a shared allocation with the inter-satellite service (ISS). Is there a need to make provisions in the Commission's rules to prevent harmful interference to and from the ISS? Should there be specific antenna performance requirements for FS and MS stations to limit potential interference to the ISS? If so, should there be separate requirements for each of the shared bands? Commenters who support antenna performance requirements for FS and MS stations should provide specific technical information and proposals showing the need for such requirements. Similarly, should there be specific antenna performance requirements for aeronautical use of MS stations or should such use be prohibited entirely to protect the ISS? The Commission seeks comment on whether NGSO satellites can be accommodated in the 116-122.25 GHz band.
26.
27.
USxxx: Federal and non-federal users shall have equal rights to access the spectrum in the 95-275 GHz band. Use of the band by non-federal users on a licensed or unlicensed basis shall not preclude or impair co-primary use of the bands by federal users and shall not establish non-federal priority in bands allocated for shared federal and non-federal use.
28.
29. Apart from a few specified frequency bands, spectrum above 38.6 GHz is designated as “restricted” in § 15.205 of the rules. Unless expressly permitted by rule or waiver, unlicensed devices are not allowed to intentionally radiate energy into a restricted band. The Commission proposes to allow unlicensed operation in additional frequency bands where the Commission believes it will not cause harmful interference to authorized services, and to remove those specific bands from the list of restricted bands.
30. The Commission seeks comment on whether to make 15.2 gigahertz of spectrum above 95 GHz available for unlicensed use in four frequency bands. First, the Commission seeks comment on allowing unlicensed operation in the 122-123 GHz and the 244-246 GHz bands, which are already designated industrial, scientific, and medical (ISM) bands. The Commission would remove these bands from the list of restricted bands in § 15.205. The Commission seeks comment on these proposals.
31. The Commission also seeks comment on whether to allow unlicensed operation in two frequency bands near 183 GHz. The Commission believes that the frequency bands located around a sharp peak in the atmospheric attenuation curve at 183 GHz may be appropriate for unlicensed use. However, no transmissions are permitted in the frequency band at the peak due to Allocations Table footnote US246 stating that no station shall be authorized to transmit in a number of bands including the 182-185 GHz band. The Commission would make spectrum available for unlicensed use on both sides of the attenuation peak, specifically, the 174.8-182 GHz and 185-190 GHz bands. The Commission would remove these bands from the list of restricted bands in § 15.205. The Commission seeks comment on this approach.
32. The Commission also seeks comment on what technical rules should apply to unlicensed operation within the 122-123 GHz, 174.8-182 GHz, 185-190 GHz and 244-246 GHz frequency bands. In particular, the Commission seeks comment on whether the requirements that apply to the operation of unlicensed devices in the 57-71 GHz band under § 15.255 of the rules are appropriate in these bands. Would the power levels provided in that
33. The Commission further seeks comment on whether there are any other bands above 95 GHz that would be suitable for unlicensed use in addition to the 15.2 gigahertz of spectrum identified above. In particular, the Commission seeks comment on allowing unlicensed use of the 116-122 GHz band. The 116-122.25 GHz band is allocated to passive services such as the EESS and SRS (passive) as well as the ISS which is used for communications between satellites with footnote 5.562C limiting ISS emission levels below the EESS (passive) protection criteria. The passive services would likely be compatible only with low density deployments and low power unlicensed uses because of the high sensitivity of these types of passive receivers. Because devices operating under our part 15 rules are limited to transmission at low power levels, and given the increased propagation attenuation from high atmospheric absorption, the Commission believes that part 15 devices may be able to share spectrum with these passive services without causing interference. However, the Commission notes that while this band is close to a peak in the atmospheric attenuation curve, this peak is smaller than the peaks at 60 GHz and 183 GHz. Also, the Commission notes that RAS observations at 115.27 GHz may necessitate geographic restrictions to protect RAS facilities. Accordingly, the Commission seeks comment on whether unlicensed operation should be permitted in the 116-122 GHz band. If so, what technical and other requirements should apply to prevent interference to authorized services in the band? The Commission also seeks comment on any other bands above 95 GHz that may be suitable for unlicensed use and the technical requirements that would be necessary to allow operation in them while protecting authorized services. In particular, the Commission seeks comment on how such use would relate to current and planned passive services.
34. Potential future applications in these bands includes ultra-high definition video, and high-speed data transmission, such as temporary fiber optic line replacement, chip-to-chip communication within computer equipment, and replacement of computer data cables in data centers with wireless links. Would the rules proposed above for unlicensed devices allow for applications such as these? With respect to non-federal users, the Commission seeks comment on whether the unlicensed spectrum access model is most appropriate for the types of devices that could be operated in the proposed frequency bands, or whether some other spectrum access model would be more appropriate,
35. As mentioned above, James Whedbee has filed a rulemaking petition requesting that the Commission adopt rules to permit unlicensed device operation in the 95-1000 GHz range. Whedbee advocates that the Commission apply the same technical rules to these unlicensed operations as currently apply in the 57-71 GHz band with a few differences. Whedbee proposes unlicensed devices in 95-1000 GHz be limited to a bandwidth of 500 megahertz. Whedbee also specifies that unlicensed operations be limited to indoors only and that transmitters not be deliberately pointed at windows in a number of bands used by the RAS, EESS (passive), and SRS (passive). According to Whedbee, licensing of transmissions over the range 95-1000 GHz may hinder the technological developments that his proposed rule would permit without licensing. The Commission is reluctant to open such a wide swath of spectrum for unlicensed use because the Commission believes it represents an inefficient use of the spectrum, provides no focus for development of technologies in specific bands and the Commission's proposals would already provide considerable opportunities for unlicensed devices. Nevertheless, in seeking comment on making 15.2 gigahertz of spectrum above 95 GHz available for unlicensed use the Commission grants his petition in part. The Commission also seeks comment broadly on Whedbee's rulemaking petition to the extent his proposal goes beyond what the Commission is seeking comment on and on any costs or benefits that could arise from making the 95-1000 GHz band available for unlicensed use in accordance with his proposal.
36. The Commission also seeks comment on what rules might be most appropriate for ISM operations in the above 95 GHz band. Part 18 of the rules contains the regulations for ISM equipment.
37. The Commission has historically treated RF devices that transmit a radio signal for purposes such as measuring the level of a fluid in a container or for measuring some quantifiable property of a material as part 15 devices. The Commission is aware of interest in using the spectrum above 95 GHz for devices that use terahertz spectroscopy to analyze material properties and for imaging applications, which could possibly be considered ISM applications. The Commission seeks comment on whether it should establish a more certain regulatory approach for devices that use the frequencies above 95 GHz. Is the lack of provisions under part 15 for equipment that operates in these higher frequency bands hampering the ability of these new technologies to be approved and, if so should the Commission modify the part 15 rules to allow them? Or would it be more appropriate to routinely treat these terahertz applications as part 18 ISM equipment for which there are already power and field strength limits specified in the rules?
38. The Commission recognizes that the radiated emission limits in part 18 were originally developed for devices operating at significantly lower frequencies than the Commission is considering here, and seeks comment on how that should affect its analysis. Accordingly, the Commission seeks comment on whether changes to these limits are necessary for operation above 95 GHz. Are the limits in § 18.305 appropriate for these devices? If not,
39.
40.
41. The Commission believes that Spectrum Horizons licenses should have a number of characteristics that differ from existing ERS authorizations, although they would also have a number of characteristics in common. Specifically, the Commission seeks comment on the following proposed rules for these Spectrum Horizon licenses.
42.
43. In the spectrum range above 95 GHz, the Commission believes that marketing of innovative devices at a relatively early stage of experimentation may be particularly important to permit entrepreneurs to gauge consumer acceptance and to determine whether to proceed to the next stage of the experiment. As operations extend further into the spectrum above 95 GHz, the unique technical issues associated with such operations make capable devices more expensive to produce. Further, these same issues also make it less likely that such devices could be easily adapted for use in the lower spectrum. Thus, entrepreneurs will be reluctant to proceed without a clear signal from consumers that they are interested in purchasing such devices.
44. The Commission proposes to allow experimental devices used in market trials in these bands to be sold directly to participants to encourage experimentation, as well as to help innovators share device manufacturing costs with potential early adopters who are willing to bear the risks associated with experimental licensing in this range. As a safeguard against such devices causing harmful interference, the Commission will maintain a requirement that the Spectrum Horizons licensee must adhere to the conditions specified in § 5.602(e) of our rules, which states that “trial devices are either rendered inoperable or retrieved . . . at the conclusion of the trial.” The Commission also proposes that the Spectrum Horizons licensee must provide market trial participants with a written disclosure clearly stating that the equipment being purchased is part of an experiment that may be terminated at any time by the licensee or the Commission. Thus, only those individuals who are willing to accept the risk that their devices could be rendered unusable on short notice would be candidates for participating in such market trials. The Commission seeks comment on these proposals.
45. In this connection, the Commission proposes to require that Spectrum Horizons licensees who choose to market equipment must label any such equipment as “Experimental—Not Authorized for Permanent Use” and carry with it an equipment ID number registered as part of the experimental license process. The Commission notes that a Spectrum Horizons license should have no expectation that an experiment will always lead to the establishment of a permanent service. Thus, a Spectrum Horizons licensee who chooses to market a substantial—rather than a limited—amount of equipment would be increasing its financial risk. The Commission seeks comment on these marketing proposals, and on any alternatives to them.
46.
47.
48.
49.
50.
51. To better ensure that Spectrum Horizons experiments do not cause harmful interference, the Commission proposes to adopt rules for such experiments similar to our existing “station identification,” “responsible party,” and “stop buzzer” rules. However, consistent with our rules for conventional experimental licenses, the Commission proposes to permit Spectrum Horizons licenses to be transferred, if the Commission finds that to be in the public interest and gives its consent in writing. Comments are requested on each of these proposals.
52.
53.
54.
55.
56.
57.
58.
59. On October 13, 2015, the Commission's Wireless Telecommunications Bureau released a public notice seeking comment on the ZenFi Waiver Request. Battelle and SMG Holdings, LLC (SMG) support grant of the ZenFi Waiver Request, and SMG asks that the Commission extend to it any relief granted to ZenFi.
60. The Commission denies the ZenFi Waiver Request and SMG's informal request seeking waiver to use the 102-109.5 GHz band because ZenFi and SMG have not met the standard for a waiver and grant of a waiver would improperly judge the outcome of the rulemaking proceeding the Commission has begun with this NPRM. First, ZenFi has failed to justify a waiver based on special circumstances because there is nothing unique or unusual about its situation. It is no different than any other operator who has potential interest in using the above 95 GHz bands, and has not demonstrated a need to use this band that cannot be met by deployment in another band. Second, ZenFi has not shown that a deviation from the general rule would be in the public interest. Although ZenFi generally discusses its intent to address the growing demand for wireless links capable of delivering 10GE, it fails to reference a specific proposed deployment that would require a waiver, or discuss the extent to which its proposed deployments could not be reasonably achieved on other spectrum. ZenFi has also failed to distinguish itself from any other party who would potentially be interested in using the 102-109.5 GHz band. ZenFi also fails to satisfy the third prong, because a waiver grant here would essentially replace the current rulemaking process, undermining the validity of that final rule. This is particularly true in this band where the Commission lacks any actual service, licensing, or technical rules. What ZenFi is requesting is not a waiver of the existing rules, but the authority to operate absent any established rules governing the operations. As noted above, there are a series of issues that the Commission must decide before it authorizes service in the 102-109.5 GHz band and develops service rules for that band, including whether to adopt the existing 70/80/90 GHz licensing regime for this band. The Commission does not believe that it would be a prudent policy to subject licensees and their customers to this potential disruption, particularly in the absence of any specific, demonstrated need for interim operation in the band. While the Commission may ultimately adopt rules similar to what Battelle has proposed, ZenFi (and SMG) have not justified the need for a waiver prior to our developing a full record on the proposed changes.
61.
62.
63.
Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of
Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701.
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW, Washington DC 20554.
64.
65. Availability of Documents. Comments, reply comments, and
66.
67.
68.
69.
70.
71.
72.
Environmental impact statements.
Radio.
Reporting and recordkeeping requirements and Radio.
Communications equipment and Radio.
Communications equipment and Radio.
Federal Communications Commission.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR parts 1, 2, 5, 15, and 101 as follows:
47 U.S.C. 34-39, 151, 154(i), 154(j), 155, 157, 160, 201, 225, 227, 303, 309, 310, 332, 1403, 1404, 1451, 1452, 1455; 28 U.S.C. 2461 note.
(b) * * *
(1) * * *
47 U.S.C. 154, 302a, 303, and 336, unless otherwise noted.
(c) * * *
(1) Activities conducted under market trials pursuant to subpart H of part 5 or in accordance with a Spectrum Horizons experimental radio license issued pursuant to subpart I of part 5.
Secs. 4, 302, 303, 307, 336 48 Stat. 1066, 1082, as amended; 47 U.S.C. 154, 302, 303, 307, 336. Interpret or apply sec. 301, 48 Stat. 1081, as amended; 47 U.S.C. 301.
(b)
(l) Experimentation in innovative new devices and services that operate on frequencies above 95 GHz.
(m) Types of experiments that are not specifically covered under paragraphs (a) through (l) of this section will be considered upon demonstration of need for such additional types of experiments.
(f)
(c) Each application for station authorization shall be specific and complete with regard to the information required by the application form and this part.
(1) Conventional and Spectrum Horizons license and STA applications shall be specific as to station location, proposed equipment, power, antenna height, and operating frequencies.
(2) Broadcast license applicants shall comply with the requirements in subpart D of this part; Program license applicants shall comply with the requirements in subpart E of this part; Medical Testing license applicants shall comply with the requirements in subpart F of this part; Compliance Testing license applicants shall comply with the requirements in subpart G of this part; and Spectrum Horizons license applicants shall comply with the requirements in subpart I of this part.
(d) Filing conventional, program, medical, compliance testing, and Spectrum Horizons experimental radio license applications:
(1) Applications for radio station authorization shall be submitted electronically through the Office of Engineering and Technology website
(2) Applications for special temporary authorization shall be filed in accordance with the procedures of § 5.61.
(3) Any correspondence relating thereto that cannot be submitted electronically shall instead be submitted to the Commission's Office of Engineering and Technology, Washington, DC 20554.
(a)
(d)
(c) A station authorization for a Spectrum Horizons experimental radio license, the frequencies authorized to be used by the grantee of such authorization, and the rights therein granted by such authorization shall be transferred, assigned, or in any manner either voluntarily or involuntarily disposed of, if the Commission decides that such a transfer is in the public interest and gives its consent in writing.
(f)
(d)
(a) For conventional, program, medical testing, compliance testing, and Spectrum Horizons experimental radio stations, the current original authorization or a clearly legible photocopy for each station shall be retained as a permanent part of the station records, but need not be posted. Station records are required to be kept for a period of at least one year after license expiration.
In addition to the rules in this subpart, Spectrum Horizons experimental radio station applicants and licensees shall follow the rules in subparts B and C of this part. In case of any conflict between the rules set forth in this subpart and the rules set forth in subparts B and C of this part, the rules in this subpart shall govern.
Each application must include a narrative statement describing in detail how its experiment could lead to the development of innovative devices and/or services on frequencies above 95 GHz. This statement must sufficiently explain the proposed new technology/potential new service and incorporate an interference analysis that explains why the proposed experiment would not cause harmful interference to any other spectrum user. The statement should include technical details, including the requested frequency band(s), maximum power, emission designators, area(s) of operation, type(s) of device(s) to be used, and the maximum number of each type of device to be used.
(a) Each program experimental radio applicant must identify a single point of contact responsible for all experiments conducted under the license and ensuring compliance with all applicable FCC rules.
(b) The responsible individual will serve as the initial point of contact for all matters involving interference resolution and must have the authority to discontinue any and all experiments being conducted under the license, if necessary.
(c) The license application must include the name of the responsible individual and contact information at which the person can be reached at any time of the day; this information will be listed on the license. Licensees are required to keep this information current.
Unless otherwise stated in the instrument of authorization, devices operating in accordance with a Spectrum Horizons experimental radio license may be marketed subject to the following conditions:
(a) Marketing of devices (as defined in § 2.803 of this chapter) and provision of services for hire is permitted before the radio frequency device has been authorized by the Commission, provided that the number of devices to be marketed shall be the minimum quantity of devices necessary to conduct the experiment as approved by the Commission.
(b) Licensees are required to ensure that trial devices are either rendered inoperable or retrieved by them from trial participants at the conclusion of the trial. Licensees are required to notify
(c) The size and scope of the experiment are subject to limitations as the Commission shall establish on a case-by-case basis. If the Commission subsequently determines that the experiment is not so limited, authorization shall be immediately terminated.
Licensee must submit to the Commission an interim progress report 5 years after grant of its license.
47 U.S.C. 154, 302a, 303, 304, 307, 336, 544a, and 549.
(d) * * *
(4) Any equipment operated under the provisions of § 15.255, § 15.256 in the frequency band 75-85 GHz, § 15.257, or § 15.258 of this part.
(a)(1) Operation under the provisions of this section is not permitted for equipment used on satellites.
(2) Operation on aircraft is permitted under the following conditions:
(i) When the aircraft is on the ground.
(ii) While airborne, only in closed exclusive on-board communication networks within the aircraft, with the following exceptions:
(A) Equipment shall not be used in wireless avionics intra-communication (WAIC) applications where external structural sensors or external cameras are mounted on the outside of the aircraft structure.
(B) Equipment shall not be used on aircraft where there is little attenuation of RF signals by the body/fuselage of the aircraft. These aircraft include, but are not limited to, toy/model aircraft, unmanned aircraft, crop-spraying aircraft, aerostats, etc.
(b) Emission levels within the 122-123 GHz, 174.8-182 GHz, 185-190 GHz and 244-246 GHz bands shall not exceed the following equivalent isotropically radiated power (EIRP) as measured during the transmit interval:
(1) The average power of any emission shall not exceed 40 dBm and the peak power of any emission shall not exceed 43 dBm; or
(2) For fixed point-to-point transmitters located outdoors, the average power of any emission shall not exceed 82 dBm, and shall be reduced by 2 dB for every dB that the antenna gain is less than 51 dBi. The peak power of any emission shall not exceed 85 dBm, and shall be reduced by 2 dB for every dB that the antenna gain is less than 51 dBi.
(i) The provisions in this paragraph for reducing transmit power based on antenna gain shall not require that the power levels be reduced below the limits specified in paragraph (b)(1) of this section.
(ii) The provisions of § 15.204(c)(2) and (4) that permit the use of different antennas of the same type and of equal or less directional gain do not apply to intentional radiator systems operating under this provision. In lieu thereof, intentional radiator systems shall be certified using the specific antenna(s) with which the system will be marketed and operated. Compliance testing shall be performed using the highest gain and the lowest gain antennas for which certification is sought and with the intentional radiator operated at its maximum available output power level. The responsible party, as defined in § 2.909 of this chapter, shall supply a list of acceptable antennas with the application for certification.
(3) The peak power shall be measured with an RF detector that has a detection bandwidth that encompasses the band of operation,
(c) Limits on spurious emissions:
(1) The power density of any emissions outside the band of operation,
(2) Radiated emissions below 40 GHz shall not exceed the general limits in § 15.209.
(3) Between 40 GHz and 200 GHz, the level of these emissions shall not exceed 90 pW/cm
(4) The levels of the spurious emissions shall not exceed the level of the fundamental emission.
(d) Except as specified paragraph (d)(1) of this section, the peak transmitter conducted output power shall not exceed 500 mW. Depending on the gain of the antenna, it may be necessary to operate the intentional radiator using a lower peak transmitter output power in order to comply with the EIRP limits specified in paragraph (b) of this section.
(1) Transmitters with an emission bandwidth of less than 100 MHz must limit their peak transmitter conducted output power to the product of 500 mW times their emission bandwidth divided by 100 MHz. For the purposes of this paragraph, emission bandwidth is defined as the instantaneous frequency range occupied by a steady state radiated signal with modulation, outside which the radiated power spectral density never exceeds 6 dB below the maximum radiated power spectral density in the band, as measured with a 100 kHz resolution bandwidth spectrum analyzer. The center frequency must be stationary during the measurement interval, even if not stationary during normal operation (
(2) Peak transmitter conducted output power shall be measured with an RF detector that has a detection bandwidth that encompasses the band of operation,
(3) For purposes of demonstrating compliance with this paragraph, corrections to the transmitter conducted output power may be made due to the antenna and circuit loss.
(e) Frequency stability: Fundamental emissions must be contained within the frequency bands specified in this section during all conditions of operation. Equipment is presumed to operate over the temperature range −20 to + 50 degrees Celsius with an input voltage variation of 85% to 115% of rated input voltage, unless justification is presented to demonstrate otherwise.
(f) Regardless of the power density levels permitted under this section, devices operating under the provisions of this section are subject to the radiofrequency radiation exposure requirements specified in §§ 1.1307(b), 2.1091 and 2.1093 of this chapter, as appropriate. Applications for equipment authorization of devices operating under this section must contain a statement confirming compliance with these requirements for both fundamental emissions and unwanted emissions. Technical information showing the basis for this statement must be submitted to the Commission upon request.
(g) Any transmitter that has received the necessary FCC equipment authorization under the rules of this chapter may be mounted in a group
(h) Measurement procedures that have been found to be acceptable to the Commission in accordance with § 2.947 of this chapter may be used to demonstrate compliance.
47 U.S.C. 154 and 303.
(b) For the 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands, the 12-month construction period will commence on the date of each registration of each individual link; adding links will not change the overall renewal period of the license.
(a) * * *
(5)
(c) * * *
(2) * * *
(i)
(ii)
(a) * * *
(c) * * *
(a) * * *
(2) * * *
(v) The emission mask for the 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands used in the equation in paragraph (a)(2)(ii) of this section applies only to the edge of each channel, but not to sub-channels established by licensees. The value of P in the equation is for the percentage removed from the carrier frequency and assumes that the carrier frequency is the center of the actual bandwidth used. The value of B will always be 500 MHz. In the case where a narrower sub-channel is used within the assigned bandwidth, such sub-carrier will be located sufficiently far from the channel edges to satisfy the emission levels of the mask. The mean output power used in the calculation is the sum of the output power of a fully populated channel.
(a) * * *
(b) * * *
(h)
(a) * * *
95,000,100,000 MHz
102,000-109,500 MHz
111,800-114,250 MHz
122,250-123,000 MHz
130,000-134,000 MHz
141,000-148,500 MHz
151,500-158,500 MHz
174,500-174,800 MHz
231,500-232,000 MHz
240,000-241,000 MHz
(z)
(2) Prior links shall be protected using the interference protection criteria set forth in § 101.105. For transmitters employing digital modulation techniques and operating in the 71-76 GHz, 81-86 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands, the licensee must construct a system that meets a minimum bit rate of 0.125 bits per second per Hertz of bandwidth. For transmitters that operate in the 92,000-94,000 MHz or 94,100-95,000 MHz bands, licensees must construct a system that meets a minimum bit rate of 1.0 bit per second per Hertz of bandwidth. If it is determined that a licensee has not met these loading requirements, then the database will be modified to limit coordination rights to the spectrum that is loaded and the licensee will lose protection rights on spectrum that has not been loaded.
The 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands are licensed on the basis of non-exclusive nationwide licenses. There is no limit to the number of non-exclusive nationwide licenses that may be granted for these bands, and these licenses will serve as a prerequisite for registering individual links.
(c) An entity may request any portion of the 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands.
Licensees may use the 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands for any point-to-point, non-broadcast service. The segments may be unpaired or paired, but pairing will be permitted only in a standardized manner (
(a) Registration of each link in the 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands will be in the Universal Licensing System until the Wireless Telecommunications Bureau announces by public notice the implementation of a third-party database.
Licensees in the 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz bands are subject to the exposure requirements found in §§ 1.1307(b), 2.1091 and 2.1093 of this chapter, and will use the parameters found therein.
(a) A licensee of bands 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz must comply with § 1.928(f) of this chapter, which pertains to coordination with Canada.
(b) A licensee of bands 71-76 GHz, 81-86 GHz, 92-95 GHz, 95-100 GHz, 102-109.5 GHz, 111.8-114.25 GHz, 122.25-123 GHz, 130-134 GHz, 141-148.5 GHz, 151.5-158.5 GHz, 174.5-174.8 GHz, 231.5-232 GHz, and 240-241 GHz must coordinate with Mexico in the following situations:
Federal Communications Commission.
Propose rule; correction.
This document corrects the preamble to a proposed rule published in the
Comments are due on or before April 30, 2018; reply comments are due on or before May 15, 2018.
You may submit comments, identified by MB Docket No. 18-20, by any of the following methods:
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• Secretary, Office of the Secretary, Federal Communications Commission.
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For additional information, contact Jonathan Mark,
Comments are due on or before April 30, 2018; reply comments are due on or before May 15, 2018.
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Notice of proposed rulemaking.
This document proposes a civil penalty rate applicable to automobile manufacturers that fail to meet applicable corporate average fuel economy (CAFE) standards and are unable to offset such a deficit with compliance credits. The agency is proposing this civil penalty rate based on a tentative determination regarding the applicability of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and in accordance with the Energy Policy and Conservation Act of 1975 (EPCA) and the Energy Independence and Security Act of 2007 (EISA).
You may submit comments to the docket number identified in the heading of this document by any of the following methods:
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•
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• Fax: 202-493-2251
Kerry Kolodziej, Office of Chief Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820, 1200 New Jersey Ave, SE, Washington, DC 20590.
NHTSA has almost forty years of experience in implementing the corporate average fuel economy (CAFE) program and its civil penalty component. This includes oversight and administration of the program's operation, how the automobile manufacturers respond to CAFE standards and increases, and the role of civil penalties in achieving the CAFE program's objectives. NHTSA has carefully considered these objectives in reconsidering the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act or 2015 Act) and its application to the CAFE civil penalty statute NHTSA administers.
As a result of this review, NHTSA is proposing to retain the current civil penalty rate in 49 U.S.C. 32912(b) of $5.50 per tenth of a mile per gallon for automobile manufacturers that do not meet applicable CAFE standards and are unable to offset such a deficit with compliance credits. NHTSA's proposal is based on its tentative determination that the CAFE civil penalty rate is not a “civil monetary penalty,” as defined by the 2015 Act, that must be adjusted for inflation. NHTSA's previous
First, civil penalties assessed for CAFE violations under Section 32912(b) are not a “penalty, fine, or other sanction that” is either “a maximum amount” or “a specific monetary amount.” Rather, the civil penalties under consideration here are part of a complicated market-based enforcement mechanism. Any potential civil penalties for failing to satisfy fuel economy requirements, unlike other civil penalties, are not determined until the conclusion of a complex formula, credit-earning arrangement, and credit transfer and trading program. In fact, the ultimate penalty assessed is based on the noncompliant
Moreover, NHTSA tentatively concludes that Congress did not intend for the 2015 Act to apply to this specialized civil penalty rate, which has longstanding, strict procedures previously enacted by Congress that limit NHTSA's ability to increase the rate. Congress specifically contemplated that increases to the CAFE civil penalty rate for manufacturer non-compliance with CAFE standards may be appropriate and necessary and included a mechanism in the statute for such increases. Critically, this mechanism requires the Secretary of Transportation to determine specifically that any such increase will not lead to certain specific negative economic effects. In addition, Congress explicitly limited any such increase to $10 per tenth of a mile per gallon.
Second, in the alternative, NHTSA is proposing to keep the civil penalty rate the same in order to comply with EPCA, which must be read harmoniously with the 2015 Act. The 2015 Act confers discretion to the head of each agency to adjust the amount of a civil monetary penalty by less than the amount otherwise required for the initial adjustment, with the concurrence with the Director of the Office of Management and Budget, upon determining that doing so would have a “negative economic impact” In EPCA, Congress previously identified specific factors that NHTSA is required to consider before making a determination about the “impact on the economy” as a prerequisite to increasing the applicable civil penalty rate. NHTSA believes that these statutory criteria are appropriate for determining whether an increase in the CAFE civil penalty rate would have a “negative economic impact” for purposes of the 2015 Act. Under EPCA, NHTSA faces a heavy burden to demonstrate that increasing the civil penalty rate “will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.” Specifically, in order to establish that the increase would not have that “substantial deleterious impact,” NHTSA would need to affirmatively determine that it is likely that the increase would
Third, even if EPCA's statutory factors for increasing civil penalties are not applied, NHTSA has tentatively determined that the $14 penalty will lead to a negative economic impact that merits leaving the CAFE civil penalty rate at $5.50. Based on available information, including information provided by commenters, the effect of applying the 2015 Act to the CAFE civil penalty could potentially drastically increase manufacturers' costs of compliance beyond those contemplated when NHTSA established the current CAFE standards in 2012. NHTSA is soliciting comments on this tentative conclusion, including the level at which the CAFE civil penalty rate should be set.
Fourth, even if the CAFE civil penalty rate is a “civil monetary penalty” under the 2015 Act and regardless of whether increasing it would have a “negative economic impact,” the increase is capped by statute at $10 by EPCA. NHTSA seeks comment on this alternative, including whether the $10 cap is itself a “civil monetary penalty” that is required to be adjusted under the 2015 Act.
NHTSA is also proposing an inflationary adjustment to the general penalty for other violations of EPCA, as amended.
NHTSA sets
(penalty rate, in $ per 0.1 mpg per vehicle) × (amount of shortfall, in tenths of an mpg) × (# of vehicles in manufacturer's non-compliant fleet).
Without even accounting for costs of generating or purchasing credits, automakers have paid more than $890 million in CAFE civil penalties, up to and including model year (MY) 2014
NHTSA has long had authority under the Energy Policy and Conservation Act (EPCA) of 1975, Public Law 94-163, 508, 89 Stat. 912 (1975), to raise the amount of the penalty for CAFE shortfalls if it can make certain findings,
Recognizing the economic harm that CAFE civil penalties could have on the automobile industry and the economy as a whole, Congress capped any increase in the original statutory penalty rate at $10 per tenth of a mile per gallon. Further—and significantly—it provided that NHTSA may only raise CAFE penalties under EPCA if it concludes through rulemaking that the increase in the penalty rate both (1) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed,
If NHTSA seeks to compromise or remit penalties for a given manufacturer, a rulemaking is not necessary, but the amount of a penalty may be compromised or remitted only to the extent (1) necessary to prevent a manufacturer's insolvency or bankruptcy, (2) the manufacturer shows that the violation was caused by an act of God, a strike, or a fire, or (3) the Federal Trade Commission certifies that a reduction in the penalty is necessary to prevent a substantial lessening of competition. NHTSA has never previously attempted to undertake this process.
On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act), Public Law 114-74, Section 701, was signed into law. The 2015 Act required federal agencies to make an initial “catch-up” adjustment to the “civil monetary penalties,” as defined, they administer through an interim final rule and then to make subsequent annual adjustments for inflation. The amount of increase for any “catch-up” adjustment to a civil monetary penalty pursuant to the 2015 Act was limited to 150 percent of the then-current penalty. Agencies were required to issue an interim final rule, without providing the opportunity for public comment ordinarily required under the Administrative Procedure Act, for the initial “catch-up” adjustment by July 1, 2016.
The method of calculating inflationary adjustments in the 2015 Act differs substantially from the methods used in past inflationary adjustment rulemakings conducted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation Adjustment Act), Public Law 101-410. Civil penalty adjustments under the 1990 Inflation Adjustment Act were conducted under rules that sometimes required significant rounding of figures.
The 2015 Act altered these rounding rules. Now, penalties are simply rounded to the nearest $1. Furthermore, the 2015 Act “resets” the inflation calculations by excluding prior inflationary adjustments under the 1990 Inflation Adjustment Act. To do this, the 2015 Act requires agencies to identify, for each civil monetary penalty, the year and corresponding amount(s) for which the maximum penalty level or range of minimum and maximum penalties was established (
The Director of the Office of Management and Budget (OMB) provided guidance to agencies in a February 24, 2016 memorandum.
Additionally, the 2015 Act gives agencies discretion to adjust the amount of a civil monetary penalty by less than otherwise required if the agency determines that increasing the civil monetary penalty by the otherwise required amount will have either a negative economic impact or if the social costs of the increased civil monetary penalty will outweigh the benefits.
On July 5, 2016, NHTSA published an interim final rule, adopting inflation adjustments for civil penalties under its administration, following the procedure and the formula in the 2015 Act. NHTSA did not analyze at that time whether the 2015 Act applied to all of its civil penalties. One of the adjustments NHTSA made at the time was raising the civil penalty rate for CAFE non-compliance from $5.50 to $14.
In response to the changes to the CAFE penalty provisions issued in the interim final rule, the Alliance of Automobile Manufacturers (Alliance) and the Association of Global Automakers (Global) jointly petitioned NHTSA for reconsideration (the Industry Petition).
In response to the Industry Petition, NHTSA issued a final rule on December 28, 2016.
Before NHTSA's December 2016 final rule became effective, in January 2017, NHTSA took action to delay the effective date of the December 2016 CAFE civil penalties rule.
Commenters included industry stakeholders and citizens. The array of commenters also included representatives from environmental groups, academia, and state governments such as attorneys general and environmental quality divisions. Industry stakeholders included comments from trade organizations and vehicle manufacturers.
Generally, commenters from environmental organizations, attorneys general of 10 states, and academia expressed support for upholding the December 2016 final rule. In addition, those supporting the $14 civil penalty generally asserted reconsidering the 2016 final rule was outside of NHTSA's authority. None of the comments received from commenters specifically addressed whether the CAFE civil penalty rate was a “civil monetary penalty” as defined by the 2015 Act.
Vehicle manufacturers, either directly or via their respective representing organizations, also expressed support for the reconsideration of the 2016 final rule. These commenters provided an analysis of how increased CAFE civil penalties could potentially impact their efforts to develop and sell vehicles in the marketplace when faced with anticipated increases in CAFE stringencies. These commenters expressed support for using 2007 as the base year for calculating inflation adjusted increases in CAFE civil penalty amounts.
Additionally, some commenters suggested civil penalty amounts of 47 dollars per 0.1 mpg and $8.47 per 0.1 mpg, the latter a 54% increase over the $5.50 per 0.1 mpg value.
The California Air Resources Board (CARB) commented that NHTSA's considerations when adjusting a civil penalty rate under EPCA do not matter for purposes of making an adjustment under the 2015 Act. CARB also stated that in past joint documents, NHTSA did not indicate that the $5.50 civil penalty rate would have a negative economic impact.
The Alliance and Global suggested that NHTSA's considerations when adjusting a civil penalty rate under EPCA are informative for purposes of making a determination of negative economic impact under the 2015 Act.
The December 28, 2016 final rule is not yet effective, and during reconsideration, the applicable civil penalty rate was $5.50 per tenth of a
In this notice of proposed rulemaking (NPRM), NHTSA is announcing that it has tentatively determined, upon reconsideration, that the 2015 Act should not be applied to the CAFE civil penalty formula provision found in 49 U.S.C. 32912 and is proposing to retain the current civil penalty rate of $5.50 per .1 of a mile per gallon.
NHTSA is also proposing to finalize the 2017 and 2018 inflationary adjustments for the maximum penalty for general CAFE violations in 49 U.S.C. 32912(a).
Upon reconsideration, NHTSA has tentatively determined that the 2015 Act is not applicable to the CAFE civil penalty formula. The penalty in 49 U.S.C. 32912(b) for a manufacturer that violates fuel economy standards is not a “civil monetary penalty” subject to inflationary adjustment under the 2015 Act. This reflects a change in NHTSA's position on this issue from when NHTSA previously adjusted the CAFE civil penalty rate from $5 to $5.50.
The 2015 Act requires agencies to adjust “civil monetary penalties” for inflation.
The 2015 Act required the Office of Management and Budget (OMB) to “issue guidance to agencies on implementing the inflation adjustments” under the Act.
Upon evaluation, NHTSA has tentatively concluded the penalty for manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) is not a “civil monetary penalty” subject to adjustment under the 2015 Act. Upon similar evaluation, NHTSA also has tentatively concluded the $10 limit for such violations in 49 U.S.C. 32912(c)(1)(B) is not a “civil monetary penalty” subject to adjustment under the 2015 Act either. To be a “civil monetary penalty,” a penalty must meet all three criteria in the statutory definition.
Unlike other civil penalties under NHTSA's jurisdiction, the penalty for manufacturer violations of fuel economy standards is not for “a maximum amount.” One example of a penalty that is for “a maximum amount” is the “general penalty” in EPCA for violations of 49 U.S.C. 32911(a). That “general penalty” is “a civil penalty of not more than $10,000 for each violation.”
The penalty for manufacturer violations of fuel economy standards also does not meet the definition of a “civil monetary penalty” because the fuel economy standards statute does not provide a “specific monetary amount” for manufacturer violations of fuel economy standards. In contrast to other provisions of the statute that provide for a specific amount on a per violation basis, often in the tens of thousands of dollars, section 32912(b) provides no specific amount. It only provides a $5.50 rate, which is one input in a market-based enforcement mechanism involving the calculation established in 49 U.S.C. 32912(b), the ultimate result of which—the penalty owed—is determined by how a manufacturer decides to use any available credits it has, or can acquire, to make up for the initial shortfall identified by NHTSA which in turn is based on the market price for credits which is dependent on the actions of other manufacturers.
For a manufacturer that does not meet an applicable fuel economy standard, NHTSA sends what is known as a “shortfall letter” to the manufacturer. NHTSA can only do so after it knows the average fuel economy “calculated under section 32904(a)(1)(A) or (B) of this title for automobiles to which the standard applies manufactured by the manufacturer during the model year.”
Once NHTSA receives the average fuel economy calculation from EPA, NHTSA must then determine whether the manufacturer's average fuel economy fails to meet the applicable average fuel economy standard.
NHTSA's preliminary calculation is determined by multiplying three numbers: (1) $5.50, (2) each tenth of a mile per gallon by which the average fuel economy falls short of the applicable average fuel economy standard, and (3) the number of automobiles manufactured by the manufacturer during the model year.
However, applying the reduction for the number of available credits is not a matter of simple mathematics because manufacturers have control over both the amount of credits available to them and the use of their credits. If a manufacturer's performance for a given fleet does not meet the applicable standard, then the manufacturer must elect how to satisfy its shortfall.
Whether and to what extent the penalty calculation is reduced “by the credits available to the manufacturer under section 32903 of this title for the model year” (
Only once NHTSA hears back from the manufacturer on how it wishes to satisfy its shortfall does NHTSA know the specific civil penalty that the manufacturer owes for falling short of the applicable average fuel economy standard. In other words, the manufacturer's decision regarding use of credits is one of the several inputs in the complex formula set forth in the fuel economy standards statute, which ultimately produces the civil penalty for a manufacturer's violation of fuel economy standards. In sum, the statute describes a process to determine a penalty amount, but does not itself provide for a penalty, fine or sanction that is “for a specific amount.” Instead,, due to additional flexibilities of credit transfers and trades, a manufacturer determines the amount of the civil penalty that is actually owed.
NHTSA must conduct a preliminary calculation for each of the manufacturer's fleets. CAFE standards are fleet-wide standards that apply to the vehicles a manufacturer produced for sale in each of three compliance categories: passenger cars manufactured domestically, imported passenger cars, and light trucks.
Since manufacturers control the use of their available credits, NHTSA has no way of determining on its own the amount of a penalty that a manufacturer must pay, or even if a manufacturer must pay any penalty at all.
Those are just the options for credits already earned. A manufacturer can also elect not to pay a penalty or pay a smaller penalty by using a “carryback” plan, in which the manufacturer applies credits it expects to earn in
There are additional considerations that strongly supports NHTSA's conclusion that the 2015 Act should not be applied to the CAFE civil penalty. Congress already adopted a specific scheme for increasing the civil penalty in 49 U.S.C. 32912(b) that requires a far more intensive and restrictive process than the summary approach in the 2015 Act. First, EPCA placed an absolute limit on such an increase to “not more than $10 for each .1 of a mile a gallon.”
The Secretary of Transportation shall prescribe by regulation a higher amount for each .1 of a mile a gallon to be used in calculating a civil penalty under subsection (b) of this section, if the Secretary decides that the increase in the penalty—(i) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed; and (ii) will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.
Notably, Congress was aware that inflation would effectively reduce the real value of the civil penalty rate over time—the CBO Director and NHTSA Administrator recognized that the civil penalty structure under 1975 EPCA
Congress also recognized the need for lead time in increasing the civil penalty for violations of fuel economy standards by specifying that an increase “is effective for the model year beginning at least 18 months after the regulation stating the higher amount becomes final.”
Congress additionally recognized the need for extensive input from the public and other parts of the Government before any such increase. It required that:
These extensive, statutorily-mandated procedures specifically applicable to increases in the penalty rate in 49 U.S.C. 32912(b) are in stark contrast to the procedures applicable to the 2015 Act. For the initial catch-up adjustment, the 2015 Act specified that agencies should use an interim final rule.
Finally, before Congress passed the 2015 Act, the CBO provided an assessment of the revenue that inflation adjustments pursuant to the 2015 Act would provide the Federal government. CBO determined that
NHTSA believes that applying the 2015 Act to the penalty in 49 U.S.C. 32912(b) would evade the statutory safeguards and limitations directly applicable to that penalty, in contrast to Congress's original awareness of penalty rate adjustments, and could result in the imposition of a potentially massive increase in civil penalties, in contrast to contemporaneous, pre-enactment evidence about the effect of the 2015 Act.
NHTSA has previously sought comment on related issues, but NHTSA believes it is important to provide the public with an opportunity to provide additional comments in light of NHTSA's analysis. Accordingly, NHTSA requests comments on this analysis. For these reasons, NHTSA tentatively concludes that it is not appropriate to apply the 2015 Act and is proposing to retain the $5.50 rate in the CAFE civil penalty.
NHTSA is proposing to retain the CAFE civil penalty rate of $5.50 per tenth of a mile per gallon, even if one were to assume that the penalties are subject to the 2015 Act, because NHTSA tentatively concludes that, in light of the statutory requirements in EPCA for raising the penalty rate, applying the increase would lead to a “negative economic impact” under the 2015 Act.
The 2015 Act states, “[a]ny increase determined under this subsection shall be rounded to the nearest multiple of $1.”
Under the 2015 Inflation Adjustment Act, NHTSA, under authority delegated by the Secretary, may adjust the amount of a civil monetary penalty by the less than the amount otherwise required for the “catch-up adjustment” upon determining in a final rule, after notice-and comment, that increasing the civil monetary penalty by the otherwise required amount will have a “negative economic impact,” or the social costs of increasing the civil monetary penalty by the otherwise required amount outweigh the benefits.
To determine whether increasing the CAFE civil penalty rate by the amount calculated under the inflation adjustment formula would have a “negative economic impact,” NHTSA must first establish the meaning of “negative economic impact.” The statute does not define “negative economic impact.” OMB issued a memorandum providing guidance to the heads of executive departments and agencies on how to implement the Inflation Adjustment Act, but the guidance does not define “negative economic impact” either.
In interpreting “negative economic impact,” NHTSA cannot just consider the Inflation Adjustment Act in isolation: statutory interpretation is not conducted in a vacuum.
Accordingly, NHTSA must interpret Congress' Inflation Adjustment Act in light of the longstanding CAFE civil penalty structure previously enacted by Congress. Interpreting the Inflation Adjustment Act in context is particularly important in determining the appropriate adjustment to make to the CAFE civil penalty rate given the unique nature of the CAFE civil penalties program. For example, in contrast to other federal civil penalty programs, the CAFE statute requires a minimum of eighteen months' lead time in advance of a model year before a higher civil penalty amount can become effective.
CAFE civil penalties are also atypical in that they follow a prescribed formula that can only be compromised or remitted by NHTSA in exceptionally limited circumstances.
The principles underlying other traditional canons of statutory interpretation further support NHTSA's proposed approach. For example, statutes that relate to the same or to similar subjects are
The principles underlying the rule of lenity also substantiate interpreting the Inflation Adjustment Act narrowly in light of EPCA. This canon instructs that statutes imposing penalties should be construed narrowly in favor of those against whom the penalties will be imposed. Although the rule of lenity is
Under 49 U.S.C. 32912(b), a manufacturer that violates a fuel economy standard is potentially subject to a civil penalty rate for each tenth of a mile per gallon that the manufacturer misses the applicable average fuel economy standard for the number of automobiles manufactured by the manufacturer during the model year, unless the manufacturer is able and willing to apply credits or establish a plan to generate and apply credits in subsequent years, as discussed above. NHTSA has exceptionally limited discretion in whether to impose the penalty or the amount of the preliminary calculation of the penalty when it does indeed apply.
The Secretary is required to increase the applicable civil penalty rate up to $10 per each tenth of a mile per gallon if she decides that the increase in the penalty:
(i) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed; and
(ii) will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.
The Secretary can only decide that the increase “will not have a substantial deleterious impact on the economy” if she decides that it is likely that the increase in the penalty will not:
(i) Cause a significant increase in unemployment in a State or a region of a State;
(ii) adversely affect competition; or
(iii) cause a significant increase in automobile imports.
Thus, to increase the civil penalty rate for CAFE violations, the Secretary must affirmatively determine that doing so “will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.” Critically, if she is unable to make such a determination or, put another way, if she determines that increasing the civil penalty may have “a substantial deleterious impact on the economy of the United States, a State, or a region of a State,” she is prohibited by statute from increasing the applicable civil penalty rate.
NHTSA also believes it is appropriate to consider the impact raising the CAFE civil penalty rate would have on individual manufacturers who fall short of fuel economy standards, and those affected, such as dealers. Such a broad interpretation is consistent with how other statutory provisions permitting or requiring agencies to consider economic impacts have been interpreted. For example, under the Safety Act, a discretionary factor in determining the amount of a penalty is “the appropriateness of such penalty in relation to the size of the business of the person charged, including the potential for
Note also that “negative economic impact,” as used in the Inflation Adjustment Act, need not mean “
To summarize: The 2015 Act allows an agency to set a lower penalty amount than would otherwise be required if it can show that raising the penalty in accordance with the 2015 Act will lead to a “negative economic impact,” which is not defined either in the 2015 Act or OMB's implementing guidance. However, the statute specifically related to penalties for violations of NHTSA's fuel economy standards has a provision allowing for an increase in the penalty rate only if the agency can determine that increasing the rate will not have a “substantial deleterious impact on the economy.” To read these two provisions together harmoniously, NHTSA interprets the statutes to mean that the agency must be able to affirmatively show that increasing the penalty as would be required by the 2015 Act will not have the adverse economic effects identified in the definition of “substantial deleterious impact.” Since the agency cannot make those affirmative findings, discussed further
Since NHTSA does not have sufficient evidence to make the requisite finding under EPCA that an increase in the CAFE penalty rate will not have a substantial deleterious impact on the economy, NHTSA is proposing to retain the $5.50 penalty rate pursuant to the negative economic impact exception to inflationary adjustments. NHTSA invites comments on whether this is the appropriate penalty level, and if not, requests data or other evidence that would support the findings necessary under EPCA that would allow for such an increase.
The comments should take into account that the factors are probabilistic and prospective, that is, to increase the penalty rate, the Secretary must determine that doing so likely would not have the statutorily-enumerated effects in the future.
The comments should also reflect the considerable burdens that must be overcome to make the findings needed to increase the civil penalty under EPCA, in part reflected in the statute's repeated use of “substantial” and “significant.” Indeed, the burden is so great that NHTSA has been unable to make all of the determinations necessary since the provisions were added in 1978.
The comments should also address the impact of increasingly stringent fuel economy standards established in existing statute and NHTSA regulation, and whether this increasing stringency has a relationship to a “negative economic impact” or “substantial deleterious impact determination.”
NHTSA tentatively concludes that an increase in the CAFE penalty rate could plausibly cause a significant increase in unemployment in a State or a region of a State. For instance, vehicle price increases—resulting from increased penalty payments or compliance costs passed through to customers—could result in customers keeping their current vehicles longer or shifting purchases towards less expensive new vehicles or toward the used vehicle market. Either outcome could lead to fewer jobs with vehicle manufacturers. Losses may be concentrated in particular States and regions within those States where automobile manufacturing plants are located. Some manufacturers who have historically paid civil penalties in lieu of compliance have automobile assembly and parts manufacturing plants located in the Midwest and Southeastern U.S. These plants employing thousands of people could be most adversely impacted by a civil penalty increase resulting in employment losses. In response to substantial increases in potential penalties, some manufacturers could plausibly lose sales due to resulting higher prices, which may result in reduced employment at facilities currently producing vehicles and engines.
Fewer new vehicle sales attributable to price increases resulting from increased penalty payments and/or compliance costs could also plausibly result in fewer jobs within new motor vehicle dealerships franchised to sell vehicles manufactured or distributed by manufacturers subject to penalties and/or increased compliance costs. A manufacturer's decision to change allocation of vehicles distributed to dealers to address increased penalties and/or compliance costs could also result in job losses within the franchised dealer network. For example, one might expect that increased CAFE penalties could lead to a decrease in the number of vehicles with powerful engines being produced or sold. Dealers in States or intra-State regions where these types of vehicles are more popular would be affected disproportionately.
Notably, unlike the other two factors, this factor does not require a finding of a “significant” effect. The absence of this modifier implies that even a modest adverse effect on competition would suffice to block a civil penalty increase. This phrasing similarly contrasts with the provision in the next section of the Code, describing the compromising or remitting the amount of a CAFE civil penalty. That provision requires the Federal Trade Commission to certify that a reduction in the penalty is “necessary to prevent a substantial lessening of competition.”
In establishing CAFE stringency requirements, NHTSA has consistently evaluated risks to competition, including the potential effects on individual automakers. For instance, in the 1985 rulemaking, NHTSA analyzed the potential effect of a 1.5 mpg fuel economy improvement on the domestic auto industry, stating:
NHTSA tentatively concludes that it is reasonable to believe that an increase in the CAFE penalty rate could distort the normal market competition that would be expected in a free market by favoring one group of manufacturers over another. This could adversely impact the affected manufacturers through higher prices for their products (without corresponding benefits to consumers), restricted product offerings, and reduced profitability. An increased CAFE penalty benefits fleets of already-compliant fuel efficient vehicles over fleets of less fuel-efficient vehicles. A manufacturer who is already generating or possesses over-compliance credits will find itself with much more valuable credits to sell and may use this additional capital to invest more heavily in research and development, marketing, add other features to its
In addition to the impact on competition an increase in penalties might have on market participants, it could also have an impact on the market itself by limiting consumer choice involving vehicles and vehicle configurations that would otherwise be produced with penalties at their current values. For instance, faced with the prospect of having to pay larger penalties in the future, a manufacturer could decide that it makes financial sense to shift resources from its planned investments in capital towards payment of possible future penalties. If the possibility of paying penalties looms too large, a manufacturer could go out of business, reducing competition even further.
Final model year fuel economy performance reports published by NHTSA indicate import passenger car fleets are performing better than domestic passenger car fleets. The model year 2015 fleet performance report
In light of this historical variation, it is unclear whether increasing the civil penalty fine amount would have a significant effect on either the domestic or import passenger cars fleets, and NHTSA seeks comment on potential positive or negative impacts civil penalties may have on the domestic and import passenger car fleets, along with any potential positive or negative impacts to the light truck fleet. Please provide supporting information for your position.
NHTSA has reviewed the comments it received on the July 2017 notice regarding “negative economic impact,” and—from previous requests for comment—on the EPCA considerations. NHTSA did not identify anything persuasive in the submissions that would undermine NHTSA's proposed interpretation of “negative economic impact.”
In its July 2017 request for comments, NHTSA specifically sought comments on:
• Whether the EPCA considerations for “substantial deleterious impact” are relevant to a determination of “negative economic impact”?
• And if so, whether those considerations must be accounted for in determining negative economic impact, or simply that they are informational, and what is the legal basis for that belief?
Only two commenters submitted comments touching on these questions. But none of the comments addressed whether the EPCA criteria for “substantial deleterious impact on the economy” should guide NHTSA's consideration of whether the inflation adjustment would have a “negative economic impact,” and if so, how much less than the otherwise required amount should the penalty level be adjusted after analyzing data relevant to the EPCA factors.
CARB observed that the 2016 joint Technical Assessment Report stated that manufacturers “who have consistently chosen to pay CAFE fines in the past may continue to do so,” even if the civil penalty rate changes. CARB concluded from that NHTSA saw no reason at the time to think its fines would have a negative economic impact. However, this conclusion does not necessarily follow, as the greatly increased civil penalty rate, in light of longstanding expectations about the steadiness of that rate, could significantly upset manufacturers' expectations about compliance and thus cause operational or other challenges given the lead time necessary to make significant fuel economy improvements in subsequent model years.
The Alliance and Global jointly submitted comments that also relate to these issues. These associations contended that although the EPCA factors “do not override” the Inflation Adjustment Act and “are not binding” in the inflation adjustment, they provide “helpful support” and “useful guidance” in deciding whether there would be a “negative economic impact” and, if so, how much to adjust the civil penalty amount. In their view, the “stringent” factors required by EPCA demonstrate that the CAFE civil penalty amount should not be increased without evidence of “substantial net benefits” and evidence that there would be “no substantial harm to the economy.”
NHTSA has previously sought comment on the EPCA civil penalty criteria in other rulemaking proceedings. In 2009, NHTSA sought comment on whether it should initiate a proceeding to consider raising the CAFE civil penalty under EPCA. Most of the comments on this issue focused on the energy conservation factor, rather than the impact on the economy. But no commenter argued that raising the penalty would have a positive or neutral impact on the economy.
In 2010, NHTSA specifically solicited comments on how raising or not raising the penalty amount under EPCA would impact the economy. Only Ferrari and Daimler commented on this issue. Both manufacturers argued that raising the penalty would have no impact on fuel savings and would simply hurt the manufacturers forced to pay it. Daimler stated further that manufacturers pay fines because they cannot increase energy savings any further. No commenter argued or provided any information supporting the opposing
In 2012, NHTSA again solicited comments on how raising or not raising the penalty amount under EPCA would impact the economy. This time, “no comments specific to this issue were received,” so NHTSA declared it would “continue to attempt to evaluate this issue on its own.”
The public has had multiple opportunities to comment on the EPCA civil penalty provisions and now the Inflation Adjustment Act. NHTSA has considered all the comments it received in generating this proposed rule.
Based on the findings discussed above, NHTSA has tentatively made a determination that negative economic impact will result if the CAFE civil penalty rate is increased. For this reason, NHTSA is proposing to retain the existing CAFE civil penalty rate of $5.50 per .1 of a mile per gallon. NHTSA also seeks comment on whether a modest increase in the CAFE civil penalty rate, less than the amount that would otherwise be required if the 2015 Act applies, would “result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed,” as expected by EPCA.
Even if NHTSA was not required to apply the EPCA factors, NHTSA has tentatively determined that raising the CAFE civil penalty rate to $14 would have a “negative economic impact.” NHTSA believes that the economic consequences described above are a reasonable estimate of what would occur if the CAFE civil penalty rate was increased 150 percent, regardless of any effect from EPCA. That is, increasing the penalty rate to $14 would lead to significantly greater costs than the agency had anticipated when it set the CAFE standards because manufacturers who had planned to use penalties as one way to make up their shortfall would now need to pay increased penalty amounts, purchase additional credits at likely higher prices, or make modifications to their vehicles outside of their ordinary redesign cycles. NHTSA believes all of these options would increase manufacturers' compliance costs, many of which would be passed along to consumers. Considering the agency's past analyses of CAFE's impact on vehicle costs, NHTSA tentatively concludes that the estimate provided by industry showing annual costs of at least one billion dollars is a reasonable estimate of this impact. NHTSA requests comments, including any substantive analysis, on this issue. The agency further believes that an increase in costs of this significant magnitude exceeds the range of adjustments Congress intended to cover when it enacted the 2015 Act, as described above.
If NHTSA determines that raising the CAFE civil penalty rate to $14 would have a “negative economic impact,” it is permitted to adjust the rate by less than the otherwise required amount. Without any statutory direction or OMB guidance on how much to adjust the rate, if at all, it falls to NHTSA to determine the appropriate adjustment—and NHTSA has wide discretion in making this determination.
In light of the regulatory concerns described above, and in consideration of the unique regulatory structure with non-discretionary penalties tied to standards that increase over time, NHTSA is proposing to keep the CAFE civil penalty rate at $5.50 because it tentatively concludes that retaining the $5.50 rate would avoid the “negative economic impact” caused by any adjustment upwards.
Although NHTSA has previously sought comment on these issues, NHTSA believes it is important to provide the public with an opportunity to provide additional information in light of NHTSA's analysis. Therefore, NHTSA requests comment on whether increasing the CAFE civil penalty rate to $14 would have a “negative economic impact,” and if so, to what level the rate should be raised, if at all.
Under 49 U.S.C. 32912(c)(1)(B), if the CAFE civil penalty rate is increased, the rate at which it is set “may not be more than $10 for each .1 of a mile a gallon.” This upper limit has been in effect since EPCA was amended in 1978 and was left in place when Congress amended the civil penalty provision in 2007.
The 2015 Act requires adjustments of “civil monetary penalties,” which must be penalties that are “assessed or enforced by an agency pursuant to Federal law.”
Accordingly, NHTSA is tentatively proposing in the alternative that any potential adjustment NHTSA makes to the CAFE civil penalty rate be capped at $10 and seeks comment on this proposal. Commenters should consider whether the $10 limit is itself a “civil monetary penalty” that must be adjusted under the 2015 Act, keeping in mind that the level was kept the same when the previous adjustment was made in 1997. Commenters should also consider the effect of the 2007 amendments in ratifying the $10 level and whether the market-based complexities established by those amendments bear on what Congress meant subsequently by “civil monetary penalty” in the 2015 Act.
NHTSA has considered the impact of this rulemaking action under Executive Order 12866, Executive Order 13563, and the Department of Transportation's regulatory policies and procedures. This rulemaking document has been considered a “significant regulatory action” under Executive Order 12866. At this stage, NHTSA believes that this rulemaking could also be “economically significant,” but cannot definitively make that determination until the final rule stage, as it depends entirely on the civil penalty rate established in the final rule.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601
NHTSA has considered the impacts of this notice of proposed rulemaking under the Regulatory Flexibility Act and certifies that this rule would not have a significant economic impact on a substantial number of small entities. The following provides the factual basis for this certification under 5 U.S.C. 605(b).
The Small Business Administration's (SBA) regulations define a small business in part as a “business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.” 13 CFR 121.105(a). SBA's size standards were previously organized according to Standard Industrial Classification (“SIC”) Codes. SIC Code 336211 “Motor Vehicle Body Manufacturing” applied a small business size standard of 1,000 employees or fewer. SBA now uses size standards based on the North American Industry Classification System (“NAICS”), Subsector 336—Transportation Equipment Manufacturing. This action is expected to affect manufacturers of motor vehicles. Specifically, this action affects manufacturers from NAICS codes 336111—Automobile Manufacturing, and 336112—Light Truck and Utility Vehicle Manufacturing, which both have a small business size standard threshold of 1,500 employees.
Though civil penalties collected under 49 CFR 578.6(h)(1) and 49 CFR 578.6(h)(2) apply to some small manufacturers, low volume manufacturers can petition for an exemption from the Corporate Average Fuel Economy standards under 49 CFR part 525. This would lessen the impacts of this rulemaking on small business by allowing them to avoid liability for penalties under 49 CFR 578.6(h)(2). Small organizations and governmental jurisdictions will not be significantly affected as the price of motor vehicles and equipment ought not change as the result of this rule.
Executive Order 13132 requires NHTSA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, the agency may not issue a regulation with Federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, the agency consults with State and local governments, or the agency consults with State and local officials early in the process of developing the proposed regulation.
This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132.
The reason is that this rule will generally apply to motor vehicle manufacturers. Thus, the requirements of Section 6 of the Executive Order do not apply.
The Unfunded Mandates Reform Act of 1995, Public Law 104-4, requires agencies to prepare a written assessment of the cost, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually. Because this rule is not expected to include a Federal mandate, no Unfunded Mandates assessment will be prepared.
The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4347) requires Federal agencies to analyze the environmental impacts of proposed major Federal actions significantly affecting the quality of the human environment, as well as the impacts of alternatives to the proposed action. 42 U.S.C. 4332(2)(C). When a Federal agency prepares an environmental assessment, the Council on Environmental Quality (CEQ) NEPA implementing regulations (40 CFR parts 1500-1508) require it to “include brief discussions of the need for the proposal, of alternatives [. . .], of the environmental impacts of the proposed action and alternatives, and a listing of agencies and persons consulted.” 40 CFR 1508.9(b). This section serves as the agency's Draft Environmental Assessment (Draft EA). NHTSA invites public comments on the contents and tentative conclusions of this Draft EA.
This notice of proposed rulemaking sets forth the purpose of and need for this action. NHTSA is required to consider whether it is appropriate, pursuant to the Inflation Adjustment Act, to make an initial “catch-up” adjustment to the civil monetary penalties it administers for the CAFE program. Further, if the agency determines that the Inflation Adjustment Act applies, it must consider the appropriate approach to undertake pursuant to the legislation. The purpose of this notice of proposed rulemaking is to consider the applicability of the Inflation Adjustment Act and to propose adjustments pursuant to the Act, consistent with its
NHTSA has considered a range of alternatives for the proposed action, including maintaining the civil penalty amount at $5.50 per each tenth of a mile per gallon (the No Action Alternative) and increasing the civil penalty amount to $14.00 per each tenth of a mile per gallon (as previously proposed). This notice of proposed rulemaking also seeks public comment on whether it is required to increase the civil penalty amount to $6.00 per each tenth of a mile per gallon (rounding pursuant to the 2015 Act) or whether the civil penalty amount is capped at $10.00 per each tenth of a mile per gallon (pursuant to EPCA). In this notice of proposed rulemaking, the agency proposes maintaining the civil penalty amount at $5.50 as its preferred alternative, although it may select any value along this range of alternatives, including any civil penalty amount between $5.50 and $14.00. NHTSA is also proposing to increase the “general penalty” to a maximum penalty of $41,484,
Under all of the alternatives under consideration, the agency would maintain or increase the civil penalty amount for a manufacturer's failure to meet its fleet's average fuel economy target (assuming the manufacturer does not have sufficient credits available to cover the shortfall). When deciding whether to add fuel-saving technology to its vehicles, a manufacturer might consider the cost to add the technology, the price and availability of credits, the potential reduction in its civil penalty liability, and the value to the vehicle purchaser of the change in fuel outlays over a specified “payback period.” A higher civil penalty amount could encourage manufacturers to improve the average fuel economy of their passenger car and light truck fleets if the benefits of installing fuel-saving technology (
However, there are many reasons why this might not occur to the degree anticipated. Apart from the civil penalty rate, as CAFE standards increase in stringency, manufacturers have needed to research and install increasingly less cost-effective technology that may not obtain levels of consumer acceptance necessary to offset the investment. A higher civil penalty amount combined with the value of the potential added fuel economy benefit of new, advanced technology to the vehicle purchaser may not be sufficient to outweigh the added technology costs (including both the financial outlays and the risk that consumers may not value the technology or accept its impact on the driving experience, therefore opting not to purchase those models). This may be especially true when gas prices are low. If the added cost in civil penalty payments is borne by the manufacturer, this may result in reduced investment in fuel saving technology or reduced consumer choice. If the added cost in civil penalty payments is passed on to the consumer, the consumer would see higher vehicle purchase costs without a corresponding fuel economy benefit or other benefits, resulting in fewer purchases of newer, more fuel-efficient vehicles. Based on the foregoing, NHTSA believes that each of the alternatives under consideration in this notice of proposed rulemaking could result, at most, only marginally better levels of compliance with the applicable fuel economy targets.
An increase in a motor vehicle's fuel economy is associated with reductions in fuel consumption and greenhouse gas (GHG) emissions for an equivalent distance of travel. Increased global GHG emissions are associated with climate change, which includes increasing average global temperatures, rising sea levels, changing precipitation patterns, increasing intensity of severe weather events, and increasing impacts on water resources. These, in turn, could affect human health and safety, infrastructure, food and water supplies, and natural ecosystems. Fewer GHG emissions would reduce the likelihood of these impacts. Changes in motor vehicle fuel economy are also associated with impacts on criteria and hazardous air pollutant emissions, safety, life-cycle environmental impacts, and more.
As part of recent rulemaking actions establishing CAFE standards, NHTSA evaluated the impacts of increasing fuel economy standards for passenger cars and light trucks on these and other environmental impact areas.
NHTSA will prepare a new EIS for its forthcoming proposal for new CAFE standards.
NHTSA is also proposing to increase the “general penalty” pursuant to the
NHTSA and DOT have consulted with OMB as described earlier in this proposal. NHTSA and DOT have not consulted with any other agencies in the development of this proposal.
NHTSA has reviewed the information presented in this Draft EA and concludes that the proposed action and alternatives would have no impact or a small positive impact on the quality of the human environment. The preferred alternative is anticipated to have no impact on the quality of the human environment, as it would result in no change, as compared to current law, to the civil penalty amount for failure to meet fuel economy targets. Further, the proposed change to the “general penalty” is not anticipated to affect on-road emissions. Any of the impacts anticipated to result from the alternatives under consideration are not expected to rise to a level of significance that necessitates the preparation of an Environmental Impact Statement. Based on the information in this Draft EA and assuming no additional information or changed circumstances, NHTSA expects to issue a Finding of No Significant Impact (FONSI). Such a finding will not be made before careful review of all public comments received. A Final EA and a FONSI, if appropriate, will be issued as part of the final rule.
This rule does not have a retroactive or preemptive effect. Judicial review of a rule based on this proposal may be obtained pursuant to 5 U.S.C. 702.
In accordance with the Paperwork Reduction Act of 1980, NHTSA states that there are no requirements for information collection associated with this rulemaking action.
Please note that anyone is able to search the electronic form of all comments received into any of DOT's dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the
This proposed rule is expected to be a deregulatory action under Executive Order 13771, although NHTSA, at this point, has not been able to quantify potential cost savings.
Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber products, Tires, Penalties.
In consideration of the foregoing, 49 CFR part 578 is proposed to be amended as set forth below.
Pub. L. 101-410, Pub. L. 104-134, Pub. L. 109-59, Pub. L. 114-74, Pub. L. 114-94, 49 U.S.C. 30165, 30170, 30505, 32308, 32309, 32507, 32709, 32710, 32902, 32912, and 33115; delegation of authority at 49 CFR 1.81, 1.95.
(h)
(2) Except as provided in 49 U.S.C. 32912(c), a manufacturer that violates a standard prescribed for a model year under 49 U.S.C. 32902 is liable to the United States Government for a civil penalty of $5.50 multiplied by each .1 of a mile a gallon by which the applicable average fuel economy standard under that section exceeds the average fuel economy—
(i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for automobiles to which the standard applies manufactured by the manufacturer during the model year;
(ii) Multiplied by the number of those automobiles; and
(iii) Reduced by the credits available to the manufacturer under 49 U.S.C. 32903 for the model year.
Fish and Wildlife Service, Interior.
Proposed rule.
Under the authority of the Endangered Species Act of 1973, as amended (Act), we, the U.S. Fish and Wildlife Service (Service), propose to reclassify the Hawaiian goose (nene) (
We will accept comments received or postmarked on or before June 1, 2018. Please note that if you are using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
Mary Abrams, Field Supervisor, telephone: 808-792-9400. Direct all questions or requests for additional information to: U.S. Fish and Wildlife Service, Pacific Islands Fish and Wildlife Office, 300 Ala Moana Boulevard, Room 3-122, Honolulu, HI 96850. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service at 800-877-8339.
• Habitat destruction and modification due to urbanization, agricultural activities, nonnative ungulates, and nonnative vegetation;
• Predation by nonnative mammals such as mongooses, cats, dogs, rats, and pigs;
• Diseases such as toxoplasmosis, avian pox, avian botulism, avian malaria, omphalitis, West Nile virus, and avian influenza;
• Human activities such as motor vehicle collisions, collisions at wind energy facilities, artificial hazards (
• Stochastic events such as drought and hurricanes.
Environmental effects from climate change are likely to exacerbate the impacts of drought and hurricanes, and flooding of nene habitat due to sea level rise may become a threat in the future. Existing regulatory mechanisms and conservation efforts do not effectively address the introduction and spread of nonnative plants and animals and other threats to the nene.
We intend that any final action resulting from this proposal will be based on the best available scientific and commercial data and will be as accurate and as effective as possible. Therefore, we invite governmental agencies, the scientific community, industry, Native Hawaiian organizations, or any other interested parties to submit comments or recommendations concerning any aspect of this proposed rule. Comments should be as specific as possible. We are specifically requesting comments on:
(1) The appropriateness of our proposal to reclassify nene from endangered to threatened.
(2) The factors that are the basis for making a reclassification determination for a species under section 4(a) of the Act (16 U.S.C. 1531
(a) The present or threatened destruction, modification, or curtailment of its habitat or range;
(b) Overutilization for commercial, recreational, scientific, or educational purposes;
(c) Disease or predation;
(d) The inadequacy of existing regulatory mechanisms; or
(e) Other natural or manmade factors affecting its continued existence.
(3) Biological, commercial trade, or other relevant data concerning any threats (or lack thereof) to the nene and existing regulations that may be addressing those threats.
(4) Additional information concerning the historical and current status, range, distribution, and population size of this species, including the locations of any additional populations of this species.
(5) Any information on the biological or ecological requirements of the species and ongoing conservation measures for the species and its habitat.
(6) Any information on foreseeable changes to State land use or County land use planning within the
(7) The appropriateness of a rule under section 4(d) of the Act to allow certain actions to take nene, and any additional actions that should be considered for authorization.
(8) The appropriateness of a rule under section 4(d) of the Act to allow interstate commerce for nene in captivity outside Hawaii.
(9) Any additional information pertaining to the promulgation of a rule under section 4(d) of the Act to allow certain actions that may take nene.
(10) Relevant data on climate change and potential impacts to the nene and its habitat.
We will take into consideration all comments and any additional information we receive. Such communications may lead to a final rule that differs from this proposal. All comments, including commenters' names and addresses, if provided to us, will become part of the supporting record. Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include. Please note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered or a threatened species must be made “solely on the basis of the best scientific and commercial data available.”
You may submit your comments and materials concerning the proposed rule by one of the methods listed in
If you submit information via
We will post all hardcopy submissions on
Section 4(b)(5)(E) of the Act provides for a public hearing on this proposal, if requested. We must receive a request for a public hearing, in writing, at the address shown in
In accordance with our policy, “Notice of Interagency Cooperative Policy for Peer Review in Endangered Species Act Activities,” which published in the
On March 11, 1967, the Secretary of the Interior identified nene as an endangered species (32 FR 4001), under the authority of the Endangered Species Preservation Act of 1966 (80 Stat. 926; 16 U.S.C. 668aa(c)). On March 8, 1969, the Secretary of the Interior again identified nene as an endangered species (34 FR 5034) under section 1(c) of the Endangered Species Preservation Act of 1966. On October 13, 1970, the Director of the Bureau of Sport Fisheries and Wildlife listed nene as an endangered species (35 FR 16047) under the authority of the new regulations implementing the Endangered Species Conservation Act (ESCA) of 1969. Species listed as endangered under the ESCA of 1969 were automatically included in the List of Endangered and Threatened Wildlife when the Endangered Species Act (Act) was enacted in 1973.
On February 14, 1983, the Service released the Nene Recovery Plan (USFWS 1983). On September 24, 2004, the Service published for comment (69 FR 57356) the Draft Revised Recovery Plan for Nene (USFWS 2004). The Draft Revised Recovery Plan presented additional information on the status of the species, factors affecting species recovery, and an updated framework for species recovery.
A 5-year status review of the nene was completed on September 30, 2011 (USFWS 2011a). This review concluded that nene continued to meet the definition of an endangered species under the Act, and recommended no change in the classification of nene as endangered. However, current information indicates the species is not in danger of extinction and may warrant reclassification from endangered to threatened.
The original rules identifying nene as an endangered species (32 FR 4001, 34 FR 5034, 35 FR 16047) listed its scientific name as
The nene is a medium-sized goose with an overall length of approximately 25 to 27 inches (in) (63 to 65 centimeters (cm)) (Banko
Nene currently use shrublands, grasslands, sparsely vegetated lava flows, and human-altered habitats ranging from coastal to alpine environments (Wilson and Evans 1890-1899, p. 186; Munro 1944, pp. 41-42; Scott
Nene are currently known to occupy various habitat and vegetation community types ranging from coastal dune vegetation and nonnative grasslands (such as golf courses, pastures, and rural areas) to sparsely vegetated low- and high-elevation lava flows, mid-elevation native and nonnative shrubland, cinder deserts, native alpine grasslands and shrublands, and open and nonnative alpine shrubland-woodland community interfaces (Banko
Nene have an extended breeding season with eggs being laid from August to April (Banko
Nene and one or more now extinct species of
Section 4(f) of the Act directs us to develop and implement recovery plans for the conservation and survival of endangered and threatened species unless we determine that such a plan will not promote the conservation of the species. Under section 4(f)(1)(B)(ii), recovery plans must, to the maximum extent practicable, include “objective, measurable criteria which, when met, would result in a determination, in accordance with the provisions of [section 4 of the Act], that the species be removed from the list.” However, revisions to the Lists of Endangered and Threatened Wildlife and Plants (adding, removing, or reclassifying a species) must be based on determinations made in accordance with sections 4(a)(1) and 4(b) of the Act. Section 4(a)(1) requires that the Secretary determine whether a species is endangered or threatened (or not) because of one or more of five threat factors. Section 4(b) of the Act requires that the determination be made “solely on the basis of the best scientific and commercial data available.” While recovery plans provide important guidance to the Service, States, and other partners on methods of enhancing conservation and minimizing threats to listed species, as well as measurable criteria against which to measure
There are many paths to accomplishing recovery of a species, and recovery may be achieved without all of the criteria in a recovery plan being fully met. For example, one or more criteria may be exceeded while other criteria may not yet be accomplished. In that instance, we may determine that the threats are minimized sufficiently and the species is robust enough to delist. In other cases, recovery opportunities may be discovered that were not known when the recovery plan was finalized. These opportunities may be used instead of methods identified in the recovery plan. Likewise, information on the species may be learned that was not known at the time the recovery plan was finalized. The new information may change the extent to which existing criteria are appropriate for recognizing recovery of the species. Recovery of a species is a dynamic process requiring adaptive management that may, or may not, follow all of the guidance provided in a recovery plan.
In 1983, the Service published the Nene Recovery Plan and concluded that the nene population in the wild was declining; however, the exact causes of the decline were not clearly understood (USFWS 1983, p. 24). The Statewide population was estimated at approximately 600 nene with 390 ± 120 nene on Hawaii Island and 112 nene on Maui. Based on the available data, the plan recommended the primary objective to delist the species was establishing a population of 2,000 nene on Hawaii Island and 250 nene on Maui, well distributed in secure habitat and maintained exclusively by natural reproduction (USFWS 1983, p. 24). The plan focused on maintenance of wild populations through annual releases of captive-reared birds to prevent further population decline, habitat management including control of introduced predators, and conducting research to determine factors preventing nene recovery and appropriate actions to overcome these factors. The plan also acknowledged that more research, biological data, and better population models would lead to a reassessment of recovery efforts and criteria for delisting the species.
On September 24, 2004, the Service published for comment (69 FR 57356) the Draft Revised Recovery Plan for Nene (USFWS 2004). The draft revised recovery plan presented additional information on the status of the species, factors affecting species recovery, and an updated framework for species recovery. At the time, the Statewide population was estimated at 1,300 nene with populations on Hawaii (349), Maui (336), Kauai (564), and Molokai (55). The primary factors affecting the nene recovery in the wild were: (1) Predation by introduced mammalian predators (Factor C), (2) inadequate nutrition (Factor E), (3) lack of lowland habitat (Factor A), (4) human-caused disturbance and mortality (Factor E), (5) behavioral issues (Factor E), (6) genetic issues (Factor E), and (7) disease (Factor C). The draft revised recovery plan recommended the following criteria for downlisting the nene from endangered to threatened: (1) Self-sustaining populations exist on Hawaii, Maui Nui (Maui, Molokai, Lanai, Kahoolawe), and Kauai (target of at least 2,000 birds distributed in 7 populations over 15 years); and (2) sufficient suitable habitat to sustain the target population levels on each island is identified, protected, and managed in perpetuity (USFWS 2004, pp. 50-52). Self-sustaining was defined as maintaining (or increasing) established population levels without additional releases of captive-bred nene, although manipulation such as predator control or pasture management may need to be continued. The draft revised recovery plan stated that consideration for delisting could occur once all of the downlisting criteria had been met, and population levels on Hawaii, Maui Nui, and Kauai had all shown a stable or increasing trend (from downlisting levels) for a minimum of 15 additional years (
As noted above, substantial self-sustaining populations exist and are well distributed in multiple localities on Hawaii Island, Maui, and Kauai (NRAG 2017; USFWS 2017), totaling nearly 3,000 individuals. The species continues to be conservation-reliant (
The 2004 draft revised recovery plan sets forth the general recovery strategy for nene (USFWS 2004, p. 47), as follows. In order for nene populations to survive they should be provided with generally predator-free breeding areas and sufficient food resources. Human-caused disturbance and mortality should be minimized, and genetic and behavioral diversity maximized. The goal of recovery stated in the draft revised recovery plan is to enable the conservation of nene by using a mix of natural and human-altered habitats in such a way that the life-history needs of the species are met and the populations become self-sustaining. While it is important to restore nene as a functioning component of the native ecosystem to ensure long-term species survival, it should be noted that nene currently successfully use a gradient of habitats ranging from highly altered to completely natural. Additionally, some populations exhibit behaviors that differ from what it is believed wild birds historically displayed. Nene are a highly adaptable species, which bodes well for recovery of the species.
Conservation needs and activities to recover nene vary among islands due to differences in factors affecting nene populations both within and among islands. For example, although mongooses occur on Hawaii, Maui, and Molokai, Kauai does not yet have an established mongoose population; thus predator control priorities there are different. In addition, elevations used by nene vary among sites and among islands, and vegetation available to nene also differs between sites and by island.
Nene are now more abundant than when they were federally listed as endangered in 1967, largely due to a captive propagation program that began in 1949 before the species was listed and continued through 2011. The program was initiated prior to Hawaiian statehood in collaboration between Territory of Hawaii biologists and private partners, and was operated by the Division of Fish and Game of the territorial government. The initial site of the captive propagation operation was at
Smaller operations to breed nene in open-top pens in semi-captive environments were conducted at Hawaii Volcanoes and Haleakala National Parks. In some cases, wild birds were placed into the pens where they could breed protected from predators. The young fledged from the pens to disperse to the surrounding areas. In some cases, birds were released directly into the wild farther from the pens.
In the years between 1960 and 2008, some 2,800 captive-bred nene were released into areas of their former range at more than 20 sites throughout the main Hawaiian Islands. Most releases of captive birds used open-top pens to provide protection from predators. The pens provide protection to the birds as long as they are inside the pens, and the birds frequently returned to breed in the same pens in subsequent years.
Many of the earlier releases were accompanied by little or no management of predators and habitats. Monitoring of released birds showed high mortality and low nesting success, indicating that food availability and predators had a significant impact on wild populations (Banko 1992, pp. 102-104). The highest levels of survival and reproductive success were documented at Hawaii Volcanoes and Haleakala National Parks, where more intensive management of threats was initiated, demonstrating the need and benefits of habitat management and predator control (Black
Recent studies on movements of nene using satellite telemetry documented the re-establishment of traditional movement patterns in two breeding subpopulations on Hawaii Island (Hess
Black and Banko (1994) conducted a population viability analysis using the VORTEX software program to model the long-term fate of nene under three different management scenarios: (1) No further releases or management, (2) releases mirroring those of the past 30 years, and (3) increased management without further releases. The report concluded that only under the third scenario could all three populations (Hawaii, Maui, and Kauai) survive for 200 years, and that reintroduction alone as a management tool may continue to be effective in delaying extinction on Hawaii, but will not lead to a self-sustaining population. The study concluded that enhanced management efforts, which include an appropriate predator control effort, would enable nene to reach a self-sustaining level.
Another population viability analysis was conducted for nene in Hawaii Volcanoes National Park to examine management options more specific to that area (Hu 1998). First year mortality was identified as the primary limiting factor for nene in Hawaii Volcanoes National Park. From 1990 to 1996, survival of fledglings averaged 84 percent for females and 95 percent for males, while survival from laying to fledging ranged from 7 to 19.5 percent (mean 12 percent; Hu 1998, pp. 84-85). While predator control had reduced egg predation, fledging success remained low, largely due to inadequate nutrition. The study found that open-top pens cannot sustain a viable nene population in Hawaii Volcanoes National Park. The study suggests that while management techniques such as grassland management, supplemental feeding, and cultivation of native food plants may sustain nene in Hawaii Volcanoes National Park, such approaches require considerable effort and would require increasing resource expenditures. Thus, Hu (1998, pp. 107-114) suggested that nene would be more secure if they were integrated into habitat management instituted on a larger scale that would involve the creation of native-dominated, fire-adapted landscapes at low and mid-elevations in Hawaii Volcanoes National Park and more efficient, widespread predator control techniques, allowing reestablishment of their seasonal movement patterns between various locations.
Black
Amidon (2017) recently conducted a preliminary assessment of the short-term population trends in nene populations on the four main Hawaiian Islands where nene currently occur. This assessment used count-based and demographic models (Morris and Doak 2002, pp. 8-9) developed with readily available information on each
In conclusion, the implementation of recovery actions for nene has significantly reduced the risk of extinction for the species. On the brink of extinction, the captive propagation and release program successfully increased the number of individuals and re-established populations throughout the species' range on Kauai, Molokai, Maui, and Hawaii Island. Studies of foraging behavior identified nene food preferences and nutritional value of food resources contributing to a greater understanding of habitat requirements during the breeding and non-breeding seasons. Current populations are sustained by ongoing management (
Section 4 of the Act and its implementing regulations (50 CFR part 424) set forth the procedures for listing species, reclassifying species, or removing species from listed status. “Species” is defined by the Act as including any species or subspecies of fish or wildlife or plants, and any distinct vertebrate population segment of vertebrate fish or wildlife that interbreeds when mature (16 U.S.C. 1532(16)). A species may be determined to be an endangered or threatened species because of any of one or a combination of the five factors described in section 4(a)(1) of the Act: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence. We must consider these same five factors in reclassifying a species from endangered to threatened (
Determining whether a species has improved to the point that it can be downlisted requires consideration of whether the species is endangered or threatened because of the same five categories of threats specified in section 4(a)(1) of the Act. A species is “endangered” for purposes of the Act if it is in danger of extinction throughout all or a “significant portion of its range” and is “threatened” if it is likely to become endangered within the foreseeable future throughout all or a “significant portion of its range.”
In considering what factors might constitute threats, we must look beyond the exposure of the species to a particular factor to evaluate whether the species may respond to the factor in a way that causes actual impacts to the species. If there is exposure to a factor and the species responds negatively, the factor may be a threat, and during the five-factor analysis, we attempt to determine how significant a threat it is. The threat is significant if it drives or contributes to the risk of extinction of the species, such that the species warrants listing as endangered or threatened as those terms are defined by the Act. However, the identification of factors that could impact a species negatively may not be sufficient to compel a finding that the species warrants listing. The information must include evidence sufficient to suggest that the potential threat is likely to materialize and that it has the capacity (
In the following analysis, we evaluate the status of the nene throughout all of its range as indicated by the five-factor analysis of threats currently affecting, or that are likely to affect the species within the foreseeable future.
The draft revised recovery plan identified the lack of lowland habitat and inadequate nutrition as two habitat-related stressors limiting nene recovery (USFWS 2004, pp. 29-30). Nene continue to be affected by historic and ongoing habitat destruction and modification caused by urbanization, agricultural activities, drought, feral ungulates, and nonnative plants. These factors limit suitable breeding and flocking habitat, constraining the recovery of nene populations.
Historical habitat loss was largely a result of human activities such as urban development and land conversion for agricultural activities, particularly in lowland areas. Degradation of lowland habitats used by nene began with Polynesian colonization (around 1,600 years ago) and has continued since European arrival over the past 200 years (Kirch 1982, pp. 7-10). Impacts to lowland habitat included clearing of land for settlements and agriculture; increased frequency of fire; heavy grazing, browsing, and soil disturbance by introduced deer, cattle, goats, sheep, and pigs; and the spread of nonnative plants (Cuddihy and Stone 1990, pp. 103-107).
The threat of destruction and modification of habitat, particularly in lowland areas, by urbanization and land use conversion, including agriculture, is ongoing and expected to continue to limit the amount of nene foraging and nesting habitat. Past land use practices have resulted in great reduction or loss of native vegetation below 2,000 feet (ft) (600 meters (m)) throughout the Hawaiian Islands (TNC 2006). Hawaii's agricultural industries (
The alteration of lowland areas and increasing pressure from human activities (including hunting; see Factor B discussion, below) led to the extirpation of nene on Kauai and Molokai, and the loss of seasonally important lowland breeding habitat in leeward regions of islands with elevations above 5,000 ft (1,524 m) (Maui and Hawaii) (Baldwin 1945). From the time of European arrival (in the late 1700s) until the late 1800s, nene were thought to be all but extirpated, except for a widely distributed population on the island of Hawaii (Baldwin 1945, pp. 27-30). By the 1940s, Baldwin (1945, p. 35) estimated a reduction in the range of nene on Hawaii Island from 2,475 square miles (mi
Feral ungulates and nonnative plants led to further degradation of nene habitat by negatively impacting forage quality, shelter, and potential nest sites. Grazing and browsing by introduced cattle, goats, and sheep converted significant portions of native montane forest and shrubland between 1,640 and 6,562 ft (500 and 2,000 m) to wild grassland and managed pastureland dominated by nonnative species (Cuddihy and Stone 1990, pp. 59-63, 63-67). Effects of nonnative ungulates have been somewhat less severe above 6,562 ft (2,000 m) because nonnative weeds are less prevalent (Banko
Studies indicate that inadequate nutritional quality is a limiting factor on nene reproduction and gosling survival, especially on Hawaii and Maui (USFWS 2004, pp. 29-30). Proper nutrition is critical for successful reproduction. Breeding females require carbohydrates and protein to increase fat reserves for egg laying and incubation; goslings require high-protein foods for growth and development (Ankney 1984, pp. 364-370; Banko
Drought has been identified as a factor contributing to nene mortality. Drought reduces the amount and quality of available forage, thereby increasing the risk of nene mortality due to starvation and dehydration; thus, for example, nene exhibited higher rates of mortality in drought years during the prolonged island-wide drought between 1976 and 1983 on Hawaii Island (Black
Recovery efforts initially focused on the establishment of populations with the majority of releases of captive-bred nene at high-elevation native shrublands (above 5,000 ft (1,524 m)) on Hawaii Island and Maui. High-elevation nesting areas are less modified than lowlands (Banko
Currently, nene are found in a range of habitats from sea level to subalpine zones on Kauai, Oahu, Molokai, Maui, and Hawaii Island. Populations are centered around release sites and rely on continued land use protections and habitat management (including predator control) to sustain populations in these areas. On Maui Nui and Hawaii Island, the majority of the nene nest in managed areas at mid- to high-elevation habitats, including Haleakala National Park, Hawaii Volcanoes National Park, and Puu Oo Ranch/Puu 6677; and at lower elevation sites, including Hanaula, Piiholo Ranch, Haleakala Ranch (Waiopae), and Puu O Hoku Ranch (Molokai). On Kauai, most nene nest and live year-round in areas below 984 ft (300 m), where large expanses of managed grasslands (including golf courses) and low levels of predation (mostly due to the absence of a mongoose population) have led to a stable and increasing nene population. The majority of the Kauai population is centered in and around the Hanalei and Kilauea Point NWRs.
Many of the areas where nene occur in the wild are afforded some level of habitat enhancement that focuses on increasing the survival and reproduction of nene. Habitat enhancement can include predator control, mowing, outplanting, and supplemental feeding. Hawaii Volcanoes National Park has areas where many of these types of enhancement occur. For instance, park staff maintain two predator-resistant open-topped pens, 4 and 5 hectares (10 and 13 acres) in size, as safe-breeding sites with supplemental feed and occasional mowing. In addition, predator control is conducted at key brooding sites, and some areas may be closed to human use during the nene breeding season. The Hawaii Division of Forestry and Wildlife also provides supplemental food for nene populations on Hawaii Island. Haleakala National Park has controlled ungulate populations and horses intermittently grazing in Paliku pasture. Kauai DOFAW also has predator control programs and may provide supplemental feed during drought years. Mowing, grazing, and irrigating grass can improve its attractiveness to geese by increasing the protein content (Sedinger and Raveling 1986, p. 302; Woog and Black 2001, pp. 324-328).
Highly altered landscapes and nonnative vegetation also can significantly affect nene recovery. For example, nene on Kauai primarily use lowland areas in highly altered, human-impacted habitats such as pastures, agricultural fields, golf courses, and highly degraded waste areas (USFWS 2004, pp. 41-42). Nene have been very successful in these areas, indicating their adaptability to a variety of habitats. Lowlands, however, are often unsuitable because of intense human activity or dense predator populations placing nene at greater risk of predation, and hazardous situations such as habituation to human feeding, vehicle collisions, and golf ball strikes (Natural Resources Conservation Service [NRCS] 2007, p. 7). The recovery of nene is dependent on a variety of habitats ranging from highly altered, managed habitats to habitats consisting of primarily native species, and it may not be feasible to restore habitats to native species in all areas used by nene. It is believed that nene currently require availability of a diverse suite of food resources that may include both nonnative and native vegetation (Baldwin 1947, pp. 108−120; Black
Our analyses of Factor A under the Act include consideration of ongoing and projected changes in climate, and the impacts of global climate change and increasing temperatures on Hawaii ecosystems, all of which are the subjects of active research. Analysis of the historical record indicates surface temperature in Hawaii has been increasing since the early 1900s, with relatively rapid warming over the past 30 years. The average increase since 1975 has been 0.48 degrees Fahrenheit (°F) (0.27 degrees Celsius (°C)) per decade for annual mean temperature at elevations above 2,600 ft (800 m) and 0.16 °F (0.09 °C) per decade for elevations below 2,600 ft (800 m) (Giambelluca
The forecast of changes in precipitation is highly uncertain because it depends, in part, on how the El Niño-La Niña weather cycle (an episodic feature of the ocean-atmosphere system in the tropical Pacific having important global consequences for weather and climate) might change (State of Hawaii 1998, pp. 2-10). The historical record indicates that Hawaii tends to be dry (relative to a running average) during El Niño phases and wet during La Niña phases (Chu and Chen 2005, pp. 4809-4810). However, over the past century, the Hawaiian Islands have experienced a decrease in precipitation of just over 9 percent (US National Science and Technology Council 2008, p. 61) and a decreasing trend (from the long-term mean) is evident in recent decades (Chu and Chen 2005, pp. 4802-4803; Diaz
Tropical cyclone frequency and intensity are projected to change as a result of increasing temperature and changing circulation associated with climate change over the next 100 to 200 years (Vecchi and Soden 2007, pp. 1068-1069, Figures 2 and 3; Emanuel
Finally, sea level rise resulting from thermal expansion of warming ocean water; the melting of ice sheets, glaciers, and ice caps; and the addition of water from terrestrial systems (Climate Institute 2011,
Sea level rise is not expected to be uniform throughout the world, due to factors including, but not limited to: (1) Variations in oceanographic factors such as circulation patterns; (2) changes in Earth's gravitational field and rotation, and the flexure of the crust and upper mantle due to melting of land-based ice; and (3) vertical land movement due to postglacial rebound of topographically depressed land, sedimentation compaction, groundwater and fossil fuel withdrawals, and other non-climatic factors (Spada
Thus, although we cannot predict the timing, extent, or magnitude of specific events, we expect effects of climate change (changes in tropical cyclone frequency and intensity, drought frequency, and sea level rise) to exacerbate the current threats to this species such as predation, inadequate nutrition, and habitat loss and degradation.
Habitat destruction and modification from urbanization, agricultural activities, drought, feral ungulates, and invasive plant species remain threats to nene. These factors contribute to an ongoing lack of suitable breeding and flocking habitat, limiting nene population expansion. Historical habitat loss was largely a result of human activities such as urban development and land conversion for agricultural activities, particularly in lowland areas, contributing to the extirpation of nene on Kauai and Molokai, and the loss of seasonally important leeward, lowland breeding areas on islands with elevations above 5,000 ft (1,524 m) (Maui and Hawaii). Feral ungulates and invasive plant species led to further degradation of nene habitat by negatively impacting forage quality, shelter, and potential nest sites.
Recovery efforts initially focused on the establishment of populations with the majority of releases of captive-bred nene at high-elevation sanctuaries (above 5,000 ft (1,524 m)) on Maui and Hawaii Island. Despite supplemental food and water and localized predator control efforts, nene at these sites experienced high rates of adult mortality and low rates of gosling survival attributed to inadequate nutrition caused by habitat factors such as poor forage quality, drought, and exposure. Research showed that access to managed grassland habitats and habitat enhancement during the breeding season improved foraging opportunities and resulted in increased survival and breeding success. Control of feral ungulate populations in areas such as Hawaii Volcanoes National Park and Haleakala National Park reduced their impacts on native vegetation and likely improved nene foraging and breeding habitat. Subsequent reintroductions at low- and mid-elevation sites, first on Kauai and Hawaii Island, and more recently on eastern Molokai and western Maui, demonstrated the ability of nene to successfully become established in these areas.
Currently, nene are found in a range of habitats from sea level to subalpine areas on Kauai, Oahu, Molokai, Maui, and Hawaii Island. Populations are centered around release sites and rely on continued land use protections and habitat management (including predator control) to sustain successful breeding and population numbers in these areas.
Overall, the expansion of existing populations is limited by the lack of suitable breeding and flocking habitat due to continuing urbanization, agricultural activities, and potential conflicts with human activities. Periods of drought are expected to continue and are likely to be exacerbated by the effects of climate change. To minimize the effects of drought on the food availability and adequate nutrition, habitat enhancement activities to provide foraging opportunities, especially during the breeding season, will need to be maintained. The rise in sea level projected by climate change models may threaten any low-lying
Overuse for commercial, recreational, scientific, or educational purposes is not a threat to the nene. The exploitation of nene for food by Hawaiians and non-Polynesian settlers is believed to have been responsible for substantial population declines in lowland areas, and hunting was a major limiting factor until a hunting ban was passed and enforced in 1907 (Banko
Numerous parasites and diseases have been documented in captive and wild nene (van Riper and van Riper 1985, pp. 308, 312, 333; Bailey and Black 1995, p. 62; Work
Omphalitis, a bacterial infection of the umbilical stump, has been found to cause mortality in both wild and captive nene goslings (USFWS 2004, p. 34). Work
Avian pox is caused by a virus that causes inflammation of the skin, and in severe cases may result in large scabs that block circulation and lead to the loss of digits or entire limbs or lead to blindness, the inability to eat, or death (USGS-NWHC 2017a,
Avian malaria is caused by the microscopic parasitic protozoan,
Avian botulism is a paralytic disease caused by the ingestion of a natural toxin produced by the bacteria,
Botulism has been found on Kauai, Oahu, Molokai, Maui, and Hawaii Island (USGS-NWHC 2017b,
The spread of avian influenza and West Nile Virus (WNV) in North America has serious implications if either arrives in Hawaii. West Nile Virus is transmitted by adults of various species of
Avian influenza has been reported to cause mortality in naturally infected Canada geese in Asia and Europe (Ellis
The Hawaii Field Station of the USGS-NWHC continues to work with wildlife managers to monitor the impact of diseases and other mortality factors on nene and other wildlife populations. Cats are the sole known lifecycle host for the protozoan that causes toxoplasmosis. Reduction in the number of feral cats will reduce the likelihood of exposure of nene to the disease. Ongoing conservation measures in nene breeding areas, such as predator control and predator-proof fences that exclude cats, reduce, but do not eliminate, the risk of exposure to toxoplasmosis due to the abundance and range of feral cat populations.
Predation by introduced mammals continues to be a major factor limiting nene breeding success and survival. Predators known to take nene eggs, goslings, or adults include dogs (
The small Indian mongoose was introduced to the Hawaiian archipelago in 1883, and quickly became widespread on Oahu, Molokai, Maui, and Hawaii Island, from sea level to elevations as high as 7,000 ft (2,130 m) (Tomich 1986, pp. 93-94). Kauai remained mongoose-free when a planned introduction was aborted; however, there have been almost 350 reported sightings since 1968, and in 1976, a road-killed, lactating female was found on the island near Eleele (KISC 2016a,
Mongooses are believed to be the most serious egg predator and are responsible for the most nene nest failures on Hawaii and Maui (Hoshide
Introduced European pigs hybridized with smaller, domesticated Polynesian pigs; became feral; and invaded forested areas, especially mesic and wet forests, from low to high elevations, and are present on all the main Hawaiian Islands except Lanai and Kahoolawe, where they have been eradicated (Tomich 1986, pp. 120-121; Munro 2007, p. 85). Pigs may roam over nearly the entire extent of the range of nene. Pigs are known to take eggs, goslings, and possibly adults (Kear and Berger 1980, p. 57; Banko and Elder 1990, p. 122; Baker and Baker 1995, p. 20; K. Misajon 2016, pers. comm.). The presence of pigs can also attract feral dogs that may then prey upon nene (NPS 2016, p. 2).
Three species of introduced rats occur in the Hawaiian Islands. Studies of Pacific rat DNA suggest they first appeared in the islands along with emigrants from the Marquesas Islands (French Polynesia) in about 400 A.D., with a second introduction around 1100 A.D. (Ziegler 2002, p. 315). The black rat and the Norway rat arrived in the islands more recently, as stowaways on ships sometime in the late 19th century (Atkinson and Atkinson 2000, p. 25). The Pacific rat and the black rat are primarily found in rural and remote areas of Hawaii, in dry to wet habitats, while the Norway rat is typically found in urban areas or agricultural fields (Tomich 1986, p. 41). The black rat is widely distributed throughout the main Hawaiian Islands and can be found in a range of ecosystems and as high as 9,000 ft (2,700 m), but it is most common at low- to mid-elevations (Tomich 1986, pp. 38-40). Sugihara (1997, p. 194) found both black and Pacific rats up to 7,000 ft (2,000 m) on Maui, but found the Norway rat only at lower elevations. Rats are known to prey upon nene eggs and goslings (Kear and Berger 1980, p. 57; Hoshide
Cats were introduced to Hawaii in the early 1800s, and are present on all the main Hawaiian Islands (Tomich 1986, p. 101). Although cats are more common at lower elevations, there are populations in areas completely isolated from human presence, including montane forests and alpine areas of Maui and Hawaii Island (Lindsey
Dogs in Hawaii are products of animals brought by Polynesians and later introductions of mixed or selected breeds from all over the world (Tomich 1986, p. 52). Nene are particularly vulnerable to dogs because they have little instinctive fear of them. Along with mongooses, dogs are a significant predator of adult nene, and may also take goslings (Kear and Berger 1980, p. 57; Banko and Elder 1990, p. 122).
Cattle egrets and barn owls were both introduced into Hawaii in the late 1950s, in an attempt to address agricultural pests on farms and ranches.
The yellow crazy ant occurs in low- to mid-elevations (less than 2,000 ft (600 m)) in rocky areas of moderate rainfall (less than 100 in (250 cm) annually) (Reimer
A variety of predator control programs have been initiated in areas where nene currently reside. Since 1994, Haleakala National Park has conducted intensive control of introduced predators using trapping and toxicants (Bailey and Tamayose 2016,
Nene population numbers at Hawaii Volcanoes National Park increased during a 10-year period (1989 to 1999), probably in part because of intensive predator control (Rave
While the predator control programs have proven effective in localized areas, recovery of nene is dependent on more aggressive and widespread control of introduced predators. Despite documentation of the impact of mongooses, dogs, feral cats, rodents, and pigs on nene, there are relatively few predator control programs, and they are not being implemented over areas large enough to elicit a population response by native species (Scott
Diseases such as toxoplasmosis, omphalitis, avian pox, avian malaria, and avian botulism cause low levels of mortality in nene populations. Avian influenza and WNV are not currently established in Hawaii, but could cause mortality of nene should they become established in the future. Measures to control feral cat populations will reduce the risk of exposure of nene to toxoplasmosis. Monitoring the occurrence of disease in nene populations, as well as early detection of avian botulism outbreaks or cases of avian influenza or WNV should minimize the impacts of these threats. Based on the above analysis, we conclude that disease will continue to affect nene now and in the foreseeable future, but it is not a significant threat because, at current and future levels, disease is not likely to cause population-level impacts.
Predation by introduced mammals is the most serious threat to nene. Predation by mongooses, dogs, cats, rats, and feral pigs continues to affect all life stages of nene (eggs, goslings, or adults), negatively impacting breeding success and survival. Predator control measures have improved survival and reproductive success and contributed to population increases in managed areas. However, these efforts are localized and overall predator populations are not being reduced; therefore, predators can readily recolonize an area. In addition, as nene populations expand into areas in their former historical range, such as lowland areas, they will likely encounter higher predator populations in and around human-occupied urban, suburban, and agricultural areas. Predation by cattle egrets and barn owls, and disturbance by ants, may result in injury or mortality of nene; however, this does not constitute a threat to nene, as such predation/disturbance occurs infrequently and is not known to have population-level impacts. Based on our analysis of the available information, we conclude that predation by introduced mammals is a threat to nene now and in the foreseeable future.
The following section includes a discussion of Federal, State, and local laws, regulations, or treaties that apply to nene. It includes laws and regulations for Federal land management agencies and State and Federal regulatory authorities affecting land use or other relevant management.
Hanalei NWR was established in 1972, to aid in the recovery of the four endangered Hawaiian waterbirds and nene (Endangered Species Conservation Act of 1969; 16 U.S.C. 668aa
At Hakalau Forest NWR, a new population was created with the reintroduction of 33 captive-bred nene between 1996 and 2003. Since then, Hakalau Forest NWR has supported approximately 20 to 25 percent of the nene population on Hawaii Island. The Hakalau Forest CCP includes the following goals: (1) Protect and maintain grassland habitat to support nene population recovery; and (2) collect scientific information (inventories, monitoring, research, assessments) necessary to support adaptive management decisions on both units of the Hakalau Forest NWR (USFWS 2010, pp. 2:30-37).
Kealia Pond NWR, on the south-central coast of Maui, was established in 1992, to conserve habitat for the endangered Hawaiian stilt (
James Campbell NWR on the northern shore of Oahu was created in 1976, also for the conservation of endangered Hawaiian waterbirds, and later expanded in 2005, to include conservation of additional threatened and endangered species, migratory birds, and their habitats (USFWS 2011c, p. 1:1). In 2014, a pair of nene arrived on Oahu, nested at James Campbell NWR, and produced three offspring. Both parents and one of the offspring have since died, leaving the two remaining offspring on NWR and adjacent lands.
The Hawaii Endangered Species law (Hawaii Revised Statutes (HRS) 195D) prohibits take, possession, sale, transport, or commerce in designated species. This State law also recognizes as endangered or threatened those species determined to be endangered or threatened pursuant to the Federal Endangered Species Act. This Hawaii law states that a threatened species (under the Act) or an indigenous species may be determined to be an endangered species under State law. Protection of these species is under the authority of Hawaii's DLNR, and under administrative rule (Hawaii Administrative Rules (HAR) 13-124-11). Incidental take of threatened and endangered species may be authorized through the issuance of a temporary license as part of a safe harbor agreement (SHA) or habitat conservation plan (HCP) (HRS 195D-21, HCPs; 195D-22, SHAs). Although this State law can address threats such as habitat modification, collisions, and other human-caused mortality through HCPs that address the effects of individual projects or programs on nene, it does not address the pervasive threats to the nene posed by introduced mammalian predators. DLNR also maintains HAR 13-124-3, which protects indigenous and introduced wildlife.
The importation of nondomestic animals, including microorganisms, is regulated by a permit system (HAR 4-71) managed through the Hawaii Department of Agriculture (HDOA). The list of nondomestic animals (HAR 4-71) is defined by providing a list of those animals considered domestic: Dog, cat, horse, ass (burro or donkey), cattle and beefalo, sheep, goat, swine, pot-bellied pig, alpaca, llama, rabbit, chicken, turkey, pigeon, duck, geese, and their hybrids. The HDOA's Board of Agriculture maintains lists of nondomestic animals that are prohibited from entry, animals without entry restrictions, or those that require a permit for import and possession. The HDOA requires a permit to import animals, and conditionally approves entry for individual possession, businesses (
Under statutory authorities provided by HRS title 12, subtitle 4, 183D Wildlife, the DLNR maintains HAR title 13, chapter 124 (2014), which defines, at section 13-124-2, “injurious wildlife” as “any species or subspecies of animal except game birds and game mammals which is known to be harmful to agriculture, aquaculture, indigenous wildlife or plants, or constitute a nuisance or health hazard and is listed in the exhibit entitled Exhibit 5, Chapter 13-124, List of Species of Injurious Wildlife in Hawaii”. Under HAR section 13-124-3(c), “no person shall, or attempt to: (1) Release injurious wildlife into the wild; (2) transport live injurious wildlife to islands or locations within the State where they are not already established and living in a wild state; or (3) export any such species, or the dead body or parts thereof, from the State.” Permits for these actions may be considered on a case-by-case basis. The small Indian mongoose, a serious predator of nene, is included in Exhibit 5, chapter 13-124, List of Species of Injurious Wildlife in Hawaii. While this HAR may address intentional attempts to transport or release mongooses, there is evidence that inspection and biosecurity measures at inter-island ports may not adequately address their unintentional introduction (
Predation by mongooses is a serious threat to nene (see Factor C discussion, above). Currently, the nene population on Kauai represents approximately 43 percent of the total Statewide population. Establishment of a breeding population of mongoose on Kauai would significantly reduce the survival and reproduction of nene on Kauai, and as a result, significantly increase the risk of extinction of nene. Although based on limited data, nene nesting success estimates on unmanaged lands on Kauai (
Critical biosecurity gaps that reduce the effectiveness of animal introduction controls include inadequate staffing, facilities, and equipment for Federal and State inspectors devoted to invasive species interdiction (Hawaii Legislative Reference Bureau 2002; USDA-APHIS-PPQ 2010; Coordinating Group on Alien Pest Species (CGAPS) 2009). In recognition of these gaps, a State law has been passed that allows the HDOA to collect fees for quarantine inspection of freight entering Hawaii (Act 36 (2011) HRS 150A-5.3). Hawaii legislation enacted in 2011 (House Bill 1568) requires commercial harbors and airports to provide biosecurity and inspection facilities to facilitate the movement of cargo through ports. This bill is a significant step toward optimizing biosecurity capacity in the State, but only time will determine its effectiveness. The Hawaii Interagency Biosecurity Plan (2017) is a 10-year strategy that addresses Hawaii's most critical biosecurity gaps and provides a coordinated interagency path that includes policies and implementation tasks in four main areas: (1) Pre-border; (2) border; (3) post-border; and (4) education and awareness. Overall, there is an ongoing need for all civilian and military port and airport operations and construction to implement biosecurity measures in order to prevent the introduction or inter-island transportation of additional predators and diseases that could impact nene.
Feral pigs pose the threat of predation to nene (see Factor C discussion, above). The State provides opportunities to the public to hunt game mammals (ungulates, including feral pigs) on 91 State-designated public hunting areas (within 45 units) on all the main Hawaiian Islands except Kahoolawe and Niihau (HAR-DLNR 2010; see HAR title 13, chapter 123; DLNR 2009, pp. 28-29). The State's management objectives for game mammals range from maximizing public hunting opportunities (
Local groups are working to implement actions urgently needed to address the importation of nonnative, invasive species. We discuss the primary groups below.
CGAPS, a partnership of managers from Federal, State, County, and private agencies and organizations involved in invasive species work in Hawaii, was formed in 1995, in an effort to coordinate policy and funding decisions, improve communication, increase collaboration, and promote public awareness (CGAPS 2009). This group facilitated the formation of the Hawaii Invasive Species Council (HISC), which was created by gubernatorial executive order in 2002, to coordinate local initiatives for the prevention of introduction and for control of invasive species by providing policy-level direction and planning for the State departments responsible for invasive species issues (CGAPS 2009). In 2003, the Governor signed into law Act 85, which conveys statutory authority to the HISC to continue to coordinate approaches among the various State and Federal agencies, and international and local initiatives, for the prevention and control of invasive species (DLNR 2003, p. 3-15; HISC 2009,
The Hawaii Association of Watershed Partnerships (HAWP) comprises 11 separate partnerships on 6 Hawaiian Islands. These partnerships are voluntary alliances of public and private landowners, “committed to the common value of protecting forested watersheds for water recharge, conservation, and other ecosystem services through collaborative management” (
These three partnerships, CGAPS, HISC, and HAWP, are collaborative measures that attempt to address issues that are not resolved by individual State and Federal agencies. The capacity of State and Federal agencies and their nongovernmental partners in Hawaii to provide sufficient inspection services, enforce regulations, and mitigate or monitor the effects of nonnative species is limited due to the large number of taxa currently causing damage (CGAPS 2009). Many invasive, nonnative species established in Hawaii currently have limited but expanding ranges, and they cause considerable concern. Resources available to reduce the spread of these species and counter their negative effects are limited. Control efforts are focused on a few invasive species that cause significant economic or environmental damage to commercial crops and public and private lands. Comprehensive control of an array of nonnative species and management to reduce disturbance regimes that favor them remain limited in scope. If current levels of funding and regulatory support for control of nonnative species are maintained, the Service expects existing programs to continue to exclude, or, on a very limited basis, control these species only in the highest priority areas. Threats from established nonnative species to nene are ongoing and are expected to continue into the future.
Based on our analysis of existing regulatory mechanisms, there is a diverse network of laws and regulations that provide some protections to the nene and its habitat. Nene habitat that occurs on NWRs is protected under the National Wildlife Refuge System Improvement Act of 1997 and section 7 of the Endangered Species Act. Nene habitat is similarly protected on lands owned by the National Park Service. Additionally, nene receive protection under State law in Hawaii.
As a conservation reliant species, nene are expected to require ongoing management to address the ongoing threat of predation by introduced mammals such as mongooses, dogs, cats, rats, and pigs (Factor C). Although State and Federal regulatory mechanisms have not prevented the introduction into Hawaii of nonnative predators or their spread between islands, with sustained management commitments, these mechanisms could be an important tool to ameliorate this threat.
On the basis of the information provided above, existing State and Federal regulatory mechanisms are not preventing the introduction of nonnative species and pathogens into Hawaii via interstate and international pathways, or via intrastate movement of nonnative species between islands and watersheds. These mechanisms also do not adequately address the current threats posed to the nene by established nonnative species. Therefore, we conclude State and Federal regulatory mechanisms do not adequately address the threats to nene and their habitats from potential new introductions of nonnative species or continued expansion of existing nonnative species populations on and between islands and watersheds. However, with sustained management commitment, these mechanisms could be tools to ameliorate these threats.
Studies have shown that nene went through a prehistoric population bottleneck and have very low genetic diversity (Paxinos
Rave (1995, p. 87) found that nene on Kauai had a significantly higher genetic similarity coefficient distribution (
A significant number of nene mortalities have been reported at wind energy facilities. Nene collide with the towers or collide with or are struck by blades of wind turbine generators (WTGs). The diameter of rotor blades (approximately 330 ft (100 m)) and combined height of WTGs (up to 428 ft (131 m)) create large obstacles for nene during flight. On Maui, 3 facilities with a total of 40 WTGs are in operation, Kaheawa Wind Power I (20 WTGs) and Kaheawa Wind Power II (12 WTGs) in western Maui, and Auwahi Wind (8 WTGs) in southeastern Maui. From 2006 to 2016, a total of 26 nene fatalities and an adjusted take of 50 nene have been reported at the three Maui wind energy facilities (DOFAW 2016,
On Hawaii Island, two facilities with a total of 30 WTGs are in operation in Hawi (16 WTGs) and South Point (14 WTGs); however, there are no reports of nene being killed at these facilities (D. Sether 2017, pers. comm.). Based on the proximity of these facilities to areas used by nene, there is the potential for collisions. On Oahu, a total of 42 WTGs are in operation at Kawailoa Wind Power (30 WTGs) and Kahuku Wind Power (12 WTGs), and an additional 9 to 10 WTGs are proposed at the Na Pua Makani project in the Kahuku area. Na Pua Makani has submitted a draft HCP and requested incidental take for nene due to the proximity of the proposed wind energy project to James Campbell NWR, where the nene have been frequently observed. Based on the recent occurrence of only two individuals, which failed to breed successfully in 2016, wind energy facilities on Oahu are not a current threat, but represent a potential future threat should a breeding population of nene become established. On Maui and Hawaii Island, we expect that collisions at wind energy facilities will continue to result in take of nene now and in the foreseeable future; however, conservation measures in approved and permitted HCPs are expected to offset any population-level impacts to the species.
Nene are attracted to feeding opportunities provided by mowed grass and human handouts, and can become tame and unafraid of human activity, making them vulnerable to the impacts of various human activities. These activities include direct harm, such as that caused by vehicles and golf ball strikes, as well as possible disturbance by hikers, hunters, and other outdoor recreationists (Banko
Vehicle collisions have been an ongoing cause of nene mortality (Hoshide
In the past, a number of mortalities caused by vehicle collisions were reported in Hawaii Volcanoes National Park (41) and in Haleakala National Park (14) (USFWS 2004, pp. 30-31; Rave
The National Park Service (NPS) is actively implementing aggressive traffic-calming measures (Haleakala National Park 2014,
Nene can become entangled or trapped in artificial hazards (
The use of certain fencing and erosion control materials has resulted in entanglement of nene with the potential to cause impaired movement, injury, and in some cases mortality. Over 2 years, a total of 44 nene (27 adults and 17 hatch-year birds) in the Poipu/Koloa population on Kauai have been observed with woven threads from erosion control slope matting wrapped around their legs at a single construction site (Kauai DOFAW 2016,
As nene populations continue to recover and increase in number and range, they will be subject to increased human interactions in and around urban, suburban, agricultural, and recreational areas. Vehicle collisions are an ongoing cause of nene injury and mortality; however, we do not have evidence that this factor is limiting population sizes. We acknowledge that increasing nene population sizes could result in increased mortality rates in the future, especially for those populations near areas with human presence. While vehicle collisions could potentially impact certain populations, they do not constitute a threat to the entire species now, and we do not expect them to be a threat in the foreseeable future. Artificial hazards that result in entanglement or drowning occur at low frequency and thus are not expected to result in population-level impacts. Collisions at wind energy facilities will result in take of nene now and in the foreseeable future; however, conservation measures in approved and permitted HCPs are expected to offset any population-level impacts to the species. While nene exhibit low levels of genetic variation, this does not appear to be a factor limiting reproductive success. Thus, low genetic variation is not a threat to nene now or in the foreseeable future.
The current Statewide nene population estimate is 2,855 (NRAG 2017). The population on Kauai, estimated at 1,107 birds, is stable and increasing, sustained by ongoing predator control and habitat management (NRAG 2017). Nene on Kauai exhibit successful breeding, likely due to abundant food in managed grasslands and the absence of mongooses, which are a significant nest predator on other islands. Between 2011 and 2016, 640 nene were relocated from Kauai to Maui and Hawaii Island. The Kauai population is expected to continue to exhibit an increasing trend. On Maui, the current population estimate is 616, with approximately half of the population in Haleakala National Park, and the remainder is distributed across areas of western Maui, southern Maui, and the northwestern slopes of Haleakala. The population at Haleakala National Park shows a general increasing trend with numbers consistently above 200 birds since
Threats to nene from habitat destruction or modification (Factor A) remain and will likely continue into the foreseeable future in the form of urbanization, agricultural activities, habitat alteration by feral ungulates and nonnative plants, and drought. These factors contribute to a lack of suitable breeding and flocking habitat and, in combination with predation (Factor C) and human activities (Factor E), continue to threaten nene and limit expansion of nene populations. Some habitats are expected to be affected by habitat changes resulting from the effects of climate change (Factor A). Overutilization (Factor B) is not a threat. Diseases (Factor C) such as toxoplasmosis, avian malaria, omphalitis, and avian botulism are not currently known to contribute significantly to mortality in nene. Thus, we do not consider disease to be a threat. Predation (Factor C) by introduced mammals, including mongooses, dogs, cats, rats, and pigs, is a significant limiting factor for nene populations now and into the foreseeable future. Therefore, we consider predation to be a threat. Existing regulatory mechanisms, including those to prevent predation will be an important component of ongoing management of nene as a conservation reliant species, but do not currently adequately ameliorate threats and will require continuing commitment to implementation (Factor D). Human activities such as vehicle collisions, artificial hazards, and other human interactions (Factor E) continue to result in injury and mortality; while the individual impacts of these hazards do not constitute threats with population-level impacts to nene, they collectively and in combination with other factors (Factors A, C, and D) constitute an ongoing threat.
Section 4 of the Act (16 U.S.C. 1533), and its implementing regulations at 50 CFR part 424, set forth the procedures for determining whether a species is an endangered species or threatened species and should be included on the Federal Lists of Endangered and Threatened Wildlife and Plants (listed). The Act defines an endangered species as any species that is “in danger of extinction throughout all or a significant portion of its range” and a threatened species as any species “that is likely to become endangered throughout all or a significant portion of its range within the foreseeable future.” On July 1, 2014, we published a final policy interpreting the phrase “significant portion of its range” (SPR) (79 FR 37578). In our policy, we interpret the phrase “significant portion of its range” in the Act's definitions of “endangered species” and “threatened species” to provide an independent basis for listing a species in its entirety; thus there are two situations (or factual bases) under which a species would qualify for listing: A species may be in danger of extinction or likely to become so in the foreseeable future throughout all of its range; or a species may be in danger of extinction or likely to become so throughout a significant portion of its range. If a species is in danger of extinction throughout an SPR, the species, is an “endangered species.” The same analysis applies to “threatened species.”
The SPR policy is applied to all status determinations, including analyses for the purposes of making listing, delisting, and reclassification determinations. Under section 4(a)(1) of the Act, we determine whether a species is an endangered species or threatened species because of any one or a combination of the following: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence. These five factors apply whether we are analyzing the species' status throughout all of its range or throughout a significant portion of its range.
As required by the Act, we considered the five factors in assessing whether nene is endangered or threatened throughout all of its range. We carefully examined the best scientific and commercial information available regarding the past, present, and future threats faced by nene. We reviewed the information available in our files and other available published and unpublished information, and we consulted with recognized experts and State agencies. The current statewide nene population estimate is 2,855 individuals, with the wild populations on the islands of Hawaii, Maui, Molokai, Kauai, and Oahu estimated to have 1,095, 616, 35, 1,107, and 2 individuals, respectively. Populations on Kauai, Maui, and Hawaii are exhibiting a stable or increasing trend, while the nene population on Molokai is experiencing a fluctuation in population numbers. Continuation of current population trends into the future is dependent on, at a minimum, maintaining current levels of management (
Because we have determined that the nene is likely to become in danger of extinction in the foreseeable future throughout all of its range, per the Service's Final Policy on Interpretation of the Phrase “Significant Portion of Its Range” in the Endangered Species Act's Definitions of “Endangered Species” and “Threatened Species” (79 FR 37578, July 1, 2014) (SPR Policy), no portion of the species' range can be “significant” for the purposes of the definitions of endangered and threatened species. Therefore, we do not need to conduct an analysis of whether there is any significant portion of its range because the species is likely to become in danger of extinction in the foreseeable future.
We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to the nene. Based on the analysis above and given increases in population numbers due to recovery efforts, we conclude the nene does not currently meet the Act's definition of an endangered species in that it is not in danger of extinction throughout all of its range. Although population numbers have increased, our analysis indicates that because of significant remaining threats, the species remains likely to become in danger of extinction in the foreseeable future throughout all of its range. Because the species is likely to become in danger of extinction in the foreseeable future throughout all of its range, the species meets the definition of a threatened species. Therefore, we propose to reclassify the nene from an endangered species to a threatened species.
This proposal, if made final, would revise 50 CFR 17.11(h) to reclassify nene from endangered to threatened. Reclassification of nene from endangered to threatened is due to the substantial efforts made by Federal, State, and local government agencies and private landowners to recover the species. Adoption of this proposed rule would formally recognize that this species is no longer in danger of extinction throughout all or a significant portion of its range and, therefore, does not meet the definition of endangered, but is still impacted by predation, habitat loss and degradation, and inadequacy of regulatory mechanisms to the extent that the species meets the definition of a threatened species under the Act.
Whenever a species is listed as threatened, the Act allows promulgation of a rule under section 4(d). Section 4(d) of the Act states that “the Secretary shall issue such regulations as he deems necessary and advisable to provide for the conservation” of species listed as threatened species. Conservation is defined in the Act to mean “to use and the use of all methods and procedures which are necessary to bring any endangered species or threatened species to the point at which the measures provided pursuant to [the Act] are no longer necessary.” The purposes of the Act are to provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved, to provide a program for the conservation of endangered species and threatened species, and to take such steps as may be appropriate to achieve the purposes of the treaties and conventions set forth in the Act. For any threatened fish and wildlife species, the Secretary has the discretion to prohibit by regulation any action prohibited under section 9(a)(1) of the Act. Exercising this discretion, the Service has by regulation (50 CFR 17.31) applied the prohibitions in section 9(a)(1) to all threatened wildlife species except for those for which a rule has been promulgated under section 4(d) of the Act. A 4(d) rule may include some or all of the prohibitions under section 9(a)(1), as set out at 50 CFR 17.21, but also may be less or more restrictive than those general provisions.
Section 9 of the Act prohibits the taking of any federally listed endangered species, including nene. Section 3(19) defines “take” to mean “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.” Service regulations (50 CFR 17.3) define “harm” to include significant habitat modification or degradation which actually kills or injures wildlife by significantly impairing essential behavioral patterns, including breeding, feeding, or sheltering. Harass is defined at 50 CFR 17.3 as an intentional or negligent act or omission which creates the likelihood of injury to wildlife by annoying it to such an extent as to significantly disrupt normal behavioral patterns which include, but are not limited to, breeding, feeding, or sheltering. Section 9 also prohibits import, export, and sale of endangered species in interstate or foreign commerce. The Act provides for civil and criminal penalties for the unlawful taking of listed species or other violations of section 9.
Under 50 CFR 17.32, permits may be issued for certain actions affecting threatened fish and wildlife species that would otherwise be prohibited under the Act. The processes and criteria for such permit issuance are governed by 50 CFR 17.32, unless otherwise provided in a 4(d) rule. If an activity that may affect the nene is not covered in this proposed 4(d) rule and the activity would result in an act that would be otherwise prohibited, authorization under 50 CFR 17.32 would be required. In addition, nothing in this 4(d) rule affects in any way other provisions of the Act, such as the designation of critical habitat under section 4, recovery planning provisions of section 4(f), and consultation requirements under section 7.
For the nene, the Service has determined that a 4(d) rule is appropriate. We propose to issue a rule for this species under section 4(d) of the Act as a means to provide continued protection from take and to facilitate conservation of nene and expansion of their range by increasing flexibility in management activities. This proposed 4(d) rule would apply only if and when the Service finalizes the reclassification of the nene as threatened. We propose a 4(d) rule for nene, as described below.
Anyone taking, attempting to take, or otherwise possessing a nene, or parts thereof, in violation of section 9 of the Act would still be subject to a penalty under section 11 of the Act, except for the actions that would be covered under the proposed 4(d) rule. Under section 7 of the Act, Federal agencies must ensure that any actions they authorize, fund, or carry out are not likely to jeopardize the continued existence of nene.
Under the proposed 4(d) rule, take will generally continue to be prohibited, but the following forms of take would be allowed under the Act:
• Take by landowners or their agents conducting intentional harassment in
• Take that is incidental to conducting lawful control of introduced predators or habitat management activities for nene; and
• Take by authorized law enforcement officers for the purposes of aiding or euthanizing sick, injured, or orphaned nene; disposing of dead specimens; and salvaging a dead specimen that may be used for scientific study.
The proposed 4(d) rule targets activities to facilitate conservation and management of nene where they currently occur and may occur in the future through increased flexibility by eliminating the Federal take prohibition under certain conditions. These activities are intended to encourage support for the occurrence of nene in areas with land use practices compatible with the conservation of nene, and to redirect nene use away from areas that do not support the conservation of nene (see
As nene increase in number and range, they are facing increased interaction and potential conflict with the human environment. In addition, the nene recently translocated from Kauai to Maui and Hawaii Island have expanded into new areas on these islands, often in close proximity to human populations. Nene are known to use and interact with human-modified environments (such as wind farms, airports, resorts, golf courses, agricultural operations, residential areas, parks, public recreation areas, and transportation routes) during feeding, breeding, molting, and sheltering activities, as well as during seasonal intra-island movements. In these environments, nene may be subject to injury or mortality as a result of activities such as vehicle collisions, collisions with wind turbines, golf ball strikes, predation or attack by unrestrained pets, entanglement with foreign materials, and ingestion of herbicides and pesticides associated with construction, maintenance, or normal business activities in these areas. The proposed 4(d) rule would not change the prohibition on any take of nene associated with these activities, although hazing to move nene away from these activities would be allowed under the 4(d) rule. For these types of activities on non-Federal lands or those without a Federal nexus where section 7 would provide incidental take exemption, landowners or project proponents may develop an HCP and apply for an incidental take permit to address any potential take of the nene to avoid violating the prohibition on take.
Hazing and other persistent deterrence actions are management strategies that may be used to address wildlife conflict issues. As nene populations increase, particularly in heavily human-populated lowland areas, they may often come into conflict with human activities. For example, nene are known to use a variety of human-modified areas including wind farms, airports, resorts, golf courses, agricultural operations, residential areas, parks, public recreation areas, and transportation routes. Nene using these areas may present a conflict with normal business activities or cause crop depredation or safety hazards to humans. Humans may also inadvertently harm nene by feeding them, which could result in nene showing aggressive behaviors towards humans, being injured or killed by vehicles or humans, or being placed at increased risk from predators. Methods such as hazing are necessary to prevent and address these potential human-nene conflicts, allowing nene to coexist with areas of established human activity and providing for continued public support of nene recovery actions.
Any deterrence activity that does not create a likelihood of injury by significantly disrupting normal nene behavioral patterns such as breeding, feeding, or sheltering is not take and is not prohibited under the Act.
If an activity creates the likelihood of injury to wildlife by annoying it to such an extent as to significantly disrupt normal behavioral patterns such as breeding, feeding, and sheltering, then the activity has the potential to cause take in the form of harassment. Hazing of nene is considered intentional harassment, which creates the likelihood of injury and has been prohibited under section 9 of the Act. Under this proposed 4(d) rule, hazing and other deterrence activities that may cause indirect injury to nene by disrupting normal behavioral patterns, but are not likely to be lethal or cause direct injury (including the need for veterinary care or rehabilitation), would be classified as intentional harassment not likely to cause direct injury or mortality, and would be allowed under Federal law. Such activities may include the use of predator effigies (including raptor kites, predator replicas, etc.), commercial chemical repellents, ultrasonic repellers, audio deterrents (noisemakers, pyrotechnics, etc.), herding or harassing with trained or tethered dogs, or access control (including netting, fencing, etc.). This proposed 4(d) rule would not apply to scenarios involving lethal or directly injurious take. For example, laser irradiation used for hazing may cause ocular damage resulting in temporary or permanent loss of visual acuity or blindness (Oregon State University 2017,
Intentional harassment activities not likely to cause direct injury or mortality that are addressed in this proposed 4(d) rule are recommended to be implemented prior to the nene breeding season (September through April) wherever feasible. If, during the breeding season, a landowner desires to conduct an action that would intentionally harass nene to address nene loafing or foraging in a given area, a qualified biologist familiar with the nesting behavior of nene must survey in and around the area to determine whether a nest or goslings are present. If a nest or families with goslings is discovered, a qualified biologist must be notified and the following measures implemented to avoid disturbance of nests and broods: (1) No disruptive activities may occur within a 100-foot (30-meter) buffer around all active nests and broods until the goslings have fledged; and (2) brooding adults (
Control of introduced predators and habitat management are identified as two primary recovery actions for nene (USFWS 2004, p. 52). Control of predators (
Nene productivity and survival are currently limited by insufficient nutritional resources due to habitat degradation and the limited availability of suitable habitat due to habitat loss and fragmentation, especially in lowland areas (USFWS 2004, pp. 29-30). Active habitat management is necessary for populations of nene to be sustained or expanded without the continued release of captive-bred birds. Active habitat management in protected nesting and brooding areas should improve productivity and survival, as well as attract birds to areas that can be protected during sensitive life stages. Habitat management actions may include: (1) Mowing, weeding, fertilizing, herbicide application, and irrigating existing pasture areas for conservation purposes; (2) planting native food resources; (3) providing watering areas, such as water units or ponds or catchments, designed to be safe for goslings and flightless/molting adults; (4) providing temporary supplemental feeding and watering stations when appropriate, such as under poor quality forage or extreme conditions (
In the course of habitat management activities, incidental take of nene may occur in the following manner: (1) Accidental crushing of non-flighted juveniles, goslings, or nests with eggs; (2) injury or death due to collisions with vehicles and equipment; (3) injury or death due to ingestion of plants sprayed with herbicides or ingestion of fertilizers; (4) injury or death due to entanglement with landscaping materials or choking on foreign materials; and (5) injury or death of goslings if goslings are separated from parents because of disturbance by restoration activities (
The increased interaction of nene with the human environment also increases the likelihood of encounters with injured, sick, or dead nene. This proposed 4(d) rule would exempt take of nene by law enforcement officers in consultation with State wildlife biologists to provide aid to injured or sick nene, or disposal or salvage of a dead nene. Law enforcement officers would be allowed take of nene for the following purposes: Aiding or euthanizing sick, injured, or orphaned nene; disposing of a dead specimen; and salvaging a dead specimen that may be used for scientific study.
As the nene population increases in number and range, nene are facing increased interaction and potential conflict with the human environment. If finalized, the reclassification of the nene to threatened status would allow employees of State conservation agencies operating a conservation program pursuant to the terms of a cooperative agreement with the Service in accordance with section 6(c) of the Act, and who are designated by their agencies for such purposes, and who are acting in the course of their official duties, to take nene in the course of carrying out conservation programs (see 50 CFR 17.31(b)). However, there are many activities carried out or managed by landowners or their agents that help reduce conflict or benefit the recovery of nene, and thereby facilitate the expansion of nene populations, but would not be exempted from take prohibitions without a 4(d) rule. These activities include intentional harassment not likely to result in mortality or direct injury, predator control, and habitat management. We anticipate that reclassification and implementation of a 4(d) rule would facilitate the expansion of nene into additional areas with land use practices compatible with the conservation of nene, and reduce the occurrence of nene in areas that do not support the conservation of nene across the landscape. The proposed 4(d) rule would provide incentives to landowners to support the occurrence of nene on their properties, as well as neighboring properties, by alleviating concerns about unauthorized take of nene.
Except as outlined in the proposed 4(d) rule, prohibitions on take of nene would remain in effect. Harm or harassment that is likely to cause mortality or injury would continue to be prohibited because allowing these forms of take would be incompatible with restoring robust populations of nene and restoring and maintaining their habitat.
This rule does not alter the requirements of the Act's section 7 or the interagency regulations implementing section 7 found at 50 CFR part 402. Federal actions covered by this rule would still be subject to section 7. The effect of this rule would be to exclude certain specific actions from the prohibitions on take so that such actions may not require an exemption through section 7(o) of the Act. However, under 50 CFR 402.14 the Federal agency would still need to consult with the Service if the proposed action may affect nene, unless the agency determines with written concurrence from the Service that the proposed action is not likely to adversely affect the nene.
One of the limiting factors in the recovery of nene has been the concern of landowners regarding nene on their property due to the potential damage to agricultural crops and potential conflicts with normal business, recreational, and residential activities. Landowners express concern over their inability to prevent or address the
The proposed 4(d) rule would address intentional harassment of nene by landowners and their agents that is not likely to result in mortality or direct injury, and predator control and habitat management. Exempting targeted activities that may normally result in take under the prohibitions of the Act would increase the incentive for all landowners to support nene recovery and provide enhanced options for wildlife managers with respect to nene management, thereby encouraging their participation in recovery actions for nene.
We believe the actions and activities that would be allowed under the proposed 4(d) rule, while they may cause some minimal level of harm or disturbance to individual nene, would not be expected to cause mortality or direct injury, would not adversely affect efforts to conserve and recover nene, and in fact should facilitate these efforts because they would make it easier to implement recovery actions and redirect nene activity toward lands that are managed for conservation.
This proposed 4(d) rule would not be made final until we have reviewed and fully considered comments from the public and peer reviewers.
The increased interaction of nene with the human environment increases the potential for nene to cause conflicts for business, agricultural, residential, and recreational activities, as well as the potential for nene to become habituated to hazardous areas (
The proposed 4(d) rule only addresses Federal Endangered Species Act requirements, and would not change State law. It is our understanding that current State of Hawaii (HRS section 195D-4) law does not include the authority to issue regulations, equivalent to those under section 4(d) of the Act, to exempt take prohibitions for endangered and threatened species. Instead, State law requires the issuance of a temporary license for the take of endangered and threatened animal species, if the activity otherwise prohibited is: (1) For scientific purposes or to enhance the propagation or survival of the affected species (HRS 195D-4(f)); or (2) incidental to an otherwise lawful activity (HRS 195D-4(g)). Incidental take licenses require the development of an HCP (section 195D-21) or a safe harbor agreement (section 195D-22), and consultation with the State's Endangered Species Recovery Committee. Therefore, persons may need to obtain a State permit for some of the actions described in the proposed 4(d) rule. In addition, it is our understanding that current State regulations for endangered and threatened wildlife (HAR section 13-124, subchapter 3) do not allow permits for the intentional harassment or hazing of endangered or threatened species, thus changes to these State regulations may be necessary to allow the State to issue such permits.
As explained above, the provisions included in this proposed 4(d) rule are necessary and advisable to provide for the conservation of the nene. Nothing in this proposed 4(d) rule would change in any way the recovery planning provisions of section 4(f) of the Act, the consultation requirements under section 7 of the Act, or the ability of the Service to enter into partnerships for the management and protection of the nene. However, the consultation process may be further streamlined through planned programmatic consultations between Federal agencies and the Service for these activities. We ask the public, particularly State agencies and other interested stakeholders that may be affected by the proposed 4(d) rule, to provide comments and suggestions regarding additional guidance and methods that the Service could provide or use, respectively, to streamline the implementation of this 4(d) rule (see Information Requested, above).
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(a) Be logically organized;
(b) Use the active voice to address readers directly;
(c) Use clear language rather than jargon;
(d) Be divided into short sections and sentences; and
(e) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in
We have determined that an environmental assessment or an environmental impact statement, as defined under the authority of the National Environmental Policy Act of 1969, need not be prepared in connection with regulations such as this. We published a notice outlining our reasons for this determination in the
A complete list of all references cited in this proposed rule is available at
The primary authors of this document are staff members of the Pacific Islands Fish and Wildlife Office in Honolulu, Hawaii (see
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we hereby propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361-1407; 1531-1544; and 4201-4245, unless otherwise noted.
(h) * * *
(d) Hawaiian goose (
(1)
(2)
(i)
(ii)
(iii)
(3)
(i)
(A) No disruptive activities may occur within a 100-foot (30-meter) buffer around all active nests and broods until the goslings have fledged; and
(B) Brooding adults (
(ii)
(A) Predator control activities include use of fencing, trapping, shooting, and toxicants to control predators, and related activities such as performing efficacy surveys, trap checks, and maintenance duties. Reasonable care for predator control activities may include, but is not limited to, procuring and implementing technical assistance from a qualified biologist on predator control methods and protocols prior to application of methods; compliance with all State and Federal regulations and guidelines for application of predator control methods; and judicious use of methods and tool adaptations to reduce the likelihood of nene ingesting bait, interacting with mechanical devices, or being injured or dying from interaction with mechanical devices.
(B) Habitat management activities include mowing, weeding, fertilizing, herbicide application, and irrigating existing pasture areas for conservation purposes; planting native food resources; providing watering areas, such as water units or ponds or catchments, designed to be safe for goslings and flightless/molting adults; providing temporary supplemental feeding and watering stations when appropriate, such as under poor quality forage or extreme conditions (
(4)
(i) Aiding or euthanizing sick, injured, or orphaned nene;
(ii) Disposing of a dead specimen; or
(iii) Salvaging a dead specimen that may be used for scientific study.
(5)
(6)
(7) Federal actions remain subject to section 7 of the Act. Nothing in this section relieves Federal agencies from compliance with the provisions of 16 U.S.C. 1536 or 50 CFR part 402.
(8) Nothing in this section provides authorization for take of nene under the Migratory Bird Treaty Act (16 U.S.C. 703-712).
Agricultural Research Service, USDA.
Notice and request for comment.
The U.S. Department of Agriculture (USDA) seeks comments on the intent of the USNA to renew an information collection that expires August 31, 2018. The information collection serves as a means to collect for certain use of the facilities, grounds, programs and services. This includes fees for educational programs and workshops and for use of the grounds and facilities, as well as for commercial photography and cinematography. Fees generated will be used to defray USNA expenses or to promote the missions of the USNA.
Comments on this notice must be received by June 1, 2018 to be assured of consideration.
You may submit comments by any of the following methods:
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Section 890(b) of the Federal Agriculture Improvement and Reform Act of 1996, Public Law 104-127 (1996 Act), expanded the authorities of the Secretary of Agriculture to charge reasonable fees for the use of USNA facilities and grounds. These authorities include the ability to charge fees for temporary use by individuals or groups of USNA facilities and grounds in furtherance of the mission of the USNA. Also, authority was provided to charge fees for tram tours and for the use of the USNA for commercial photography and cinematography. All rules and regulations noted in 7 CFR 500, subpart 2A, conducted on the USNA property will apply to individuals or groups granted approval to use the facilities and grounds. In order to administer the use of the USNA facilities and to determine if the requested use is consistent with the mission of the USNA, it is necessary for the USNA to obtain information from the requestor. Each request will require the completion of an application and submission of an application fee. The application is simple and requires only information readily available to the requestor. The requestor is asked to indicate by whom and for what the purpose the USNA facilities are to be used. Applications are available in hard copy format as well as electronic format (PDF fillable) on the USNA website
The PDF fillable application for the use of facilities is available on the website and can be submitted electronically to USNA. Completed hard copies of permit requests can be submitted to the Administrative Office, USDA, ARS, U.S. National Arboretum, 3501 New York Avenue NE, Washington, DC 20002.
Commodity Credit Corporation and Farm Service Agency, USDA.
Notice; request for comments.
In accordance with the Paperwork Reduction Act of 1995, the Commodity Credit Corporation (CCC) and Farm Service Agency (FSA) are requesting comments from all interested individuals and organizations on an extension with a revision of a currently approved information collection. The information collection is associated with assignment of payment, joint payment authorization, and request for a paper check (new). Certain services for FSA and the National Resources Conservation Service (NRCS) are being merged to consolidate services. The information on the forms is used by FSA and NRCS employees in order to record the payment or contract being assigned, the amount of the assignment, the date of the assignment, and the name and address of the assignee and the assignor. This will enable FSA and NRCS employees to pay the proper party when payment becomes due. A new waiver request form to receive a paper check for program payments in lieu of electronic fund transfer is being added in the information collection request. In general, NRCS programs are exempt from the Paperwork Reduction Act.
We will consider comments that we receive by June 1, 2018.
We invite you to submit comments on this notice. In your comments, include the date, volume, and page number of this issue of the
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You may also send comments to the Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503.
Copies of the information collection may be requested by contacting Yanira Sanabria at the above address.
For specific questions related to collection activities, Yanira Sanabria, (202) 772-6032. Persons with disabilities who require alternative mean for communication (Braille, large print, audio tape, etc.) should contact the USDA's TARGET Center at (202)720-2600 (Voice).
Section 8(g) of the Soil Conservation and Domestic Allotment Act (16 U.S.C. 590h(g)) authorizes producers to assign FSA conservation program payments in accordance with regulations issued by the Secretary. The Assignment of Payment regulation in 7 CFR part 1404 requires that any such assignment be signed by both the assignor and the assignee. The Agricultural Act of 1949, as amended, extends that authority to CCC programs, including rice, feed grains, cotton, and wheat. There are no regulations governing joint payments, but this service is offered as a result of public requests for the type of payment option.
The Department of the Treasury (Treasury) amended its regulation to require recipients of Federal nontax payments to receive payment by electronic funds transfer (EFT), effective May 1, 2011. The Treasury regulation allows an automatic waiver for customers who were born before May 1, 1921. The Treasury regulation is focused on requiring payments to be received by EFT, therefore customers who want a payment by paper check need to submit a waiver request, even for the automatic waiver category. The Treasury regulation also provides 2 hardship waiver categories related to a mental impairment or living in a remote geographic location.
For FSA and NRCS payments, USDA collects the customer information and submits it to Treasury, including any account information for those customers requesting payment by paper check instead of EFT. To collect the waiver request information, FSA and NRCS will use the new CCC-40 form. FSA used the Treasury form FS Form 1201W (March 2014) (approved under OMB #1530-0019) as the model for CCC-40. The differences in the forms are that FSA and NRCS use a tax identification number instead of a social security number and the CCC-40 form will be submitted by FSA or NRCS customers to FSA or NRCS, respectively, instead of to Treasury. Once approved by FSA or NRCS, such request will be forwarded by FSA or NRCS to Treasury as part of the payment information.
The overall burden hours increased because FSA added a new form of CCC-40, “Request for FSA and NRCS Payments of Federal Benefits by Check (Request for Waiver)” (paper form), and FSA increased the number of respondents who are currently participating in the FSA, CCC, and NRCS programs.
For the following estimated total annual burden on respondents, the formula used to calculate the total burden hours is the estimated average time per response multiplied by the estimated total annual responses.
We are requesting comments on all aspects of this information collection to help FSA.
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of burden of the collection of information including the validity of the methodology and assumptions used;
(3) Evaluate the quality, ability and clarity of the information technology; and
(4) Minimize the burden of the information collection on those who respond through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
All comments received in response to this notice, including names and addresses when provided, will be made a matter of public record. Comments will be summarized and included in the submission for Office of Management and Budget approval.
Food and Nutrition Service, USDA.
Notice.
This notice announces the surplus and purchased foods that the Department expects to make available for donation to States for use in providing nutrition assistance to the needy under The Emergency Food Assistance Program (TEFAP) in Fiscal Year (FY) 2018. The foods made available under this notice must, at the discretion of the State, be distributed to eligible recipient agencies (ERAs) for use in preparing meals and/or for distribution to households for home consumption.
Implementation date October 1, 2017.
Polly Fairfield, Policy Branch, Food Distribution Division, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Alexandria, Virginia 22302-1594 or telephone (703) 305-2662.
In accordance with the provisions set forth in the Emergency Food Assistance Act of 1983 (EFAA), 7 U.S.C. 7501,
The types of foods the Department expects to make available to States for distribution through TEFAP in FY 2018 are listed in the table below.
Surplus foods donated for distribution under TEFAP are Commodity Credit Corporation (CCC) foods purchased under the authority of section 416 of the Agricultural Act of 1949, 7 U.S.C. 1431 (section 416) and foods purchased under the surplus removal authority of section 32 of the Act of August 24, 1935, 7 U.S.C. 612c (section 32). The types of foods typically purchased under section 416 include dairy, grains, oils, and peanut products. The types of foods purchased under section 32 include meat, poultry, fish, vegetables, dry beans, juices, and fruits.
Approximately $184.4 million in surplus foods acquired in FY 2017 are being delivered to States in FY 2018. These foods include Alaska pollock, apples, applesauce, apple slices, beans, blueberries, cranberries, cranberry sauce, eggs, figs, grape juice, peaches, pears, plums, raisins, and turkey. Other surplus foods may be made available to TEFAP throughout the year. The Department would like to point out that food acquisitions are based on changing agricultural market conditions; therefore, the availability of foods is subject to change.
In accordance with section 27 of the Food and Nutrition Act of 2008, 7 U.S.C. 2036, the Secretary is directed to purchase an estimated $288.8 million worth of foods in FY 2018 for distribution through TEFAP. These foods are made available to States in addition to those surplus foods which otherwise might be provided to States for distribution under TEFAP.
For FY 2018, the Department anticipates purchasing the foods listed in the following table for distribution through TEFAP. The amounts of each item purchased will depend on the prices the Department must pay, as well as the quantity of each item requested by the States. Changes in agricultural market conditions may result in the availability of additional types of foods or the non-availability of one or more types listed in the table.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Applicable April 2, 2018.
Jerry Huang at (202) 482-4047 (the People's Republic of China (China)), Robert Palmer at (202) 482-9068 (India), George Ayache at (202) 482-2623 (the Republic of Korea (Korea)), and Ajay Menon at (202) 482-1993 (the Republic of Turkey (Turkey)), AD/CVD Operations, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230.
On February 9, 2018, the Department of Commerce (Commerce) initiated countervailing duty (CVD) investigations on large diameter welded pipe from China, India, Korea, and Turkey.
Section 703(b)(1) of the Tariff Act of 1930, as amended (the Act), requires Commerce to issue the preliminary determination in a CVD investigation within 65 days after the date on which Commerce initiated the investigation. However, if the petitioner makes a timely request for a postponement, section 703(c)(1)(A) of the Act permits Commerce to postpone the preliminary determination until no later than 130 days after the date on which Commerce initiated the investigation. Under 19 CFR 351.205(e), a petitioner must submit a request for postponement 25 days or more before the scheduled date of the preliminary determination and must state the reason for the request. Commerce will grant the request unless it finds compelling reasons to deny the request.
On March 20, 2018, the petitioners
This notice is issued and published pursuant to section 703(c)(2) of the Act and 19 CFR 351.205(f)(1).
U.S. Department of Commerce, International Trade Administration
Notice of an Open Meeting of the President's Advisory Council on Doing Business in Africa
The President's Advisory Council on Doing Business in Africa (Council) will meet to deliberate and adopt a report containing recommendations to the President on actions the United States Government could take to mitigate obstacles U.S. companies face in doing business in Kenya, Côte d'Ivoire, Ethiopia, and Ghana, countries the Council has identified as holding particular promise of business opportunities for U.S. companies. The report of recommendations will be a follow-up to the Council's report of analysis adopted on November 29, 2017, which identified the top issues U.S. companies face in approaching African markets for the first time, competing for business opportunities on the continent, and executing business operations. The final agenda for the meeting will be posted at least one week in advance of the meeting on the Council's website at
April 18, 2018, 3:00 p.m. (EDT).
The President's Advisory Council on Doing Business in Africa meeting will be broadcast via live webcast on the internet at
Giancarlo Cavallo or Ashley Bubna, Designated Federal Officers, President's Advisory Council on Doing Business in Africa, Department of Commerce, 1401 Constitution Ave. NW, Room 22004, Washington, DC, 20230, telephone: 202-482-2091, email:
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Statements will be provided to the members in advance of the meeting for consideration and also will be posted on the Council website (
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is rescinding the administrative review of the antidumping duty (AD) order on polyethylene terephthalate film, sheet, and strip (pet film) from the People's Republic of China (China) for the period of review (POR) November 1, 2016, through October 31, 2017.
Applicable April 2, 2018.
Jonathan Hill, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-3518.
On November 1, 2017, Commerce published in the
Commerce exercised its discretion to toll all deadlines affected by the closure of the Federal Government from January 20 through 22, 2018. If the new deadline falls on a non-business day, in accordance with Commerce's practice, the deadline will become the next business day.
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if the party that requested the review withdraws its request within 90 days of the publication date of the notice of initiation of the requested review. The petitioners withdrew their request for review within the 90-day deadline. Because Commerce received no other requests for review of the above-referenced companies, and no other requests were made for a review of the AD order on pet film from China with respect to other companies, we are rescinding the administrative review covering the period November 1, 2016, through October 31, 2017, in full, in accordance with 19 CFR 351.213(d)(1).
Commerce will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties on all appropriate entries of pet film from China during the POR at rates equal to the cash deposit rate for estimated antidumping duties required at the time of entry, or withdrawal from warehouse, for consumption, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue appropriate assessment instructions to CBP 15 days after publication of this notice in the
This notice serves as the only reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the presumption that reimbursement of antidumping duties occurred and the subsequent assessment of doubled antidumping duties.
This notice also serves as the only reminder to parties subject to administrative protective orders (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3), which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.
This notice is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213(d)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Every five years, pursuant to the Tariff Act of 1930, as amended (the Act), the Department of Commerce (Commerce) and the International Trade Commission automatically initiate and conduct a review to determine whether revocation of a countervailing or antidumping duty order or termination of an investigation suspended under section 704 or 734 of the Act would be likely to lead to continuation or recurrence of dumping or a countervailable subsidy (as the case may be) and of material injury.
Pursuant to section 751(c) of the Act, the following Sunset Review is scheduled for initiation in May 2018 and will appear in that month's
Commerce's procedures for the conduct of Sunset Reviews are set forth in 19 CFR 351.218. The
Pursuant to 19 CFR 351.103(c), Commerce will maintain and make available a service list for these proceedings. To facilitate the timely preparation of the service list(s), it is requested that those seeking recognition as interested parties to a proceeding contact Commerce in writing within 10 days of the publication of the Notice of Initiation.
Please note that if Commerce receives a Notice of Intent to Participate from a member of the domestic industry within 15 days of the date of initiation, the review will continue.
Thereafter, any interested party wishing to participate in the Sunset Review must provide substantive comments in response to the notice of initiation no later than 30 days after the date of initiation.
This notice is not required by statute but is published as a service to the international trading community.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Brenda E. Brown, Office of AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, telephone: (202) 482-4735.
Each year during the anniversary month of the publication of an antidumping or countervailing duty order, finding, or suspended investigation, an interested party, as defined in section 771(9) of the Tariff Act of 1930, as amended (the Act), may request, in accordance with 19 CFR 351.213, that the Department of Commerce (Commerce) conduct an administrative review of that antidumping or countervailing duty order, finding, or suspended investigation.
All deadlines for the submission of comments or actions by Commerce discussed below refer to the number of calendar days from the applicable starting date.
In the event Commerce limits the number of respondents for individual examination for administrative reviews initiated pursuant to requests made for the orders identified below, Commerce intends to select respondents based on U.S. Customs and Border Protection (CBP) data for U.S. imports during the period of review. We intend to release the CBP data under Administrative Protective Order (APO) to all parties having an APO within five days of publication of the initiation notice and to make our decision regarding respondent selection within 21 days of publication of the initiation
In the event Commerce decides it is necessary to limit individual examination of respondents and conduct respondent selection under section 777A(c)(2) of the Act:
In general, Commerce finds that determinations concerning whether particular companies should be “collapsed” (
Pursuant to 19 CFR 351.213(d)(1), a party that requests a review may withdraw that request within 90 days of the date of publication of the notice of initiation of the requested review. The regulation provides that Commerce may extend this time if it is reasonable to do so. In order to provide parties additional certainty with respect to when Commerce will exercise its discretion to extend this 90-day deadline, interested parties are advised that, with regard to reviews requested on the basis of anniversary months on or after April 2018, Commerce does not intend to extend the 90-day deadline unless the requestor demonstrates that an extraordinary circumstance prevented it from submitting a timely withdrawal request. Determinations by Commerce to extend the 90-day deadline will be made on a case-by-case basis.
Commerce is providing this notice on its website, as well as in its “Opportunity to Request Administrative Review” notices, so that interested parties will be aware of the manner in which Commerce intends to exercise its discretion in the future.
None.
In accordance with 19 CFR 351.213(b), an interested party as defined by section 771(9) of the Act may request in writing that the Secretary conduct an administrative review. For both antidumping and countervailing duty reviews, the interested party must specify the individual producers or exporters covered by an antidumping finding or an antidumping or countervailing duty order or suspension agreement for which it is requesting a review. In addition, a domestic interested party or an interested party described in section 771(9)(B) of the Act must state why it desires the Secretary to review those particular producers or exporters. If the interested party intends for the Secretary to review sales of merchandise by an exporter (or a producer if that producer also exports merchandise from other suppliers) which was produced in more than one country of origin and each country of origin is subject to a separate order, then the interested party must state specifically, on an order-by-order basis, which exporter(s) the request is intended to cover.
Note that, for any party Commerce was unable to locate in prior segments, Commerce will not accept a request for an administrative review of that party absent new information as to the party's location. Moreover, if the interested party who files a request for review is unable to locate the producer or exporter for which it requested the review, the interested party must provide an explanation of the attempts it made to locate the producer or exporter at the same time it files its request for review, in order for the Secretary to determine if the interested party's attempts were reasonable, pursuant to 19 CFR 351.303(f)(3)(ii).
As explained in
Commerce no longer considers the non-market economy (NME) entity as an exporter conditionally subject to an antidumping duty administrative reviews.
All requests must be filed electronically in Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS) on Enforcement and Compliance's ACCESS website at
Commerce will publish in the
For the first administrative review of any order, there will be no assessment of antidumping or countervailing duties on entries of subject merchandise entered, or withdrawn from warehouse, for consumption during the relevant provisional-measures “gap” period of the order, if such a gap period is applicable to the period of review.
This notice is not required by statute but is published as a service to the international trading community.
International Trade Administration, U.S. Department of Commerce.
Notice; Invitation for applications.
Under the Swiss-U.S. Privacy Shield Framework, the U.S. Department of Commerce (DOC) and the Swiss Administration have committed to implement an arbitration mechanism as set forth in Annex I, to provide Swiss individuals with the ability to invoke binding arbitration to determine, for residual claims, whether an organization has violated its obligations under the Privacy Shield Framework. The DOC and the Swiss Administration will work together to implement the arbitration mechanism, including by jointly developing a list of up to five arbitrators with European or Swiss expertise to supplement the list of arbitrators developed under the EU-U.S. Privacy Shield Framework. Parties to a binding arbitration under this Swiss-U.S. Privacy Shield mechanism may only select arbitrators from the list developed under the EU-U.S. Privacy Shield Framework to be supplemented by this list. This notice announces the opportunity to apply for inclusion on the Swiss-U.S. Privacy Shield Supplemental List of Arbitrators developed by the DOC and the Swiss Administration.
Applications should be received by Friday April 30th, 2018.
Please submit applications to David Ritchie at the U.S. Department of Commerce, either by email at
David Ritchie, International Trade Administration, 202-482-4936 or
The Swiss-U.S. Privacy Shield Framework was designed by the U.S. Department of Commerce (DOC) and the Swiss Administration (Swiss) to provide companies in both Switzerland and the United States with a mechanism to comply with data protection requirements when transferring personal data from Switzerland to the United States in support of transatlantic commerce. On January 12, 2017, the Swiss deemed the Swiss-U.S. Privacy Shield Framework (Swiss Privacy Shield) adequate to enable data transfers under Swiss law, and on April 12, 2017, the DOC began accepting self-certifications from U.S. companies to join the program (82 FR 16375; April 12, 2017). For more information on the Privacy Shield, visit
As described in Annex I of the Swiss Privacy Shield, the DOC and the Swiss have committed to implement an arbitration mechanism to provide Swiss individuals with the ability to invoke binding arbitration to determine, for residual claims, whether an organization has violated its obligations under the Privacy Shield. Organizations voluntarily self-certify to the Swiss Privacy Shield and, upon certification, the commitments the organization has made to comply with the Swiss Privacy Shield become legally enforceable under U.S. law. Organizations that self-certify to the Swiss Privacy Shield commit to binding arbitration of residual claims if the individual chooses to exercise that option. Under the arbitration option, a Privacy Shield Panel
The DOC and the Swiss Administration seek to develop a list of up to five arbitrators to supplement the list of arbitrators developed under the EU-U.S. Privacy Shield Framework. To be eligible for inclusion on the supplemental list, applicants must be admitted to practice law in the United States and have expertise in both U.S. privacy law and European or Swiss data protection law. Applicants shall not be subject to any instructions from, or be affiliated with, any Privacy Shield organization, or the U.S., Switzerland, EU, or any EU Member State or any other governmental authority, public authority or enforcement authority.
Eligible individuals will be evaluated on the basis of independence, integrity, and expertise:
Independence:
• Freedom from bias and prejudice.
Integrity:
• Held in the highest regard by peers for integrity, fairness and good judgment.
• Demonstrates high ethical standards and commitment necessary to be an arbitrator.
Expertise:
Required:
• Admission to practice law in the United States.
• Level of demonstrated expertise in U.S. privacy law and European or Swiss data protection law.
Other expertise that may be considered includes any of the following:
• Relevant educational degrees and professional licenses.
• Relevant professional or academic experience or legal practice.
• Relevant training or experience in arbitration or other forms of dispute resolution.
Evaluation of applications for inclusion on the list of arbitrators will be undertaken by the DOC and the Swiss Administration. Selected applicants will remain on the list for a period of 3 years, absent exceptional circumstances, change in eligibility, or for cause, renewable for one additional period of 3 years.
The DOC selected the International Centre for Dispute Resolution-American Arbitration Association (ICDR-AAA) as administrator for Privacy Shield arbitrations brought under either the Swiss-U.S. or EU-U.S. Privacy Shield Frameworks.
Arbitrators will be subject to a code of conduct consistent with Annex I of the Swiss-U.S. Privacy Shield Framework and generally accepted ethical standards for arbitrators. The DOC and the Swiss Administration agreed to adopt the arbitral procedures adopted under the EU-U.S. Privacy Shield Framework to govern the arbitral proceedings, subject to considerations identified in Annex I of the Swiss-U.S. Privacy Shield Framework, including that materials submitted to arbitrators will be treated confidentially and will only be used in connection with the arbitration. For more information, please visit
Eligible individuals who wish to be considered for inclusion on the Swiss-U.S. Privacy Shield Supplemental List of Arbitrators are invited to submit applications. Applications must be typewritten and should be headed “Application for Inclusion on the Swiss-U.S. Privacy Shield Supplemental List of Arbitrators.” Applications should include the following information, and each section of the application should be numbered as indicated:
—Name of applicant.
— Address, telephone number, and email address.
—Description of the applicant's affiliations with any organization that has self-certified under either the Swiss-U.S. or EU-U.S. Privacy Shield Frameworks, or the U.S., Switzerland, any EU Member State or any other governmental authority, public authority, or enforcement authority.
— On a separate page, the names, addresses, telephone, and fax numbers of three individuals willing to provide information concerning the applicant's qualifications for service, including the applicant's character, reputation, reliability, and judgment.
—Description of the applicant's willingness and ability to make time commitments necessary to be an arbitrator.
—Demonstration of admittance to practice law in the United States.
—Relevant academic degrees and professional training and licensing.
—Current employment, including title, description of responsibility, name and address of employer, and name and telephone number of supervisor or other reference.
—Employment history, including the dates and addresses of each prior position and a summary of responsibilities.
—Description of expertise in U.S. privacy law and European or Swiss data protection law.
—Description of training or experience in arbitration or other forms of dispute resolution, if applicable.
—A list of publications, testimony, and speeches, if any, concerning U.S. privacy law and European or Swiss data protection law, with copies appended.
OMB has reviewed and approved this information collection on an emergency basis as of March 26, 2018 under Control Number 0625-0278. The emergency approval is only valid for 180 days. ITA will submit a request for a 3-year approval through OMB's general PRA clearance process. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act, unless that collection of information displays a currently valid OMB control number.
Written comments regarding the burden estimate for this data collection requirement, or any other aspect of this data collection, to the Office of Information and Regulatory Affairs of OMB, Attention: Desk Officer for the International Trade Administration via email at
Applications will be covered by the Department of Commerce's Privacy Act System of Records Notice 23
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) received information from U.S. Customs and Border Protection (CBP) relating to the antidumping duty (AD) and countervailing duty (CVD) orders on 1-Hydroxyethylidene-1, 1-Diphosphonic Acid (HEDP) from the People's Republic of China (China); the AD order on cold-rolled steel from Japan; the AD order on hydrofluorocarbon blends (HFCs) from China; and the AD and CVD orders on light-walled rectangular pipe and tube from China. Commerce is providing notice that it is opening scope segments in each proceeding in order to place this information on the record of the respective cases, and provide an opportunity for interested parties to comment.
Applicable April 2, 2018.
Omar Qureshi at (202) 482-5307 (HEDP), Trisha Tran at (202) 482-4852 (cold-rolled steel), Andrew Medley at (202) 482-4987 (HFCs), or Celeste Chen at (202) 482-0890 (light-walled rectangular pipe and tube), AD/CVD Operations, Enforcement & Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230.
AD and CVD orders on HEDP from China: Commerce received information from CBP regarding an entry into the
AD order on certain cold-rolled steel from Japan: Commerce received information from CBP regarding entries into the United States of certain products that closely resemble merchandise subject to this order that have a manganese content of greater than 2.5 percent. Commerce opened a segment entitled “Manganese Content,” in order to place this information on the record.
AD order on HFCs from China: Commerce received information from CBP regarding entries into the United States of certain products that closely resemble merchandise subject this order. Commerce opened a segment entitled “Certain R-32/R-125 Blends,” in order to place this information on the record.
AD and CVD orders on light-walled rectangular pipe and tube from China: Commerce received information from CBP regarding entries into the United States of certain products that closely resemble merchandise subject to these orders that have a vanadium content greater than 0.15 percent. Commerce opened a segment entitled “Vanadium Content” in order to place this information on the record.
Commerce is hereby notifying interested parties that it has received the information discussed above and intends to provide interested parties with the opportunity to submit comments, and, if appropriate, new factual information. Parties are invited to submit factual information and/or comment on these materials no later than April 20, 2018.
Parties are also hereby notified that this is the only notice that Commerce intends to publish in the
The scope of the relevant AD and CVD orders may be found in the Appendices to this document as follows:
All submissions to Commerce must be filed electronically using Enforcement and Compliance's Antidumping Duty and Countervailing Duty Centralized Electronic Service System (ACCESS).
Interested parties that wish to participate in the respective segments of the proceedings and be added to the public service list for that segment must file a letter of appearance in accordance with 19 CFR 351.103(d)(1) on the record of the appropriate segment.
Commerce placed APOs on the respective records as follows: On January 10, 2018, for the segments involving light-walled rectangular pipe and tube from China
Interested parties must submit applications for disclosure under the APO in accordance with the procedures outlined in Commerce's regulations at 19 CFR 351.305. Those procedures apply to the respective segments of each proceeding addressed in this notice.
The merchandise covered by these orders includes all grades of aqueous acidic (non-neutralized) concentrations of HEDP, also referred to as hydroxyethylidenendiphosphonic acid, hydroxyethanediphosphonic acid, acetodiphosphonic acid, and etidronic acid. The Chemical Abstract Service (CAS) registry number for HEDP is 2809-21-4.
The merchandise subject to these orders is currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) at subheading 2931.90.9043. It may also enter under HTSUS subheadings 281.19.6090 and 2931.90.9041. While HTSUS subheadings and the CAS registry number are provided for convenience and customs purposes only, the written description of the scopes of these orders is dispositive.
The products covered by this order are certain cold-rolled (cold-reduced), flat-rolled steel products, whether or not annealed, painted, varnished, or coated with plastics or other non-metallic substances. The products covered do not include those that are clad, plated, or coated with metal. The products covered include coils that have a width or other lateral measurement (width) of 12.7 mm or greater, regardless of form of coil (
(1) Where the nominal and actual measurements vary, a product is within the scope if application of either the nominal or actual measurement would place it within the scope based on the definitions set forth above, and
(2) where the width and thickness vary for a specific product (
Steel products included in the scope of this order are products in which: (1) Iron predominates, by weight, over each of the other contained elements; (2) the carbon content is 2 percent or less, by weight; and (3) none of the elements listed below exceeds the quantity, by weight, respectively indicated:
For example, specifically included in this scope are vacuum degassed, fully stabilized (commonly referred to as interstitial-free (IF)) steels, high strength low alloy (HSLA) steels, motor lamination steels, Advanced High Strength Steels (AHSS), and Ultra High Strength Steels (UHSS). IF steels are recognized as low carbon steels with micro-alloying levels of elements such as titanium and/or niobium added to stabilize carbon and nitrogen elements. HSLA steels are recognized as steels with micro-alloying levels of elements such as chromium, copper, niobium, titanium, vanadium, and molybdenum. Motor lamination steels contain micro-alloying levels of elements such as silicon and aluminum. AHSS and UHSS are considered high tensile strength and high elongation steels, although AHSS and UHSS are covered whether or not they are high tensile strength or high elongation steels.
Subject merchandise includes cold-rolled steel that has been further processed in a third country, including but not limited to annealing, tempering, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the order if performed in the country of manufacture of the cold-rolled steel.
All products that meet the written physical description, and in which the chemistry quantities do not exceed any one of the noted element levels listed above, are within the scope of this order unless specifically excluded. The following products are outside of and/or specifically excluded from the scope of this order:
• Ball bearing steels;
• Tool steels;
• Silico-manganese steel;
• Grain-oriented electrical steel (GOES) as defined in the final determination of the U.S. Department of Commerce in Grain-Oriented Electrical Steel from Germany, Japan, and Poland.
• Non-Oriented Electrical Steels (NOES), as defined in the antidumping orders issued by the U.S. Department of Commerce in Non-Oriented Electrical Steel from the People's Republic of China, Germany, Japan, the Republic of Korea, Sweden, and Taiwan.
Also excluded from the scope of this order is ultra-tempered automotive steel, which is hardened, tempered, surface polished, and meets the following specifications:
• Thickness: less than or equal to 1.0 mm;
• Width: less than or equal to 330 mm;
• Chemical composition:
• Physical properties:
• Microstructure: Completely free from decarburization. Carbides are spheroidal and fine within 1% to 4% (area percentage) and are undissolved in the uniform tempered martensite;
• Surface roughness: less than or equal to 0.80 to µm Rz;
• Non-metallic inclusion:
○ Sulfide inclusion less than or equal to 0.04% (area percentage);
○ Oxide inclusion less than or equal to 0.05% (area percentage); and
• The mill test certificate must demonstrate that the steel is proprietary grade “PK” and specify the following:
○ The exact tensile strength, which must be greater than or equal to 1600 N/mm2;
• The exact hardness, which must be greater than or equal to 465 Vickers hardness number;
• The exact elongation, which must be between 2.5% and 9.5%; and
• Certified as having residual compressive stress within a range of 100 to 400 N/mm2.
Also excluded from the scope of this order is certain cold-rolled flat-rolled steel meeting the requirements of ASTM A424 Type 1 and having each of the following characteristics:
• Continuous annealed cold-reduced steel in coils with a thickness of between 0.30 mm and 0.36 mm that is in widths either from 875 mm to 940 mm or from 1,168 to 1,232 mm;
• a chemical composition, by weight, of:
○ Not more than 0.004% carbon;
○ not more than 0.010% aluminum;
○ 0.006%-0.010% nitrogen;
○ 0.012%-0.030% boron;
○ 0.010%-0.025% oxygen;
○ less than 0.002% of titanium;
○ less than 0.002% by weight of vanadium;
○ less than 0.002% by weight of niobium;
○ less than 0.002% by weight of antimony;
• a yield strength of from 179.3 MPa to 344.7 MPa;
• a tensile strength of from 303.7 MPa to 413.7 MPa;
• a percent of elongation of from 28% to 46% on a standard ASTM sample with a 5.08 mm gauge length;
• a product shape of flat after annealing, with flat defined as less than or equal to 1 I unit with no coil set as set forth in ASTM A568, Appendix X5 (alternate methods for expressing flatness).
The products subject to this order are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under item numbers: 7209.15.0000, 7209.16.0030, 7209.16.0060, 7209.16.0070, 7209.16.0091, 7209.17.0030, 7209.17.0060, 7209.17.0070, 7209.17.0091, 7209.18.1530, 7209.18.1560, 7209.18.2510, 7209.18.2520, 7209.18.2580, 7209.18.6020, 7209.18.6090, 7209.25.0000, 7209.26.0000, 7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000, 7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500, 7211.23.6030, 7211.23.6060, 7211.23.6090, 7211.29.2030, 7211.29.2090, 7211.29.4500, 7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000, 7212.40.5000, 7225.50.6000, 7225.50.8080, 7225.99.0090, 7226.92.5000, 7226.92.7050, and 7226.92.8050. The products subject to the order may also enter under the following HTSUS numbers: 7210.90.9000, 7212.50.0000, 7215.10.0010, 7215.10.0080, 7215.50.0016, 7215.50.0018, 7215.50.0020, 7215.50.0061, 7215.50.0063, 7215.50.0065, 7215.50.0090, 7215.90.5000, 7217.10.1000, 7217.10.2000, 7217.10.3000, 7217.10.7000, 7217.90.1000, 7217.90.5030, 7217.90.5060, 7217.90.5090, 7225.19.0000, 7226.19.1000, 7226.19.9000, 7226.99.0180, 7228.50.5015, 7228.50.5040, 7228.50.5070, 7228.60.8000, and 7229.90.1000. The HTSUS subheadings above are provided for convenience and U.S. Customs and Border Protection purposes only. The written description of the scope of the order is dispositive.
The products subject to this order are HFC blends. HFC blends covered by the scope are R-404A, a zeotropic mixture consisting of 52 percent 1,1,1 Trifluoroethane, 44 percent Pentafluoroethane, and 4 percent 1,1,1,2-Tetrafluoroethane; R-407A, a zeotropic mixture of 20 percent Difluoromethane, 40 percent Pentafluoroethane, and 40 percent 1,1,1,2-Tetrafluoroethane; R-407C, a zeotropic mixture of 23 percent Difluoromethane, 25 percent Pentafluoroethane, and 52 percent 1,1,1,2-Tetrafluoroethane; R-410A, a zeotropic mixture of 50 percent Difluoromethane and 50 percent Pentafluoroethane; and R-507A, an azeotropic mixture of 50 percent Pentafluoroethane and 50 percent 1,1,1-Trifluoroethane also known as R-507. The foregoing percentages are nominal percentages by weight. Actual percentages of single component refrigerants by weight may vary by plus or minus two percent points from the nominal percentage identified above.
Any blend that includes an HFC component other than R-32, R-125, R-143a, or R-134a is excluded from the scope of this order.
Excluded from this order are blends of refrigerant chemicals that include products other than HFCs, such as blends including chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), hydrocarbons (HCs), or hydrofluoroolefins (HFOs).
Also excluded from this order are patented HFC blends, including, but not limited to, ISCEON® blends, including MO99TM (R-438A), MO79 (R-422A), MO59 (R-417A), MO49PlusTM (R-437A) and MO29TM (R-4 22D), Genetron® PerformaxTM LT (R-407F), Choice® R- 421A, and Choice® R-421B.
HFC blends covered by the scope of this order are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) at subheadings 3824.78.0020 and 3824.78.0050. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.
The merchandise subject to these orders is certain welded carbon quality light-walled steel pipe and tube, of rectangular (including square) cross section, having a wall thickness of less than 4 mm. The term carbon-quality steel includes both carbon steel and alloy steel which contains only small amounts of alloying elements. Specifically, the term carbon-quality includes products in which none of the elements listed below exceeds the quantity by weight respectively indicated: 1.80 percent of manganese, or 2.25 percent of silicon, or 1.00 percent of copper, or 0.50 percent of aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or 0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or 0.15 percent vanadium, or 0.15 percent of zirconium. The description of carbon-quality is intended to identify carbon-quality products within the scope. The welded carbon-quality rectangular pipe and tube subject to these orders is currently classified under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7306.61.50.00 and 7306.61.70.60. While HTSUS subheadings are provided for convenience and Customs purposes, our written description of the scope of these orders is dispositive.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of intent to prepare a PEIS; request for comments.
Pursuant to the National Environmental Policy Act (NEPA) and the Council on Environmental Quality Regulations (CEQ), the National Marine Fisheries Service (NMFS) announces its intention to prepare a Programmatic Environmental Impact Statement (PEIS) to evaluate potential environmental effects associated with continued implementation of the Marine Mammal Health and Stranding Response Program
Comments must be received by June 1, 2018. Scoping meetings are scheduled as follows:
Those wishing to attend either the webinars or in-person meeting must register at
NMFS invites comments from all interested parties regarding the scope and content of a PEIS for changes and updates to the MMHSRP. For additional background and reference, the previous MMHSRP PEIS published in 2009 is available in electronic form via the internet at
Stephen Manley, NMFS, Office of Protected Resources, 301-427-8402,
Pursuant to Title IV of the Marine Mammal Protection Act (MMPA; 16 U.S.C. 1421), NMFS implements the MMHSRP. The mandated goals and purposes of the MMHSRP are to: (1) Facilitate the collection and dissemination of reference data on the health of marine mammals and health trends of marine mammal populations in the wild; (2) correlate the health of marine mammals and marine mammal populations in the wild, with available data on physical, chemical, and biological environmental parameters; and (3) coordinate effective responses to unusual mortality events in accordance with section 404 of the MMPA.
To meet the goals of the MMPA, the MMHSRP carries out several important activities, including: Coordinating the National Marine Mammal Stranding Network, the John H. Prescott Marine Mammal Rescue Assistance Grant Program, the National Marine Mammal Entanglement Response Program, the Marine Mammal Unusual Mortality Event and Emergency Response Programs, the Marine Mammal Biomonitoring Program, the Marine Mammal Tissue Bank, the Marine Mammal Analytical Quality Assurance Program, the MMHSRP Information Management Program, and the facilitation of several regional health assessment programs on wild marine mammals.
Individuals, groups and organizations throughout the country have been responding to stranded marine mammals for decades. After the passage of Title IV of the MMPA in 1992, NMFS began the process of codifying the roles, responsibilities, and activities of participant organizations in the National Marine Mammal Stranding Network through a Stranding Agreement (SA), issued under MMPA section 112(c) (16 U.S.C. 1382) and through the 109(h) authority for Federal, state, and local government employees (16 U.S.C. 1379). By issuing SAs under section 112(c), NMFS allows stranding network response organizations, acting as agents of the government, an exemption to the prohibition on takes of marine mammals established under the MMPA. A standardized national template for SAs was developed, including sections that may be customized by each region in order to maintain flexibility. NMFS also developed a list of minimum criteria for organizations wishing to obtain a SA and participate in the stranding network. NMFS proposes to modify both the template and the list of minimum criteria to become a member of the stranding network. Additionally, NMFS has national protocols to help standardize the stranding network across the country while maintaining regional flexibility where appropriate. These protocols, as well as the SAs and minimum criteria, were analyzed in the initial PEIS and were issued in 2009 as one consolidated manual, titled “
Stranded marine mammals undergoing rehabilitation and the facilities conducting rehabilitation activities are not subject to inspection or review by the Animal and Plant Health Inspection Service (APHIS) under the United States Department of Agriculture, if they are not also a public display facility (separate from their rehabilitation activities) or a research facility. These facilities are therefore not subject to APHIS minimum requirements for facilities, husbandry, or veterinary standards. Previously, NMFS developed minimum standards for marine mammal rehabilitation facilities that are required of all facilities operating under a SA with NMFS. Additionally, section 402(a) (16 U.S.C. 1421a) of the MMPA charges NMFS with providing guidance for determining at what point a rehabilitated marine mammal is releasable to the wild. Standards for release of rehabilitated marine mammals were developed by NMFS and are part of the Policies and Practices document. NMFS proposes to review the rehabilitation guidelines, as well as the criteria for release of rehabilitated
In addition, the MMHSRP maintains a permit from the NMFS Office of Protected Resources Permits and Conservation, issued under the MMPA (16 U.S.C. 1361
NEPA, CEQ Regulations (40 CFR 1500.4(i), 1502.4 and 1502.20) and NOAA Administrative Order (NAO) 216-6A require all proposals for major actions to be reviewed with respect to environmental consequences on the human environment and encourage the use of programmatic NEPA documents and tiering to streamline decision making in a process that progresses from programmatic analyses to site-specific reviews. NMFS determined a programmatic approach is appropriate because multiple activities are conducted in support of the MMHSRP and activities occur nationally, over large geographical areas. Therefore, the analysis in the PEIS will support NMFS planning-level decisions associated with oversight and implementation of the MMHRSP and establish the framework and parameters for subsequent analyses based on the programmatic review. In addition, NMFS will rely on this PEIS for permitted activities as well as the basis for tiering in site-specific NEPA review.
NMFS is proposing to continue coordinating and implementing the MMHSRP. Using a programmatic approach, NMFS will identify and prepare a qualitative analysis of environmental impacts covering a range of activities conducted in support of the MMHSRP program, including the issuance of revised Policies and Best Practices, revised protocols and procedures, and a new MMPA/ESA permit for this program. Resource areas to be addressed in this analysis include, but are not limited to, biological resources (notably marine mammals, threatened and endangered species, fish and other wildlife species and their habitat), sediments and water quality, historic and cultural resources, socioeconomics and tourism, and public health and safety. This PEIS will supersede the initial PEIS published in 2009 and will assess the potential environmental effects of marine mammal health and stranding response under a range of alternatives characterized by different methods, mitigation measures, and level of response. For all potentially significant impacts, the proposed PEIS will identify avoidance, minimization and mitigation measures to reduce these impacts, where feasible, to a level below significance.
The scoping process will be used to identify public concerns along with national and local issues to be addressed in the PEIS. Federal agencies, state agencies, local agencies, Native American Indian Tribes and Nations, the public, and interested persons are encouraged to identify specific issues or topics of environmental concern that NMFS should consider. Public participation is invited by providing written comments to NMFS and/or attending the scoping meetings and webinars.
The in-person meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Stephen Manley (see
National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
Written comments must be submitted on or before June 1, 2018.
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW, Washington, DC 20230 (or via the internet at
Requests for additional information or copies of the information collection instrument and instructions should be directed to Dr. Danielle Schwarzmann 240-533-0706 or
This request is for a new collection of information. NOAA's Office of National Marine Sanctuaries (ONMS) is conducting research to measure the public's opinions about sanctuary visitor centers, exhibits, and kiosks. Exhibits and kiosks covered under the survey can be permanent or traveling/temporary. The survey will be administered annually both within an ONMS visitor center as well as at partner venues that host an exhibit or kiosk on a national marine sanctuary or marine national monument. The survey will cover visitor centers, exhibits, and kiosks system-wide across all the national marine sanctuaries and marine national monuments managed or co-managed by NOAA's ONMS.
The visitor survey will be conducted to obtain an objective analysis of visitor experiences within a sanctuary visitor center or at a partner venue that includes an exhibit or kiosk with information on a national marine sanctuary or marine national monument. Information will be obtained on visitor satisfaction with the overall exhibits or kiosks, graphics, multi-media products, interactives, along with the overall feelings about the facilities and services offered at the centers/venues. The survey will acquire data on the effectiveness of sanctuary/monument messaging, awareness about and use of sanctuary/monument resources, as well as additional recreational and/or educational opportunities available to the public. Lastly, the survey will include questions about visitor demographics.
The information will aid NOAA's Office of National Marine Sanctuaries budget allocation and prioritization, strategic planning, and management
The surveys will be conducted in person or through web applications at kiosks.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
The Department of Commerce will submit to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
Section 6(b) of Public Law 92-205 requires that persons who engage in weather modification activities (
This information collection request may be viewed at
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
The Department of Commerce will submit to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act.
This information collection request may be viewed at
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
Bureau of Consumer Financial Protection.
Notice and request for information.
The Bureau of Consumer Financial Protection (Bureau) is seeking comments and information from interested parties to assist the Bureau in assessing the overall effectiveness and accessibility of its guidance materials and activities (including implementation support) to members of the general public, including regulated entities. The Bureau is also considering whether it would be appropriate to make changes, consistent with law, to the formats, processes, and delivery methods for providing such guidance.
Comments must be received by July 2, 2018.
You may submit responsive information and other comments, identified by Docket No. CFPB-2018-0013, by any of the following methods:
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•
•
•
All submissions in response to this request for information, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Submissions will not be edited to remove any identifying or contact information.
Kristin Switzer, Regulatory Implementation Program Manager; Angela Fox and Eliott C. Ponte, Attorneys (Regulatory Guidance and Implementation); and Brian Shearer, Counsel, at 202-435-7700. If you require this document in an alternative electronic format, please contact
The Dodd-Frank Act transferred to the Bureau rulemaking authority that previously had been exercised by seven other Federal agencies. Those agencies used a variety of methods for providing guidance to industry on interpretive questions arising under the statutes and regulations they administered. Such guidance is “widely understood to be an essential instrument of [F]ederal administration”
For example, the Board of Governors of the Federal Reserve System (“Board”) primarily relied upon what it denominated as “Official Staff Interpretations,” which were published in the Code of Federal Regulations (CFR) as an appendix to the Board's rules, typically following a notice-and-comment process.
As described further below, the Bureau, since its inception, has provided guidance through a variety of means, and its guidance and implementation support functions are continuing to evolve in response to feedback from industry and other stakeholders. This Request for Information (RFI) seeks input on a number of aspects of the Bureau's guidance activities to date and suggestions for future improvements.
Unless specified otherwise by statute, agency rulemaking activities and many guidance activities are governed by the Administrative Procedure Act (APA). 5 U.S.C. 551
The APA also designates “interpretive rules,” which advise the public of an agency's construction of the statutes and rules which it administers, and “general statements of policy,” which articulate the agency's prospective plans to exercise discretionary authorities.
Interpretive rules and general statements of policy are frequently referred to as “guidance.”
The type of guidance issued also can have legal and practical significance under certain Federal consumer financial laws that provide industry a safe harbor for good faith reliance on legislative rules and certain interpretations issued by the Bureau or duly authorized staff.
Consistent with the practice of many Federal agencies, including its predecessor agencies, the Bureau has released an array of guidance. These documents and activities have included interpretive rules,
Like other agencies, the Bureau faces tradeoffs that it must consider when issuing guidance. Where the Bureau does not use notice-and-comment procedures, it can act more quickly to issue or update guidance materials to address industry interpretive questions and respond to developments in the marketplace. However, the more expedited the process is in developing guidance, the more likely that an agency may find a need over time to revise or adjust its initial guidance statements and address related legal, factual, and policy issues, even though revisiting such materials can impose additional costs on both the agency and regulated entities. Materials issued through less formal processes also may, depending on the circumstances, receive less deference from courts in litigation.
The Bureau is using this request for information (RFI) to seek public input regarding the overall effectiveness and accessibility of the Bureau's guidance as well as changes that it may make, consistent with applicable law, to the formats, processes, and delivery methods for providing such guidance. Additionally, the Bureau is seeking comment on potential new forms of guidance that could support regulatory implementation and compliance, as well as on the disclaimers used for its non-rule guidance.
In this RFI, the Bureau is not seeking comments on the following topics, as these have been addressed or will be addressed in other Bureau RFIs: (1) Educational materials on its regulations developed for consumers or in response to consumer inquiries; (2) the substance of any particular proposed or final rule (for both rules the Bureau adopted and those it inherited), including a proposed or final rule's Official Interpretations that are published with the regulations; or (3) the guidance provided in the Bureau's Supervision and Examination Manuals or Supervisory Highlights.
The Bureau encourages comments from all interested members of the public. The Bureau anticipates that the responding public may include entities subject to Bureau rules, trade associations and professional services organizations that represent these entities, individual consumers, consumer advocates, regulators, and researchers or members of academia.
To allow the Bureau to evaluate suggestions more effectively, the Bureau requests that, where possible, comments include:
• Specific discussions of the positive and negative aspects of the Bureau's guidance materials and activities (including implementation support).
• Specific suggestions regarding any potential updates or modifications to the Bureau's approach to providing guidance (including implementation support), and including, in as much detail as possible, supporting data or other information on impacts and costs, or information concerning alignment with the processes of other agencies.
• Specific identification of any aspects of the Bureau's approach to guidance (including implementation support) provided by the Bureau that should not be modified, and including, in as much detail as possible, supporting data or other information on impacts and costs, or information concerning alignment with the processes of other agencies.
The following sections list areas of interest on which commenters may want to focus input. This non-exhaustive list is meant to assist in the formulation of comments and is not intended to restrict what may be addressed by the public. Commenters may comment on matters that are related to the Bureau's guidance (including implementation support), but do not appear in the list below. The Bureau requests that, in addressing these questions, commenters identify with specificity the Bureau guidance material or activity, format, process, or delivery platform at issue, providing specific examples where appropriate. In discussing Bureau guidance provided to date, the Bureau also requests that commenters provide examples and supporting information where possible, as well as relevant information about the frequency with which particular types of guidance have been used within an institution, by which parties, and in what ways. Commenters should feel free to comment on some or all of the questions below, but are encouraged to indicate in which area their comments are focused.
From all of the suggestions, the Bureau requests that commenters offer their highest priorities, where possible, along with an explanation of how or why certain suggestions have been prioritized. Commenters are asked to single out their top priority where possible. Suggestions will be most helpful if they focus on revisions that the Bureau could implement without changes in the law, consistent with the Bureau's authorities and in light of tradeoffs under the APA framework described above.
The Bureau's Regulatory Inquiries Function assists individual inquirers
Although the assistance provided through the Regulatory Inquiries Function is limited and individualized, the Bureau believes that the assistance is valuable to those receiving it. In addition, the inquiries received through this channel provide an important information source, which helps the Bureau prioritize provision of the various other types of guidance described in this RFI by providing a window (supplementing the Bureau's general market monitoring and outreach activities) into the implementation and compliance challenges faced by regulated entities. Thus, when the Bureau receives multiple individual inquiries about the same topic, as described below, the Bureau often prioritizes that topic for webinars and various forms of written guidance, potentially culminating in revisions to the Official Interpretations to the particular rule after a notice-and-comment process.
Generally, individual inquiries are submitted to the Bureau through a phone message or a form accessed on the Bureau's website. However, inquiries related specifically to the Home Mortgage Disclosure Act (HMDA) and its implementing Regulation C are also submitted through a separate channel—the Bureau's HMDA Help function—via phone, email, or a form accessed on a specific Bureau website dedicated to HMDA operational support.
Historically, responses to regulatory inquiries have been provided orally via phone conversations with Bureau staff. However, the Bureau has been providing an increasing number of responses to regulatory inquiries through emails, most extensively with the responses provided through its HMDA Help function.
The Bureau is seeking feedback on all aspects of its Regulatory Inquiries Function, including the following areas of interest:
1. The preferred vehicle(s) for submitting inquiries
2. Preferences regarding the responses to regulatory inquiries; the format and delivery method for the responses provided (
3. The relative value of responses to regulatory inquiries. In particular, the Bureau is interested in the tradeoffs between providing quick guidance orally to individuals through the Regulatory Inquiries Function and providing written guidance, which is generic and takes more time, but generally is more broadly accessible.
4. Whether the Bureau should, as a matter of practice, publish written responses to regulatory inquiries and, if so, consistent with law, the appropriate vehicle or platform for such publications, the desired frequency for publishing such responses, and the appropriate disclaimers to accompany such publications.
5. Additional ways that the Bureau can improve the Regulatory Inquiries Function, including improvements to the process for submitting inquiries, the process for receiving responses, the substance of responses, or the timing of responses.
The Bureau creates and releases on its website several categories of regulatory implementation and compliance aids, including: (1) Compliance guides; (2) rule summaries and other quick reference materials; and (3) webinars. These regulatory implementation and compliance aids are examples of implementation support materials categorized as non-rule guidance. These materials provide relatively brief, informal summaries of Federal consumer financial laws and regulations, generally focusing on summarizing statutes and interpretations and positions previously announced in Bureau legislative or non-legislative rules using language and formats that may be particularly useful to compliance professionals. As noted above, both the content and format of regulatory implementation and compliance aids are informed by what the Bureau learns as it administers its Regulatory Inquiries Function and general market monitoring and outreach activities.
Compliance guides are plain language summaries of a Bureau rule and, like other examples of non-rule guidance in this section, are not intended to be interpretations of that rule or general statements of policy. Compliance guides include Small Entity Compliance Guides as well as instructional guides for disclosure forms. The Bureau is statutorily required to provide Small Entity Compliance Guides for rules it issues that meet certain criteria, although it also provides them for certain rules for which they are not required.
Quick reference materials are additional plain language summaries of a rule or portions of a rule, but are shorter than compliance guides. These include, but are not limited to, executive summaries, summaries of changes, factsheets, flow charts, decision trees, and summary tables. Executive summaries are posted at the same time that the underlying rule is released, and other quick reference materials are posted as they are completed.
Webinars are recorded presentations in which the Bureau (either
The Bureau is seeking feedback on all aspects of its regulatory implementation and compliance aids, including the following areas of interest:
6. The utility of the Bureau's compliance guides and quick reference materials as well as potential areas for improvement, including:
a. The scope of topics addressed and the format in which they are presented;
b. The ease of navigation to materials on the Bureau's website and to sections within the compliance guides or quick reference materials;
c. The effectiveness of the Bureau's use of the plain language writing style in the Small Entity Compliance Guides and quick reference materials to help make the rules more easily understandable; and
d. The usefulness of the Bureau providing Small Entity Compliance Guides and quick reference materials when not legally required to do so (particularly for entities that do not meet the Small Business Administration's definition of “small business.”).
7. The utility of the Bureau's webinars as well as potential areas for improvement, including issues related to the website utilized for viewing; the format of the webinar guidance (
8. For the identified types of regulatory implementation and compliance aids in questions six and seven, feedback on the delivery methods (
Many regulations issued under the Bureau's rulemaking authority contain Official Interpretations within the supplement or appendix to the regulatory text in the CFR. The Bureau, as a matter of practice, has published Official Interpretations in the
Although the Bureau has generally used Official Interpretations as a cumulative repository of the Bureau's interpretations issued over time, the Bureau also occasionally has issued standalone interpretive rules without notice and comment when rapid issuance of interpretive clarification will assist industry with regulatory implementation or compliance.
Consistent with applicable law, the Bureau is seeking feedback on all aspects of the process by which it issues interpretive rules and Official Interpretations, including the following areas of interest:
9. The efficiency and effectiveness of providing guidance through the Bureau's Official Interpretations.
10. Which types of standalone interpretive rules are most efficient and effective and, if any, with what frequency and through what processes the Bureau should amend the Official Interpretations to incorporate standalone interpretive guidance into the CFR.
11. Whether there are circumstances in which the Bureau should use the notice-and-comment process (even though not legally required) for standalone interpretive rules.
The Bureau's Division of Supervision, Enforcement, and Fair Lending (SEFL) issues a number of documents meant to provide industry and the public with insight into the Bureau's enforcement and supervision priorities, perspectives regarding compliance with Federal consumer financial law, and supervisory expectations. For example, SEFL guidance materials have helped to identify compliance risks, made recommendations to strengthen compliance management systems, and provided options for reducing compliance risks. Those materials include, for example, compliance bulletins, policy statements, and statements on supervisory practices. They generally are examples of policy
The Bureau is seeking feedback on all aspects of these SEFL guidance materials, including but not limited to:
12. The timing, frequency, scope, and delivery method of SEFL guidance materials.
13. The benefits or drawbacks associated with the Bureau's use of each particular type of SEFL guidance vehicle.
14. Other feedback or suggestions related to SEFL guidance materials.
The Bureau has received feedback from industry and other external stakeholders encouraging the use of forms of written guidance that have been used frequently by some other agencies, such as Frequently Asked Questions (FAQs) and advisory opinions. In response to this feedback, the Bureau has begun to explore new and enhanced methods for delivering direct, easy-to-understand written guidance that can be delivered via a public-facing platform on a shorter timeline than might be required for interpretive rules.
For example, the Bureau recently published on its website FAQs on bankruptcy issues related to mortgage servicing,
The Bureau has also begun exploring the use of advisory opinions and similar types of focused guidance to assist industry in better understanding its legal and regulatory obligations.
The Bureau is seeking feedback on potential new methods or channels for providing guidance, including but not limited to:
15. The utility of FAQs. Specifically, comment is sought on the types of questions that are appropriately dealt with through FAQs rather than another instrument, and the mechanisms that the Bureau should use to identify and prioritize issues and topics that should be addressed using FAQs.
16. The potential utility of establishing an advisory opinion program that would provide interpretations, in addition to or instead of an FAQ program, including the particular scope and benefits of advisory opinions that would be distinct from generalized FAQs and the types of questions or issues that could or could not be appropriately dealt with by advisory opinions.
17. The potential benefits and costs of memorializing over time any interpretations reflected in advisory opinions or other standalone guidance documents in the Official Interpretations to the underlying regulations, after notice and comment.
18. The tradeoffs between issuing FAQs or advisory opinions quickly and issuing written guidance after notice and comment. With respect to FAQs or advisory opinions, commenters should include, where possible, suggestions on how best to mitigate risks to stakeholders (
19. Other approaches, methods, or practices not currently employed by the Bureau that would enhance external stakeholders' ability to comprehend, implement, or comply with statutes and regulations subject to the Bureau's purview.
The Bureau uses disclaimers on non-rule guidance materials to, among other things, describe the purpose of the material, note the legal limitations of the guidance in light of the APA and underlying Federal consumer financial laws, and emphasize that the rule and its Official Interpretations are the definitive sources regarding a rule's requirements in the event of a perceived conflict. In other words, these disclaimers are often used to clarify when guidance materials are non-rule materials that are intended only to aid understanding and implementation.
The Bureau has received feedback from industry indicating that the Bureau's use of disclaimers on its materials causes confusion as to the utility and reliability of the guidance and otherwise diminishes the usefulness of the guidance provided. The Bureau has also received feedback urging the Bureau to modify existing disclaimers.
Bureau disclaimers are printed on, for example, rule summaries, compliance guides, quick reference materials, and other compliance aids. These disclaimers are given orally to industry stakeholders when Bureau staff present in webinars or at industry conferences or respond to questions through the Regulatory Inquiries Function. The particular language used in disclaimers is tailored to the type of guidance being provided. For example, the disclaimers provided within the Bureau's regulatory implementation and compliance aids generally indicate that the explanation or summary of a regulatory requirement does not apply to all possible circumstances and is not legal advice. Oral disclaimers given through the Bureau's Regulatory Inquiries Function generally explain that Bureau staff only provide informal responses to regulatory inquiries and that the responses are not intended to serve as legal advice or considered to be an official interpretation of a regulation.
The Bureau has developed different disclaimers for different types of materials as its guidance function has evolved over time, and stakeholders have indicated that some historical formulations are particularly likely to cause confusion. For example, industry stakeholders point to language stating that webinar materials do not bind the Bureau, or create any rights, benefits, or defenses that are enforceable by other parties, as raising questions about whether material presented can be relied upon. They question whether the Bureau would change its interpretation without notice or take action against a party acting in conformity with an interpretation stated in a webinar.
The Bureau is seeking feedback on all aspects of its disclaimers, including the following areas of interest:
20. Taking into consideration the Bureau's purposes for providing guidance as well as APA requirements discussed above, whether disclaimers are transparent, understandable, and appropriate to the type of guidance being provided.
21. Desired changes to the Bureau's disclaimer language or approach to disclaimers generally, and whether other Federal agencies have adopted disclaimer language or approaches to disclaimers that would be useful to the Bureau.
22. The variety of Bureau disclaimers currently provided, and whether the Bureau should adopt a single, more generic disclaimer to be used in most instances.
23. Other feedback or suggestions related to the Bureau's disclaimers.
12 U.S.C. 5511(c).
Defense Security Cooperation Agency, Department of Defense.
Arms sales notice.
The Department of Defense is publishing the unclassified text of an arms sales notification.
Pamela Young, (703) 697-9107,
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 17-52 with attached Policy Justification.
(i)
(ii)
(iii)
Continuation of Maintenance Support Services (MSS) contract that supports the Royal Saudi Land Forces Aviation Command's (RSLFAC) fleet of AH-64D/E, UH-60L, Schweizer 333 and Bell 406CS helicopters. The MSS contract services includes the management and installation of engineering change proposals and modification work orders; Repair and Return (R&R) management services and component repairs; aircraft simulator logistics, maintenance and technical support; training; and maintenance management support for the RSLFAC Headquarters staff; and other related elements of logistics and program support.
(iv)
(v)
(vi)
(vii)
(viii)
* As defined in Section 47(6) of the Arms Export Control Act.
The Kingdom of Saudi Arabia has requested the continuation of the Maintenance Support Services (MSS) contract that supports the Royal Saudi Land Forces Aviation Command's (RSLFAC) fleet of AH-64D/E, UH-60L, Schweizer 333 and Bell 406CS helicopters. The MSS contract services includes management and installation of engineering change proposals and modification work orders; Repair and Return (R&R) management services and component repairs; aircraft simulator logistics, maintenance and technical support; training; and maintenance management support for the RSLFAC Headquarters staff; and other related elements of logistics and program support. The estimated total case value is $106.8 million.
This proposed sale will support U.S. foreign policy and national security objectives by helping to improve the security of a friendly country which has been, and continues to be, an important force for political stability and economic growth in the Middle East. This potential sale is a continuation of current support. Saudi Arabia will have no difficulty absorbing this equipment and support into its armed forces.
The continuation of MSS services will aid in the maintenance support of Saudi Arabia's rotary wing aircraft fleet, engines, avionics, weapons, and missile components.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be DynCorps International, Mclean, VA. There are no known offset agreements in connection with this potential sale.
Implementation of this proposed sale will require the assignment of one (1) U.S. Government and up to three hundred twenty (320) contractor representatives to travel to Saudi Arabia for a period of two (2) years.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
Defense Security Cooperation Agency, Department of Defense.
Arms sales notice.
The Department of Defense is publishing the unclassified text of an arms sales notification.
Pamela Young, (703) 697-9107,
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 17-60 with attached Policy Justification.
(i)
(ii)
(iii)
A new Foreign Military Sales Order (FMSO) II to provide funds for blanket order requisitions under a Cooperative Logistics Supply Support Agreement (CLSSA) for common spares/repair parts to support Saudi Arabia's fleet of M1A2 Abrams tanks, M2 Bradley Fighting Vehicles, High Mobility Multipurpose Wheeled Vehicles (HMMWVs), Light Armored Vehicles (LAVs), M198 Towed Howitzers, additional support, and other related elements of logistics and program support.
(iv)
(v)
(vi)
(vii)
(viii)
*As defined in Section 47(6) of the Arms Export Control Act.
The Government of the Kingdom of Saudi Arabia has requested a possible purchase of a new Foreign Military Sales Order (FMSO) II to provide funds for blanket order requisitions under a Cooperative Logistics Supply Support Agreement (CLSSA) for common spares/repair parts to support Saudi Arabia's fleet of M1A2 Abrams tanks, M2 Bradley Fighting Vehicles, High Mobility Multipurpose Wheeled Vehicles (HMMWVs), Light Armored Vehicles (LAVs), M198 Towed Howitzers, additional support, and other related elements of logistics and program support. The total estimated program cost is $300 million.
This proposed sale will contribute to U.S. foreign policy and national security objectives by helping to improve the security of a friendly country which has been, and continues to be, an important force for political stability and economic growth in the Middle East. This potential sale is consistent with U.S. initiatives to provide key allies in the region with modern systems that will enhance interoperability with U.S. forces and increase stability.
The primary objective of this proposed sale is to allow the Royal Saudi Land Forces Ordnance Corps to continue to purchase needed spare/repair parts to maintain Saudi Arabia's fleet of M1A2 Abrams Tanks, M2 Bradley Fighting Vehicles, High Mobility Multipurpose Wheeled Vehicles (HMMWVs), Light Armored Vehicles (LAVs), M198 Towed Howitzers, additional support vehicles and other related logistics support as part of the Cooperative Logistics Supply Support Arrangement (CLSSA) program. Saudi Arabia will have no difficulty absorbing this equipment and support into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
There are no principal contractors involved with this potential sale. There are no known offset agreements proposed in connection with this potential sale.
Implementation of this proposed sale will not require the permanent assignment of any U.S. Government or contractor representatives to Saudi Arabia.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
General Counsel of the Department of Defense.
Notice of Federal Advisory Committee meeting.
The Department of Defense (DoD) is publishing this notice to announce that the following Federal Advisory Committee meeting of the Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces will take place. This meeting will be open to the public.
Open to the public, Friday, April 20, 2018 from 9:00 a.m. to 4:00 p.m.
One Liberty Center, 875 N Randolph Street, Suite 1432, Arlington, Virginia 22203.
Dwight Sullivan, 703-695-1055 (Voice), [email protected] (Email). Mailing address is DACIPAD, One Liberty Center, 875 N Randolph Street, Suite 150, Arlington, Virginia 22203. Website:
This meeting is being held under the provisions of the Federal Advisory Committee Act (FACA) of 1972 (5 U.S.C., Appendix, as amended), the Government in the Sunshine Act of 1976 (5 U.S.C. 552b, as amended), and 41 CFR 102-3.140 and 102-3.150.
Defense Security Cooperation Agency, Department of Defense.
Arms sales notice.
The Department of Defense is publishing the unclassified text of an arms sales notification.
Pamela Young, (703) 697-9107,
This 36(b)(1) arms sales notification is published to fulfill the requirements of section 155 of Public Law 104-164 dated July 21, 1996. The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 17-62 with attached Policy Justification and Sensitivity of Technology.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
* As defined in Section 47(6) of the Arms Export Control Act.
The Government of the Kingdom of Saudi Arabia has requested to buy up to six thousand six hundred (6,600) TOW 2B missiles (BGM-71F-Series) and ninety-six (96) TOW 2B (BGM-71F-Series) fly-to-buy lot validation missiles. Also included is government furnished equipment; technical manuals and publications; essential spares and repair parts; consumables; live fire exercise and ammunition; tools and test equipment; training; transportation; U.S. Government technical support and logistic support; contractor technical support; repair and return support; quality assurance teams; in-country Field Service Representative (FSR); other associated equipment and services in support of TOW 2B missiles; and other related elements of logistics and program support. The total estimated program cost is $670 million.
This proposed sale will support U.S. foreign policy and national security objectives by improving the security of a friendly country which has been, and continues to be, an important force for political stability and economic growth in the Middle East. This potential sale is consistent with U.S. initiatives to provide key partners in the region with modern systems that will enhance interoperability with U.S. forces and increase stability.
The proposed sale of TOW 2B missiles and technical support will advance the Kingdom of Saudi Arabia's efforts to develop an integrated ground defense capability. A strong national defense and dedicated military force will assist Saudi Arabia to sustain itself in its efforts to maintain stability. Saudi Arabia will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor is Raytheon Missile Systems, Tucson, AZ. There are no known offset agreements proposed in connection with this potential sale.
Implementation of this proposed sale will not require the permanent assignment of any U.S. Government or contractor representatives to Saudi Arabia. There will be no more than two contractor personnel in the Kingdom of Saudi Arabia at any one time and all efforts will take less than two weeks in total.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The TOW 2B RF Missile is a fly-over-shoot-down missile designed to defeat armored vehicles. These missiles are fired from a variety of TOW launchers in the U.S. Army, USMC and FMS customer forces. The TOW 2B RF can be launched from the same launcher platforms as the existing wire-guided TOW 2B missiles without modification to the launcher. The TOW 2B missile (both wire & RF) contains two tracker beacons (xenon and thermal) for the launcher to track and guide the missile in flight. Guidance commands from the launcher are provided to the missile by an RF link contained within the missile case. The hardware, software and technical publications provided with the sale are unclassified; however, the system itself contains sensitive technology that instructs the system on how to operate in the presence of countermeasures.
2. If a technologically advanced adversary obtains knowledge of the specific hardware and software elements, the information could be used to develop countermeasures or equivalent systems that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
3. A determination has been made that Saudi Arabia can provide substantially the same degree of protection for the sensitive technology being released as the U.S. Government. This sale is necessary in furtherance of the U.S. foreign policy and national security objectives outlined in the Policy Justification.
4. All defense articles and services listed in this transmittal are authorized for release and export to the Kingdom of Saudi Arabia.
Office of the Secretary (OS), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing a revision of an existing information collection.
Interested persons are invited to submit comments on or before June 1, 2018.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Alfreida Pettiford, 202-245-6110.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection
The 524B is being revised to collect additional information to sufficiently monitor states on data security requirements for grant programs.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing an extension of an existing information collection.
Interested persons are invited to submit comments on or before June 1, 2018.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Ian Foss, 202-377-3681.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing an extension of an existing information collection.
Interested persons are invited to submit comments on or before June 1, 2018.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Ian Foss, 202-377-3681.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
In notice document 2018-06278 beginning on page 13266 in the issue of Wednesday, March 28, 2018, make the following correction:
On page 13266 the table heading “LTCH QRP QUALITY MEASURES UNDER CONSIDERATION FOR FUTURE YEARS” should not have appeared.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995, ED is proposing an extension of an existing information collection.
Interested persons are invited to submit comments on or before June 1, 2018.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Ian Foss, 202-377-3681.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in
Office of Postsecondary Education (OPE), Department of Education (ED).
Notice; reopening of comment period.
On March 26, 2018, the U.S. Department of Education published an emergency comment period notice in the
The closing date for the comment period has been reopened and extended to April 5, 2018.
The Acting Director, Information Collection Clearance Division, Office of the Chief Privacy Officer, Office of Management, hereby issues a notice as required by the Paperwork Reduction Act of 1995.
This is a supplemental notice in the above-referenced proceeding of Delta Solar I, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is April 16, 2018.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
On July 14, 2017 and supplemented on November 2, 2017, Gerald Ohs and Glenda Ohs co-licensees (transferors) filed an application for the partial transfer of license for the North Willow Creek Project No. 7804, from Gerald and Glenda Ohs as co-licensees (transferors) to Gerald Ohs as sole licensee (transferee). The project is located on North Willow Creek in Madison County, Montana.
The applicants seek Commission approval to partially transfer the license for the North Willow Creek Project from the transferors as co-licensees to Gerald Ohs as sole-licensee.
Deadline for filing comments, motions to intervene, and protests: 30 days from the date that the Commission issues this notice. The Commission strongly encourages electronic filing. Please file comments, motions to intervene, and protests using the Commission's eFiling system at
Take notice that on March 16, 2018, pursuant to Rule 207(a)(2) of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.207(a)(2) (2017), CCPS Transportation, LLC, filed a petition for a declaratory order seeking approval of the proposed capacity allocation and rate structure for a planned re-contracting of a portion of the capacity of the Spearhead Pipeline, all as more fully explained in the petition.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Petitioner.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
This is a supplemental notice in the above-referenced proceeding of Delta Solar II, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is April 16, 2018.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
This is a supplemental notice in the above-referenced proceeding of Trishe Wind Ohio, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is April 11, 2018.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following public utility holding company filings:
Take notice that the Commission received the following electric reliability filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
On February 28, 2018, RAMM Power Group LLC, filed an application for a preliminary permit, pursuant to section 4(f) of the Federal Power Act (FPA), proposing to study the feasibility of the Sacaton Energy Storage Project (Sacaton Project or project), a closed-loop pumped storage project to be located in Pinal County, Arizona. The sole purpose of a preliminary permit, if issued, is to grant the permit holder priority to file a license application during the permit term. A preliminary permit does not authorize the permit holder to perform any land-disturbing activities or otherwise enter upon lands or waters owned by others without the owners' express permission.
The proposed project would consist of the following new facilities: (1) A 28-foot-high dam with a total crest length of 6,000 feet, creating a 1,300 acre-foot upper reservoir with a maximum surface elevation of 1,456 feet mean sea level (MSL); (2) a 200-foot-long, 12-foot-diameter steel penstock extending from the upper reservoir dam to the powerhouse; (3) an underground powerhouse with two 75-megawatt pump/turbine units; (4) a 2,200-foot-long, 14-foot-diameter low pressure draft tube extending from the powerhouse to the lower reservoir; (5) a 1,500 acre-foot lower reservoir with a maximum reservoir surface elevation of 455 feet MSL to be located within an existing pit mine (no dam needed); (6) a new 200-Megavolt-ampere substation located adjacent to the upper reservoir; (7) a 2,500-foot-long, 137-kilovolt (kV) transmission line extending from the project's substation to existing 137-kV transmission lines owned by Arizona Public Service; and (8) appurtenant facilities. The estimated average annual generation of the Sacaton Project would be 400,000 megawatt-hours
Deadline for filing comments, motions to intervene, competing applications (without notices of intent), or notices of intent to file competing applications: 60 Days from the issuance of this notice. Competing applications and notices of intent must meet the requirements of 18 CFR 4.36.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, notices of intent, and competing applications using the Commission's eFiling system at
More information about this project, including a copy of the application, can be viewed or printed on the “eLibrary” link of Commission's website at
This is a supplemental notice in the above-referenced proceeding of Imperial
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is April 16, 2018.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
This is a supplemental notice in the above-referenced proceeding of Walleye Energy, LLC`s application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is April 11, 2018.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Comments/Protests Due: 5 p.m. ET 4/6/18.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and § 385.214) on or before 5:00 p.m. Eastern time on the specified date(s). Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
The Federal Energy Regulatory Commission (Commission) hereby gives notice that members of the Commission's staff may attend the following meetings related to the transmission planning activities of the New York Independent System Operator, Inc. (NYISO):
The above-referenced meeting will be via web conference and teleconference.
The above-referenced meeting is open to stakeholders.
Further information may be found at:
The above-referenced meeting will be via web conference and teleconference.
The above-referenced meeting is open to stakeholders.
Further information may be found at:
The above-referenced meeting will be via web conference and teleconference.
The above-referenced meeting is open to stakeholders.
Further information may be found at:
The above-referenced meeting will be via web conference and teleconference.
The above-referenced meeting is open to stakeholders.
Further information may be found at:
The above-referenced meeting will be via web conference and teleconference.
The above-referenced meeting is open to stakeholders.
Further information may be found at:
The discussions at the meetings described above may address matters at issue in the following proceedings:
For more information, contact James Eason, Office of Energy Market Regulation, Federal Energy Regulatory Commission at (202) 502-8622 or
Take notice that on March 23, 2018, pursuant to Rule 204 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.204, Green River Devco LP filed a petition for temporary waiver of the tariff filing and reporting requirements of sections 6 and 20 of the Interstate Commerce Act and parts 341 and 357 of the Commission's regulations with respect to a crude petroleum gathering system it owns in Weld County, Colorado, as more fully explained in the petition.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Petitioner.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
This is a supplemental notice in the above-referenced proceeding of NRG Cottonwood Tenant LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is April 12, 2018.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that on March 14, 2018, Texas Gas Transmission, LLC (Texas Gas), 9 Greenway Plaza, Suite 2800, Houston, Texas 77046, filed in Docket No. CP18-116-000, an application pursuant to section 7(b) of the Natural Gas Act (NGA) requesting to abandon approximately 11.0 miles of its 16-inch-diameter North Lake Pagie pipeline and approximately 5.7 miles of its 16-inch-diameter Bay Junop-Bay Round pipeline, including all appurtenant and auxiliary facilities. The facilities are located approximately 22.1 miles southwest of Houma, Louisiana, extending offshore in Terrebonne Parish, Louisiana, as part of Texas Gas' Southeast Supply Lateral, all as more fully set forth in the application which is on file with the Commission and open to public inspection. The filing is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's website web at
Any questions concerning this application may be directed to Juan Eligio Jr, Supervisor of Regulatory Affairs, Texas Gas Transmission, LLC, 9 Greenway Plaza, Suite 2800, Houston, Texas 77046, by telephone at (713) 479-3480, by fax at (713) 479-1818, or by email at
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice the Commission staff will either: Complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding; or issue a Notice of Schedule for Environmental Review. If a Notice of Schedule for Environmental Review is issued, it will indicate, among other milestones, the anticipated date for the Commission staff's issuance of the EA for this proposal. The filing of the EA in the Commission's public record for this proceeding or the issuance of a Notice of Schedule for Environmental Review will serve to notify federal and state agencies of the timing for the completion of all necessary reviews, and the subsequent need to complete all federal authorizations within 90 days of the date of issuance of the Commission staff's EA.
There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before the comment date stated below file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit seven copies of filings made in the proceeding with the Commission and must mail a copy to the applicant and to every other party. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.
However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commentors will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with the Commission's environmental review process. Environmental commentors will not be required to serve copies of filed documents on all other parties. However, the non-party commentors will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and will not have the right
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the “eFiling” link at
Comment Date: 5:00 p.m. Eastern Time on April 17, 2018.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than April 30, 2018.
1.
The companies listed in this notice have given notice under section 4 of the Bank Holding Company Act (12 U.S.C. 1843) (BHC Act) and Regulation Y, (12 CFR part 225) to engage
Each notice is available for inspection at the Federal Reserve Bank indicated. The notice also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the question whether the proposal complies with the standards of section 4 of the BHC Act.
Unless otherwise noted, comments regarding the applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than April 17, 2018.
1.
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, the CDC and the Health Resources and Services Administration (HRSA), announce the following meeting for the CDC/HRSA Advisory Committee on HIV, Viral Hepatitis and STD Prevention and Treatment (CHACHSPT). This meeting is open to the public, limited only by 100 room seating and 100 ports for audio phone lines. Time will be available for public comment. The public is welcome to submit written comments in advance of the meeting. Comments should be submitted in writing by email to the contact person listed below. The deadline for receipts is Monday, May 7, 2018. Persons who desire to make an oral statement, may request it at the time of the public comments period on May 9, 2018 at 4:15 p.m. EDT. This meeting is accessible by web conference: 1-877-603-4228, Participant code: 42598858.
The meeting will be held on May 9, 2018, 8:30 a.m. to 5:00 p.m., EDT and May 10, 2018, 8:30 a.m. to 12:00 p.m., EDT.
CDC Corporate Square, Building 8, Conference Room 1-ABC, 8 Corporate Boulevard, Atlanta, Georgia 30329.
Margie Scott-Cseh, Committee Management Specialist, CDC, 1600 Clifton Road NE, Mailstop: E-07, Atlanta, Georgia 30333, telephone (404) 639-8317;
The Director, Management Analysis and Services Office, has been delegated the authority to sign
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, the CDC announces the following meeting for the Board of Scientific Counselors, Office of Infectious Diseases (BSC, OID). This meeting is open to the public, limited only by the space available; the meeting room will accommodate up to 100 people. The public is also welcome to listen to the meeting by telephone, limited only by the number of ports available (50); the toll-free dial-in number is 1-888-998-7892, with a pass code of 1252535.
The meeting will be held on May 2, 2018, 8:30 a.m. to 5:00 p.m., EDT, and May 3, 2018, 8:30 a.m. to 12:00 p.m., EDT.
CDC, Global Communications Center, 1600 Clifton Road NE, Building 19, Auditorium B1/B2, Atlanta, Georgia 30329; also 1-888-998-7892.
Sarah Wiley, MPH, Designated Federal Officer, OID, CDC, 1600 Clifton Road NE, Mailstop D10, Atlanta, Georgia 30329, Telephone (404) 639-4840;
The Director, Management Analysis and Services Office, has been delegated the authority to sign
Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, the CDC announces the following meeting for the Board of Scientific Counselors, Office of Public Health Preparedness and Response, (BSC, OPHPR). This meeting is open to the public, limited only by the room seating. The meeting room accommodates up to 80 people. Public participants should pre-register for the meeting as described below. Members of the public that wish to attend this meeting in person should pre-register by submitting the following information by email, facsimile, or phone (see Contact Person for More Information) no later than 12:00 noon (EDT) on Wednesday, May 2, 2018:
The public is also welcome to listen to the meeting by via Adobe Connect. Pre-registration is required by clicking the links below.
The meeting will be held on May 9, 2018, 10:00 a.m.-5:30 p.m., EDT and May 10, 2018, 8:30 a.m.-3:30 p.m., EDT.
Centers for Disease Control and Prevention (CDC), Global Communications Center, Building 19, Auditorium B3, 1600 Clifton Road NE, Atlanta, Georgia 30329.
Dometa Ouisley, Office of Science and Public Health Practice, Centers for Disease Control and Prevention, 1600 Clifton Road NE, Mailstop D-44, Atlanta, Georgia 30329, Telephone: (404) 639-7450; Facsimile: (404) 471-8772; Email:
Day two of the meeting will cover briefings and BSC deliberation on the following topics: OPHPR Office of Policy, Planning and Evaluation activities; CDC's Data Preparedness activities; Public Health System Perspectives on Hurricanes Response; and Excellence in Response Operations Initiative. Agenda items are subject to change as priorities dictate.
The Director, Management Analysis and Services Office, has been delegated the authority to sign
Centers for Medicare & Medicaid Services, HHS.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' website address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
William Parham at (410) 786-4669.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
CMS' program audit protocols are posted to the CMS website each year for use by sponsoring organizations to prepare for their audit. Currently CMS utilizes the following 5 protocols to audit sponsoring organizations' performance: Compliance Program Effectiveness (CPE), Formulary Administration (FA); Coverage Determinations, Appeals, and Grievances (CDAG); Organization Determinations, Appeals, and Grievances (ODAG), Special Needs Program Model of Care (SNP-MOC) (only administered on organizations who operate SNPs). Beginning in audit
Beginning in audit year 2019, the data collected via program-specific record layouts, and collected via impact analyses on an as-needed basis, will be consolidated into each program area data request document. The pre-audit issue summary was updated for technical terminology changes. Three of the questionnaires and the power point template that previously have been distributed as part of our CPE audits will remain. However, the CPE self-assessment questionnaire and the CDAG and ODAG questionnaires have been removed. We have added new questionnaires for FA and SNP-CCQIPE. A revised template for collecting root cause analyses from organizations on an as-needed basis during the program audit has been included in this package.
We have also included a new independent validation audit work plan template that will be collected from sponsors that are required to undergo an independent validation audit. The validation audit is part of our robust audit process where CMS requires sponsoring organizations that have been audited and found to have deficiencies to undergo a validation audit to ensure correction. The validation audit utilizes the same audit protocols, but only tests the elements where deficiencies were found, as opposed to re-administering the entire audit. This validation audit work plan template will be populated by the sponsoring organization's independent auditing firm to describe how it plans to test for correction of the deficiencies identified during the program audit.
To assist in improving the audit process, we have also included an audit feedback questionnaire that is representative of the survey link we send to sponsoring organizations at the end of each program audit. Completion of this questionnaire is optional for sponsoring organizations to provide feedback on the audit process.
The proposed changes to each data collection instrument, along with the new FA and SNP-CCQIPE questionnaires, root cause template, validation audit work plan template and audit feedback questionnaire are included in the posted PRA package.
Finally, separate from the audit process and in order to address sponsoring organizations' concerns regarding undue harm in Star Ratings during audit years. The number of sponsoring organizations that are required to submit universes annually for their coverage/organization determinations and appeals increased. In 2016, CMS expanded this annual collection to all MA and Part D sponsoring organizations. The universes are submitted in the same format as required for audits under the Part D CDAG protocol and the Part C ODAG protocol. The universes are then analyzed for timeliness on an annual basis, across all sponsoring organizations, to allow a more comprehensive review of the accuracy of Part C and D appeals data to calculate Star Ratings.
Administration for Community Living (ACL), HHS.
Notice.
The Administration for Community Living is announcing that the proposed collection of information listed above has been submitted to the Office of Management and Budget (OMB) for review and clearance as required under section 506(c)(2)(A) of the Paperwork Reduction Act of 1995. This 30-Day notice collects comments on the information collection requirements related to annual performance data from State grantees under the Older Americans Act related to Title III and Title VII (Chapters 3 and 4) of that act. Title III includes, for example, home delivered and congregate meal services, transportation and caregiver service; and Title VII includes Elder Abuse Prevention and Legal Assistance Development (ICR Rev).
Submit written comments on the collection of information by May 2, 2018.
Submit written comments on the collection of information by:
(a)
(b) Fax to 202.395.5806, Attn: OMB Desk Officer for ACL; or
(c) By mail to the Office of Information and Regulatory Affairs, OMB, New Executive Office Bldg., 725 17th St. NW, Rm. 10235, Washington, DC 20503, Attn: OMB Desk Officer for ACL.
ACL's Office of Performance and Evaluation at
In compliance with 44 U.S.C. 3507, ACL has submitted the following proposed collection of information to OMB for review and clearance. This collection is a revision of the 2016 approved version of the State Program Report and incorporates significant reduction in data collected. This data collection is essential to provide performance measures as required by Congress and the GPRA Modernization Act of 2010 (GPRAMA). Significant revisions to the SPR were last implemented in 2005. This proposed collection is a revision of the currently approved version (effective 2016-2019). The factors that influenced the proposed revision of the SPR, include: (1) The need to modernize the data structure to allow for more efficient reporting and the ability to use current technology for reporting and analysis; (2) the interest in aligning data elements within and across data collections; (3) the need to consider alternative data elements that reflect the current Aging Network and long-term care services and supports; and (4) the need to reduce reporting burden while enhancing data quality. The proposed SPR revision reduces the number of data elements reported by 70% and the amount of time for completion by 30% as compared to the current 2016-2019 SPR. This is a reduction of 874 hours from the previous version.
Reductions in data elements are found throughout the data collection but are concentrated in the consumer demographic components. Due to the aggregate level nature of the SPR, information on combinations of demographic characteristics (
Limited expansions in data elements are found in the Title III-E National Family Caregiver Support Program service component. The proposal separates out three service areas that were reported as a whole (
A 60-day
ACL received comments from fourteen (14) organizations and one (1) individual about the State Performance Report (SPR) redesign. ACL reviewed all of the comments, but some of the comments were deemed not relevant because they were: (a) About the data submission process itself (b) did not request a change (c) only commented on the format (d) indicated topics for technical assistance and training for the final data collection or (e) provided commentary without referencing the SPR. Regarding concerns about the:
• Timeline-ACL proposes moving the effective date back by 12 months,
• Cost, burden, and changes to data elements-ACL recognizes that there is always a cost to changing data systems, but believes that the anticipated improvement in the data justifies the proposed changes,
• New items related to Legal Services-ACL worked closely with program staff and stakeholders to develop a reasonable data collection to measure the contribution of this important program about which performance data were not previously collected,
• Need for additional elements including sub-state and individual level data-ACL is not adding more elements or more granular data collection at this time but will consider those suggestions for future data collections,
• Need for improved definitions and language-ACL made several changes to specific elements and is using these comments to inform the training and technical assistance it provides, and
• Caregiver program-ACL made revisions to several items and is using these comments to inform the training and technical assistance it provides.
A detailed analysis of the comments and responses can be found at (
The proposed data collection template may be found on the ACL website at
Food and Drug Administration, HHS.
Notice; request for comments.
The Food and Drug Administration (FDA or Agency) is announcing the availability of a draft 5-year plan describing the Agency's approach to further the implementation of structured benefit-risk assessment, including the incorporation of the patient's voice in drug development and decision-making, in the human drug review program and the opportunity for public comment on the draft plan. This new draft plan is an update to the 5-year plan published in February 2013 on FDA's website. This new draft plan is
Submit either electronic or written comments by June 1, 2018.
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before June 1, 2018. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Graham Thompson, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 1146, Silver Spring, MD 20993-0002, 301-796-5003, Fax: 301-847-8443,
FDA is announcing the availability of a draft 5-year plan describing the Agency's approach to further the implementation of structured benefit-risk assessment into human drug and biologics review. This draft plan is intended to meet a performance goal included in the sixth authorization of PDUFA (PDUFA VI). This reauthorization, part of the FDA Reauthorization Act of 2017 signed by the President on August 18, 2017, includes a number of performance goals and procedures that are documented in the PDUFA VI Commitment Letter, which is available at
This new draft plan is an update to the 5-year plan published in February 2013 on FDA's website:
FDA's commitments to meet certain performance goals under PDUFA VI were developed in consultation with patient and consumer advocates, health care professionals, and other public stakeholders, as part of negotiations with regulated industry. Section J.2 of the commitment letter, “Enhancing Benefit-Risk Assessment in Regulatory Decision-Making” (
Benefit-risk assessment is the foundation for FDA's regulatory review of human drugs and biologics. In PDUFA V, FDA's Center for Drug
The plan also includes an overview of FDA's commitments in PDUFA VI for continued implementation of structured benefit-risk assessment during FY 2018-2022. These commitments include participating in a meeting to gather stakeholder input on key topics, publishing a draft guidance on benefit-risk assessment for new drugs and biologics, continuing to revise relevant Manuals for Policies and Procedures and Standard Operating Practices and Procedures to incorporate benefit-risk assessment approaches, and conducting a second evaluation of the implementation of the Benefit-Risk Framework beginning in 2021. In addition to these commitments, FDA also plans to explore additional opportunities to enhance our use and communication of benefit-risk assessments.
FDA has published the draft plan on its website:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or Agency) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (PRA), Federal Agencies are required to publish notice in the
Submit either electronic or written comments on the collection of information by June 1, 2018.
You may submit comments as follows: Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before June 1, 2018. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available
Domini Bean, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
Under the PRA (44 U.S.C. 3501-3520), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
Under FIMA (21 U.S.C. 141-149), milk or cream may be imported into the United States only by the holder of a valid import milk permit (21 U.S.C. 141). Before such permit is issued: (1) All cows from which import milk or cream is produced must be physically examined and found healthy; (2) if the milk or cream is imported raw, all such cows must pass a tuberculin test; (3) the dairy farm and each plant in which the milk or cream is processed or handled must be inspected and found to meet certain sanitary requirements; (4) bacterial counts of the milk at the time of importation must not exceed specified limits; and (5) the temperature of the milk or cream at time of importation must not exceed 50 °F (21 U.S.C. 142).
Our regulations in part 1210 (21 CFR part 1210), implement the provisions of FIMA. Sections 1210.11 and 1210.14 require reports on the sanitary conditions of, respectively, dairy farms and plants producing milk and/or cream to be shipped to the United States. Section 1210.12 requires reports on the physical examination of herds, while § 1210.13 requires the reporting of tuberculin testing of the herds. In addition, the regulations in part 1210 require that dairy farmers and plants maintain pasteurization records (§ 1210.15) and that each container of milk or cream imported into the United States bear a tag with the product type, permit number, and shipper's name and address (§ 1210.22). Section 1210.20 requires that an application for a permit to ship or transport milk or cream into the United States be made by the actual shipper. Section 1210.23 allows permits to be granted based on certificates from accredited officials.
We estimate the burden of this collection of information as follows:
Upon review of the information collection, we have retained the currently approved estimated burden. The estimated number of respondents and hours per response are based on our experience with the import milk permit program and the average number of import milk permit holders over the past 3 years. Assuming two respondents will submit approximately 200 Form FDA 1996 reports annually for a total of 600 responses, and that each response requires 1.5 hours, we estimate the total burden is 600 hours.
The Secretary of Health and Human Services has the discretion to allow Form FDA 1815, a duly certified statement signed by an accredited official of a foreign government, to be submitted in lieu of Forms FDA 1994 and 1995. To date, Form FDA 1815 has been submitted in lieu of these forms. Because we have not received any Forms FDA 1994 or 1995 in the last 3 years, we assume no more than one will be submitted annually. We also assume each submission requires 0.5 hour for a total of 0.5 burden hour annually.
We estimate that two respondents will submit one Form FDA 1997 report annually, for a total of two responses. We estimate the reporting burden to be 2.0 hours per response, for a total burden of 4 hours. We estimate that two respondents will submit one Form FDA 1993 report annually, for a total of two responses. We estimate the reporting burden to be 0.5 hour per response, for a total burden of 1 hour. We estimate that two respondents will submit one Form FDA 1815 report annually, for a total of two responses. We estimate the reporting burden to be 0.5 hour per response, for a total burden of 1 hour.
With regard to records maintenance, we estimate that approximately two recordkeepers will spend 0.05 hour annually maintaining the additional pasteurization records required by § 1210.15, for a total of 0.10 hour annually.
No burden has been estimated for the tagging requirement in § 1210.22 because the information on the tag is either supplied by us (permit number) or is disclosed to third parties as a usual and customary part of the shipper's normal business activities (type of product, shipper's name and address). Under 5 CFR 1320.3(c)(2), the public disclosure of information originally supplied by the Federal Government to the recipient for the purpose of disclosure to the public is not subject to review by the Office of Management and Budget under the Paperwork Reduction Act. Under 5 CFR 1320.3(b)(2)), the time, effort, and financial resources necessary to comply with a collection of information are excluded from the burden estimate if the reporting, recordkeeping, or disclosure activities needed to comply are usual and customary because they would occur in the normal course of business activities.
Food and Drug Administration, HHS.
Notice.
The Commissioner of Food and Drugs (the Commissioner) is denying requests for a hearing and issuing an order withdrawing approval of abbreviated new drug applications (ANDAs) for certain prescription laxatives with the active ingredient polyethylene glycol 3350 (PEG 3350), listed in this document, because the drug products are misbranded under the Federal Food, Drug, and Cosmetic Act (FD&C Act).
This order is applicable May 2, 2018.
For access to the docket, go to
Julie Finegan, Office of Scientific Integrity, Office of the Chief Scientist, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 1, Rm. 4218, Silver Spring, MD 20993-0002, 301-796-8618.
On February 18, 1999, the U.S. Food and Drug Administration (FDA or the Agency) approved a new drug application (NDA) submitted by Braintree Laboratories, Inc., (Braintree) for prescription (or “Rx”) PEG 3350 (MiraLAX) (NDA 20-698). Subsequently, FDA approved five ANDAs for prescription PEG 3350.
Section 503(b)(1) of the FD&C Act requires that a drug which: (1) Because
Likewise, at section 503(b)(4)(A), drugs that are subject to the prescription dispensing provisions of section 503(b)(1) must bear the “Rx only” symbol; if not, they would be misbranded. These provisions mean that nonprescription (over-the-counter (OTC)) drugs must not bear the “Rx only” symbol and prescription drugs must bear the “Rx only” symbol; otherwise, they each would be misbranded. FDA has long interpreted these provisions to mean that section 503(b) of the FD&C Act does not permit the same active ingredient to be simultaneously marketed in both a prescription drug product and a nonprescription drug product, unless a meaningful difference exists between the two that makes the prescription product safe only under the supervision of a licensed practitioner.
FDA's regulation at § 310.200 (21 CFR 310.200) sets forth the procedure for exempting a drug approved for prescription use from the prescription dispensing requirements of section 503(b)(1)(B) of the FD&C Act. A drug limited to prescription use under section 503(b)(1)(B) shall be exempt from the prescription dispensing requirements if FDA determines that the prescription dispensing requirements are “not necessary for the protection of the public health by reason of the drug's toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, and [FDA] finds that the drug is safe and effective for use in self-medication as directed in proposed labeling.” (See § 310.200(b).) In this instance, based on studies submitted by the sponsor, FDA determined that the original prescription MiraLAX product no longer met the criteria in section 503(b)(1) of the FD&C Act for prescription use. Therefore, FDA changed MiraLAX's status from prescription to nonprescription (commonly referred to as an “Rx to OTC switch”). When FDA concludes, as it did with MiraLAX, that no prescription indications remain, FDA describes the Rx to OTC switch as a “full” or “complete” switch. The Braintree product continued to use the trade name MiraLAX when it switched from prescription to nonprescription.
Due to this change in MiraLAX's status from prescription to nonprescription, in an April 20, 2007, letter to the ANDA holders, FDA noted that the approved ANDAs were based on a reference listed drug (RLD) with labeling for prescription only use (NDA 20-698) and that MiraLAX had recently switched from “Rx-only” to OTC marketing. FDA explained that the FD&C Act does not permit both prescription and nonprescription versions of the same drug product to be marketed at the same time. The Agency notified the PEG 3350 ANDA holders that their prescription products, which bear the “Rx only” symbol, are misbranded and may not be lawfully marketed. FDA explained that if the ANDA holders wished to continue marketing PEG 3350, they may not do so pursuant to the ANDAs referencing prescription MiraLAX. FDA informed the ANDA holders that they must file new ANDAs referencing NDA 22-015 and the new ANDAs must include the same OTC labeling as the RLD. FDA also explained that under section 505(j)(2)(D)(i) of the FD&C Act, the ANDA holders were not permitted to supplement their ANDAs to reference NDA 22-015, which was not the RLD identified in their ANDAs. The ANDA holders did not seek voluntary withdrawal of their applications.
In the
The NOOH proposed the withdrawal of the PEG 3350 ANDAs on the basis of the switch of MiraLAX from Rx to OTC. The NOOH noted that the FD&C Act does not permit both Rx and OTC versions of the same drug product to be marketed at the same time. Under the FD&C Act, a drug to which the prescription dispensing requirements do not apply (
The Background section of the NOOH described the original approval of prescription MiraLAX and the subsequent approval of the OTC product. The NOOH summarized the two studies that formed the basis for approval of NDA 20-698, the prescription MiraLAX product for the treatment of occasional constipation, as follows:
• Study 851-6 was a double-blind, parallel trial that enrolled 151 subjects who were randomized to placebo or MiraLAX 17 grams (g). The treatment lasted 14 days. The primary efficacy endpoint was bowel movement frequency with success defined as more
• Study 851-3 was a single-center, double-blind, triple-crossover trial that randomized 50 constipated patients to a first period (10 days) of either 17 or 34 g of MiraLAX therapy. Subsequently, without a washout interval, subjects were randomized to second or third periods (also 10 days) of placebo or the alternate MiraLAX dose. The primary endpoints of efficacy were stool frequency and stool weight. All 50 patients completed the trial. This study helped to define a dose-response for MiraLAX.
Table 1 illustrates that in both studies submitted to support the prescription MiraLAX NDA at least one-third of subjects taking 17 g of MiraLAX had a bowel movement by Day 1 and at least three-fourths had a bowel movement by Day 3. Based on the results of these studies, a length of treatment of 2 weeks or less was recommended.
To support approval of the nonprescription application for MiraLAX for occasional constipation, Braintree submitted three studies (described in bullets below) evaluating safety and efficacy in adults (including a subset of elderly subjects) for a period longer than the previously approved period of up to 14 days of use. Although nonprescription MiraLAX is indicated for a period of up to 1 week, the submitted long-term studies supported a determination that the product would be safe for use in the OTC setting, where repeated purchase and use may be likely. Subjects who participated in these long-term studies were constipated, but otherwise healthy, adults with no documented organic cause for constipation who met protocol-specified modified Rome Criteria
• 851-CR1: A randomized, double-blind, placebo-controlled, parallel-group, multicenter study of 304 subjects comparing 6 months of treatment with MiraLAX 17 g per day to daily treatment with a matched placebo. Of the patients enrolled in this study 75 (25 percent) were 65 years of age or older. This was an efficacy study in which efficacy was measured by outcomes of more than 3 satisfactory stools per week and the occurrence of one or fewer of the following symptoms: Straining in more than 25 percent of defecations; lumpy or hard stools in more than 25 percent of defecations; or sensation of incomplete evacuation in more than 25 percent of defecations. More than 80 percent of patients in this study experienced a bowel movement within 1 to 3 days of starting therapy.
• 851-ZCC: An open-label, randomized, parallel-arm, multicenter study of constipated adult patients randomized to treatment with either 17 g per day MiraLAX or Zelnorm (tegaserod maleate, indicated for the short-term treatment of women with irritable bowel syndrome whose primary bowel symptom is constipation) for 28 days. This study excluded elderly and male patients because of Zelnorm labeling restrictions. This study demonstrated that MiraLAX is more effective than Zelnorm at treating constipation over a 4-week period. Overall, patients who were having fewer than three bowel movements per week began having approximately one bowel movement per day by weeks 1 and 2.
• 851-CR3: An open-label, extended use, multicenter, single-treatment study of 311 subjects using MiraLAX 17 g per day for 12 months. Of the patients enrolled in this study 117 (38 percent) were 65 years of age or older. This was a 1-year safety study of MiraLAX use, and no placebo arm was included. Patients treated with MiraLAX for up to 12 months achieved similar benefits to those previously reported in shorter studies. According to the self-assessment measure used, 80 to 88 percent of patients (and 84 to 94 percent of elderly patients) rated themselves successfully treated during the course of the study.
According to CDER, after reviewing the results of these studies, FDA determined that the three studies provided evidence that nonprescription MiraLAX could be used by consumers effectively in the OTC setting, concluding that OTC MiraLAX is efficacious for the vast majority of users with constipation within 7 days and generally produces a bowel movement by day 3, and would also be safe if repeatedly used over time. FDA determined that the criteria in section 503(b)(1) of the FD&C Act were no longer met and that the criteria for switching prescription MiraLAX to nonprescription status under § 310.200 were met. Thus, the Agency approved MiraLAX as a nonprescription product for occasional constipation.
As CDER stated in the NOOH, for the prescription and nonprescription versions of PEG 3350 to be lawfully marketed simultaneously, there must be some meaningful difference between the two products (
CDER explained that it determined that there is no meaningful difference between the prescription PEG 3350 ANDA holders' laxative products and the nonprescription MiraLAX product based upon an evaluation of the active ingredient, dosage form, strength, route of administration, indications, and patient population for both versions. As stated in the NOOH, CDER found that
CDER concluded that, where there is no meaningful difference between nonprescription MiraLAX and the prescription PEG 3350 products, the continued marketing of the same PEG 3350 product could result in the consumer confusion that Congress intended to prevent through section 503(b)(4)(B) of the FD&C Act. CDER reasoned that the display of the Rx-only symbol on the ANDA holders' PEG 3350 products rendered the labeling of those products false or misleading where the same PEG 3350 product was approved for OTC use. Accordingly, CDER concluded that the labeling of the prescription PEG 3350 products is false and misleading, and the products are thus misbranded under section 502 of the FD&C Act (21 U.S.C. 352) because they continue to bear the “Rx only” symbol.
The NOOH informed the PEG 3350 ANDA holders that if they requested a hearing they would have to present data and information showing that there is a genuine and substantial issue of fact requiring a hearing. The NOOH also stated that if it conclusively appeared from the face of the data, information, and factual analyses submitted in support of a hearing request that there was no genuine and substantial issue of fact precluding the withdrawal of the PEG 3350 ANDAs, or if the requests for a hearing were not made in the required format or with the required analyses, the Commissioner would enter summary judgment against the holders of the PEG 3350 ANDAs, making findings and conclusions, and denying a hearing (73 FR 63491).
The specific criteria considered when determining whether a hearing is justified are set out in § 12.24(b) (21 CFR 12.24(b)). Under that regulation, a hearing will be granted if the material submitted by the requester shows, among other things, the following: (1) There is a genuine and substantial factual issue for resolution at a hearing; a hearing will not be granted on issues of policy or law; (2) the factual issue can be resolved by available and specifically identified reliable evidence; a hearing will not be granted on the basis of mere allegations or denials or general descriptions of positions and contentions; (3) the data and information submitted, if established at a hearing, would be adequate to justify resolution of the factual issue in the way sought by the requestor; a hearing will be denied if the Commissioner concludes that the data and information submitted are insufficient to justify the factual determination urged, even if accurate; (4) resolution of the factual issue in the way sought by the person is adequate to justify the action requested; a hearing will not be granted on factual issues that are not determinative with respect to the action requested (
A party seeking a hearing is required to meet a “threshold burden of tendering evidence suggesting the need for a hearing.” (
A hearing request must not only contain evidence, but that evidence should raise a material issue of fact concerning which a meaningful hearing might be held (
In summary, a hearing request must present sufficient credible evidence to raise a genuine and substantial issue of fact and the evidence presented by the requestor, if established at a hearing, must be adequate to resolve the issue as requested and to justify the action requested.
The Commissioner has reviewed the evidence submitted by the holders of the PEG 3350 ANDAs and finds that they have not raised a genuine and substantial issue of fact requiring a hearing under §§ 12.24(b) and 314.200(g), that the legal objections offered are without merit and cannot justify a hearing, and that summary judgment should be granted against them. The Commissioner also orders that, under section 505(e) of the FD&C Act, approval of the PEG 3350 ANDAs, including all related amendments and supplements, are hereby withdrawn, effective May 2, 2018.
The reasons for the Commissioner's decision are described more fully below.
As noted, each of the PEG 3350 ANDA holders, except Teva, requested a hearing and submitted evidence, including information and factual analyses, as to why FDA should grant a hearing regarding their requests. As § 12.24(b) makes clear, FDA requires “specifically identified reliable evidence” to grant a hearing. FDA will not grant a hearing based solely upon “mere allegations or denials or general descriptions of positions and contentions.” Furthermore, courts have held that “general and unsupported statements . . . of experts . . . [that] fail to address the specific problems identified by the FDA . . . do not create a genuine issue of fact.” (
None of the PEG 3350 ANDA holders submitted data or other information in support of their requests for a hearing that presents a genuine and substantial issue of fact that would be determinative with respect to whether there is some meaningful difference between the prescription and nonprescription products approved by FDA that makes the prescription product safe only under the supervision of a licensed practitioner. Instead, they made numerous assertions and included anecdotal evidence in the form of declarations from practicing physicians, published medical literature, and trade publications on issues that are not material to this proceeding. Much of the information submitted by the PEG 3350 ANDA holders overlapped, and some ANDA holders chose to reference other submissions. Nexgen submitted five declarations from practicing physicians, one news release, and one document outlining objections to the medical review of NDA 22-015 (nonprescription MiraLAX). Nexgen also submitted a bibliography of journal articles cited by its medical experts in their declarations. Paddock submitted a wide variety of documents, including labeling for different products, published medical literature, letters sent to the company by FDA, a copy of the NOOH, a copy of the tentative final monograph (TFM) for OTC laxatives, and various web publications on constipation and its comorbidities. Paddock also referenced a number of online resources in its footnotes and cross-referenced three of the declarations submitted by Nexgen—those of Thomas Quincy Garvey III, M.D., Paul Erick Hyman, M.D., and Irvin Wechsler, B.Sc Pharm. Schwarz did not submit any original evidence, but rather chose to incorporate all of Nexgen's arguments and evidence by reference. Gavis submitted no evidence in support of its assertions.
The ANDA holders object to the proposed order's treatment of their evidentiary submissions. They maintain that the proposed order misapplied the summary judgment standard and misinterpreted FDA regulations and precedent relevant to summary judgment. Nexgen and Breckenridge submitted a joint objection to the proposed order in which they maintain that FDA cannot impose summary judgment where it has not issued a regulation setting forth the standard on which summary judgment will be based (Nexgen/Breckenridge Joint Objection (hereafter Nexgen Objection) at 13-17). Nexgen and Paddock contend that summary judgment is inappropriate where the term meaningful difference has not been defined and the determination of meaningful difference is inherently factual (Paddock Comments at 19; Nexgen Objection at 21-22). Nexgen complains that FDA applied the concept of material fact so narrowly that no issue is likely to satisfy those criteria (Nexgen Objection at 19). Kremers maintains that the proposed order's application of the summary judgment standard violates due process
The Commissioner has reviewed the evidence presented and finds that it either fails to address the specific problems identified by FDA and/or that it does not constitute specifically identified reliable evidence. In the ANPRM and the NOOH, FDA stated that in determining whether the same active ingredient can be simultaneously marketed in prescription and OTC products, FDA would consider whether there is a meaningful difference between two drug products, such as active ingredient, dosage form, strength, route of administration, indications, or patient population that makes the prescription product safe only under the supervision of a licensed practitioner. Much of the evidence submitted by the ANDA holders does not warrant granting a hearing because the evidence is not relevant to the above factors. A significant portion of the evidence submitted by the ANDA holders in support of the hearing includes published medical literature and affidavits summarizing the impressions of practicing physicians regarding unapproved uses of PEG 3350, such as chronic constipation, opioid-induced constipation, and use in pediatric patients (see,
The expert statements regarding duration of use likewise fail to meet the criteria at § 12.24 for granting a hearing. The NOOH explained that, in previous switches, a drug remained prescription for one duration of use while becoming OTC for the other duration only when there was an additional and more fundamental difference between the products, such as a different indication, dose, duration of therapy, and/or target population (73 FR 63491 at 63493 n.1), none of which are present here. The NOOH further explained that the 7-day duration of use for OTC MiraLAX was based upon the labeling intended for the OTC audience and to ensure consistent labeling among OTC laxative products. The ANDA holders did not dispute this. Nevertheless, they made arguments and submitted affidavits of impressions of practitioners citing review documents and approved labeling related to duration of use. The ANDA holders focus on PEG 3350's alleged increased efficacy after 2 to 4 weeks and maintained efficacy from 4 weeks to up to 6 months of use, based upon the “or as directed by a physician” language in the prescription labeling. Also relying upon the “or as directed by a physician” phrase in the prescription labeling, the ANDA holders contend that such language indicates that prescription MiraLAX has an unlimited duration of use. They further maintain that OTC MiraLAX has a maximum duration of use of 7 days.
Prescription PEG 3350 is approved for a duration of use of “2 weeks
Duration of use alone was not set forth in the ANPRM or the NOOH as a factor the Agency considers in determining whether there is a meaningful difference between a prescription product and an OTC product. Moreover, the NOOH made clear that the duration of use on the OTC label resulted from the intended audience (consumers) and the need to maintain consistency with the labeling of other OTC laxative products, and not from any difference necessitated by science. The plain language of the labeling provides discretion to patients and physicians with regard to duration of use. Considering all these factors, the Commissioner in this proceeding declines to conclude that duration of use alone, without an additional more fundamental difference between the products, is sufficient to establish a meaningful difference. As such, the evidence and affidavits regarding duration of use do not raise material issues of fact that would be determinative with respect to this action, and thus do not justify a hearing. Additional discussion of the meaningful difference standard and duration of use is found in section III.D.
Other evidence submitted by the ANDA holders consists of expert statements or impressions of practitioners that challenge FDA's 2006 decision to approve MiraLAX—or, in some instances, any laxative product—as an OTC product (see,
This evidence challenges FDA's decision to approve MiraLAX as an OTC product. As explained in the Background section, the PEG 3350 ANDAs were approved based upon FDA's finding that the generic PEG 3350 products have the same active ingredient, indication for use, route of administration, dosage form, strength, and labeling as, and that they were bioequivalent, to prescription MiraLAX. The PEG ANDA holders were not required to submit evidence to establish the safety and efficacy of their products. Rather, the ANDAs relied upon FDA's prior finding of MiraLAX's safety and efficacy for approval, which was supported by the evidence submitted in the previously approved NDA for prescription MiraLAX (NDA 20-698). Subsequently, FDA approved NDA 22-015 for OTC MiraLAX, which has the same active ingredient, indication for use, route of administration, dosage form, and strength as prescription MiraLAX. The ANDA holders now challenge the decisions made in the course of the approval of NDA 22-015 and seek a hearing on these issues. Neither the FD&C Act nor its implementing regulations require that the ANDA holders be afforded a hearing on FDA's decision to approve the NDA for OTC MiraLAX, and that issue is not determinative in this proceeding, which is only to decide whether OTC MiraLAX as already approved by FDA is meaningfully different from the approved prescription products. Accordingly, the Commissioner finds that a hearing on this evidence submitted with regard to these issues is not warranted. (See § 12.24(b);
The Commissioner further concludes that a hearing may be denied in this proceeding, even in the absence of a regulation setting forth the standard for determining whether there is a meaningful difference between prescription and nonprescription products containing the same active ingredient. This is so because the meaningful difference standard was set forth in the ANPRM and the NOOH, and the NOOH discussed in detail the facts and evidence that formed the basis for CDER's proposed withdrawal of the ANDAs. Where the NOOH provides such information, precise regulations specifying the type of evidence necessary to justify a hearing are not required (
As to the complaint that the proposed order “applied the concept of `material fact' ” so narrowly that no issue is likely to satisfy that standard (Nexgen Objection at 17), the ANDA holders' requests for hearing and objections to the proposed order do not dispute that the active ingredient, dosage form, strength, route of administration, indication, and patient population are the same for the original prescription MiraLAX product approved in NDA 20-698, the prescription generic PEG 3350 products, and OTC MiraLAX approved in NDA 22-015, as reflected on the products' labeling. Contrary to their assertions, the Agency is not construing substantial and genuine issue of fact narrowly. Rather, any data or information presented by the ANDA holders purporting to establish facts that do not relate to the factors set forth in the ANPRM and NOOH is immaterial because those are the factors that are relevant to determining if there is a meaningful difference between the products. In addition, the factors the Agency set forth as relevant to determining a meaningful difference between the products largely align with those the Agency relied upon in approving the PEG 3350 ANDAs (see 21 U.S.C. 355(j)(2)(A)(i) to (v)). Under these circumstances, it would be difficult for the ANDA holders to raise a genuine and substantial issue of fact requiring a hearing. Considering the relevant issues in this proceeding, the evidence submitted combined with the mere assertions of fact advanced by the PEG 3350 ANDA holders is insufficient to raise a genuine and substantial issue of fact requiring a hearing. The Commissioner therefore denies the PEG 3350 ANDA holders' request for a hearing and is entering summary judgment (§§ 12.24(b)(1) and (2), and 314.200(g)).
In addition to submitting evidence intended to support its arguments in its request for hearing, Nexgen's objection to CDER's proposed order included new evidence and allegations. Nexgen maintains the new information and allegations raise genuine and substantial issues of fact requiring a hearing. The new information includes medical literature describing the use of PEG 3350 for chronic constipation and for a duration longer than 14 days, and literature discussing the physician's role in PEG 3350 use. Also included in the Objection are allegations that FDA was long “aware” of the tension between the safe duration of use period for OTC laxatives and the use of laxatives for prolonged periods in certain populations with physician supervision. Nexgen also alleges for the first time that OTC MiraLAX has a new indication because FDA's approval letter referenced required pediatric studies for OTC MiraLAX. Nexgen also raises allegations regarding: additional active ingredients for which FDA has permitted simultaneous prescription and nonprescription products; the lack of a labeling comprehension study and advisory committee meeting prior to approval of OTC MiraLAX; a U.S. Department of Health and Human Services (HHS) announcement of a grant to study PEG 3350 in the pediatric population; and the cost of OTC MiraLAX. Nexgen submitted survey results of physician perceptions of the OTC and prescription MiraLAX labeling, data on reported adverse events for MiraLAX after the OTC approval, and data on continued sales of prescription MiraLAX (Nexgen Objection at 23-43; Nexgen Objection Exhibits 5-7).
Under § 314.200(c), an applicant who wishes to participate in a hearing shall file the studies on which the person relies to justify a hearing within 60 days after the date of publication of the notice of opportunity for hearing. FDA will not consider data or analyses submitted after that 60-day timeframe when determining whether a hearing is warranted unless they are derived from well-controlled studies begun before the
In the preamble to 21 CFR 130.14, the predecessor to § 314.200, FDA rejected a comment suggesting that FDA should permit later submission of material “not known” to exist at the time a request for hearing is due. FDA stated on numerous occasions in the past, persons requesting a hearing have subsequently supplemented that request with multiple submissions of data and information culled from the literature and other sources, all of which were available at the time of the original request for hearing. This has resulted in lengthy delays while the newly submitted information has been assessed. In the interest of administrative efficiency, it is essential that this type of continuous submission be precluded. Accordingly, the new regulations require that any submission of existing information be made within the 60-day time period permitted in the regulations. (39 FR 9750 at 9757.) Likewise, in the preamble to the predecessor to part 12, FDA stated it would be impracticable to permit supplementation at any time prior to the Commissioner's ruling on an objection or request for hearing, for the Commissioner would then be required to defer his ruling whenever supplemental material was received. This would seriously disrupt the process of ruling on objections and requests, would frustrate efforts of persons to respond in support of denial of a hearing, and could prolong action indefinitely. (41 FR 51706 at 51707, November 23, 1976.)
In its request for a hearing, Nexgen stated, “Nexgen is submitting herein substantial facts and legal analyses controverting FDA's position, and intends to supplement this information in its `60 day' submission pursuant to 21 CFR 12.22 and 314.200.” (Nexgen Comment at 2). Regarding the new information and allegations Nexgen submitted in its Objection, Nexgen made no attempt to supplement its request for hearing in a manner that comports with the requirements of § 314.200(c)(2). Nexgen did not show that the information includes data derived from well-controlled studies that began before the date of the notice of opportunity for hearing and that the results were not available within 60 days of the date of publication of the notice. Nexgen did not list the studies in progress, nor did it submit the protocols, the participating investigators, or a status report of the studies. Nexgen made no showing that any of the data or analyses or cited publications are derived from well-controlled studies. Even if FDA were to consider information not derived from well-controlled studies submitted after 60 days, Nexgen made no attempt to inform FDA that it would be submitting the results of a telephonic survey, adverse event data, labeling analysis of products for which FDA has permitted simultaneous prescription and nonprescription marketing, cost data, or continued sales data for prescription MiraLAX. Additionally, Nexgen did not show that the new information and allegations submitted in the Objections were not included in its Request for Hearing due to an inadvertent omission and hardship. Nexgen's failure to submit this new evidence in conformance with § 314.200 gives the Commissioner sufficient reason to decline to review it.
Even if the Commissioner were to consider the submissions in Nexgen's objection, Nexgen's new information and analyses are not relevant to the issue of whether there is a meaningful difference between the prescription and nonprescription versions of MiraLAX approved by FDA such that PEG 3350 could be marketed simultaneously in both a prescription and nonprescription MiraLAX product. The data and analyses submitted by Nexgen, such as the physician survey, studies of PEG 3350 for chronic constipation, the approval process for OTC MiraLAX, adverse event reports for MiraLAX, sales data for prescription MiraLAX, the cost of OTC MiraLAX, and HHS funding to study PEG 3350 in the pediatric population, are not related to the factors set forth in the ANPRM and the NOOH as material to determining meaningful difference. In light of the requirements in § 314.200 for submitting data and analyses after the 60-day deadline, FDA's rationale for imposing restrictions on the submission of data and analyses after 60 days, and the lack of relevance of this information, the Commissioner will not further consider the information Nexgen and Breckenridge submitted with their objections to the proposed order.
The ANDA holders have failed to raise a genuine and substantial issue of fact that requires a hearing, and a hearing will not be granted on issues of law (§ 12.24(b)(1)). In addition, the Commissioner does not find the arguments advanced by the PEG 3350 ANDA holders persuasive and is entering summary judgment against them. The Commissioner will address each argument and assertion made by the PEG 3350 ANDA holders in support of their hearing requests to explain the finding of summary judgment.
The arguments addressed in section III.C of this order challenge the statutory and regulatory requirements of the FD&C Act that govern prescription and nonprescription marketing status, the withdrawal of approval of a drug application, generic drugs and exclusivity, and FDA enforcement. The arguments challenge the regulatory requirements of the Administrative Procedure Act (APA) and FD&C Act with regard to notice and comment rulemaking. The arguments also challenge the statutory and regulatory requirements for summary judgment. As such, they are legal arguments, which do not raise a genuine and substantial issue of fact. Thus, these arguments cannot form the basis for granting a hearing (see §§ 12.24(b)(1) and 314.200(g)). In addition, these arguments do not have any legal merit.
Nexgen, Paddock, and Gavis all submitted arguments regarding the Agency's authority under section 503(b)(4)(B) of the FD&C Act. Specifically, they argue that because their ANDAs were approved as prescription products, they are required to bear the “Rx only” symbol and therefore cannot be deemed misbranded under section 503(b)(4)(B) of the FD&C Act (Nexgen Comments at 37-39). As the basis for this argument, they suggest that the provisions in section 503(b)(1)(A) are independent of those in section 503(b)(1)(B) of the FD&C Act, and a drug is a prescription drug if it is covered under section 503(b)(1)(B), regardless of whether it is covered under section 503(b)(1)(A) (Nexgen Comments at 38; Gavis Comments at 002; Paddock Comments at 6). Thus, they contend that once a drug is approved as prescription under section 503(b)(1)(B) of the FD&C Act, it is
Likewise, they argue that the Durham-Humphrey Amendments (Pub. L. 82-215 (1951)) were not intended to address the situation in which a prescription drug product is forced to change to nonprescription because a separate NDA for the same active ingredient was approved as a nonprescription product (Nexgen Comments at 39-40). They further argue that if Congress intended generic prescription drugs to become misbranded immediately when their referenced products are approved for nonprescription use, it should have written that explicitly into the FD&C Act (Gavis Comments at 003; Paddock Comments at 6; Nexgen Comments at 39-40).
A basic rule of statutory construction is that “a statute is to be read as a whole . . . since the meaning of statutory language, plain or not, depends on context.” (
The ANDA holders' argument that once a product is approved as a prescription product, it is always a prescription product, cannot withstand a holistic reading of section 503(b) of the FD&C Act. Section 503(b)(3) states that FDA may “remove drugs subject to section 505 [of the FD&C Act] from the requirements of [section 503(b)(1)] . . . when such requirements are not necessary for the protection of the public health.” On its face, the statute authorizes the Secretary to exempt a product from the prescription-dispensing requirements when such requirements are not necessary for the protection of the public health. Further, section 503(b)(3) of the FD&C Act references 503(b)(1) in its entirety and thus applies to drugs that are limited by an application approved under section 505 of the FD&C Act to prescription use under section 503(b)(1)(B). FDA set forth this interpretation when it issued § 310.200 in 1963 (28 FR 6377, June 20, 1963). That regulation states that any drug limited to prescription use under section 503(b)(1)(B) of the act shall be exempted from prescription dispensing requirements when the Commissioner finds such requirements are not necessary for the protection of the public health by reason of the drug's toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, and he finds that the drug is safe and effective for use in self-medication as directed in proposed labeling. (§ 310.200(b).) Therefore, the ANDA holders' general contention that once a product is approved as a prescription product under section 503(b)(1)(B) of the FD&C Act, it can never lose its prescription status, is incorrect.
Section 503(b)(4) of the FD&C Act describes when a drug product is required to bear the “Rx only” symbol on its label and when a drug product may not bear the “Rx only” symbol. Under section 503(b)(4)(A), any drug product that is subject to 503(b)(1) “shall be deemed misbranded if at any time prior to dispensing the label of the drug fails to bear . . . the symbol `Rx only'.” Under section 503(b)(4)(B) of the FD&C Act, any drug product that is not subject to 503(b)(1),
While considering the Durham-Humphrey Amendments, Congress noted that retail pharmacists shelved one and the same drug product made by various manufacturers, but with different labels. Some drug products bore prescription labeling while the same drug product manufactured by a different firm bore nonprescription labeling, leading to confusion for both pharmacists and the public. (See H.R. Rep. No. 82-700, at 3 (1951); S. Rep. No. 82-946, at 2 (1951); 97 Cong. Rec. 9235 (1951); see also 97 Cong. Rec. 9321 (1951).) Congress stated that the purpose of the amendments was to change that “uncertain situation” into a “certain situation.” (See 97 Cong. Rec. 9330 (1951).) The amendments were also meant to “relieve retail pharmacists and the public from burdensome and unnecessary restrictions on the dispensing of drugs that are safe for use without the supervision of a physician.” (S. Rep. No. 82-946, at 1-2 (1951); see also 97 Cong. Rec. 9235 (1951).)
If section 503(b)(4) of the FD&C Act were construed the way Nexgen, Paddock, and Gavis describe, the Durham-Humphrey Amendments would be rendered meaningless. If a prescription generic drug product were allowed to remain on the market by virtue of its approval as a prescription product, which approval was based, among other things, on its bioequivalence to an RLD, despite that RLD's switch from prescription to nonprescription, there would be simultaneous marketing of prescription and nonprescription versions of the same drug product. This result conflicts with a holistic reading of section 503(b) of the FD&C Act. Further, this result would negate a central purpose of the Durham-Humphrey Amendments as set forth in the legislative history: avoiding confusion for pharmacists and the public.
Additionally, the ANDA holders' argument with respect to Congress's failure to include specific language in the FD&C Act describing the exact situation in which the PEG 3350 ANDA holders find themselves is not persuasive. In the absence of express statutory language, FDA is permitted to put forth a reasonable interpretation of the statute. The courts have long held that FDA's interpretation of the FD&C Act governs as long as it is “a permissible construction of the statute.” (See
Furthermore, the PEG 3350 ANDA holders' interpretation of section 503(b)(4) of the FD&C Act is inconsistent with that held by the United States Court of Appeals for the Seventh Circuit (Seventh Circuit). The PEG 3350 ANDA holders were the Defendants-Appellees in a case under section 43(a)(1)(B) of the Lanham Act (15 U.S.C. 1125(a)(1)(B)) concerning the marketing of generic prescription PEG 3350 products, which was appealed to the Seventh Circuit after the District Court dismissed the case pending a decision by FDA regarding the misbranding of their products (
In this case, CDER concluded, and the Commissioner affirms, that there is not a meaningful difference between the prescription and nonprescription versions of MiraLAX;
These legal arguments are based upon an incorrect assertion that the products are not misbranded under section 503(b)(4) of the FD&C Act. In this instance, neither criterion under 503(b)(1) applies to the generic PEG 3350 products. FDA previously determined, at the time OTC MiraLAX was approved, that the supervision of a licensed practitioner is no longer necessary for the use of MiraLAX and that no prescription indications remained. After FDA made that determination with regard to the RLD, the legal status of the RLD as a prescription product and the medical and scientific basis underlying the approval of both the RLD and the generic PEG 3350 products as prescription drugs no longer existed. Where, as here, the legal and scientific underpinnings of the approval of the generic PEG 3350 products as prescription drugs have ceased to exist, FDA concludes that section 503(b)(1)(B) of the FD&C Act no longer applies to those products. This interpretation is supported by a reading of section 503(b) as a whole and is consistent with the purpose of the statute as set forth in the legislative history, as discussed in the above subsection of this order. In addition, the labeling of the ANDA PEG 3350 products is false or misleading. By bearing the “Rx only” symbol, the labeling implies that the products can be dispensed safely only with a licensed practitioner's prescription. Yet, FDA has determined that MiraLAX can be used safely and effectively in the nonprescription setting and specifically does not meet the criteria in 503(b)(1) of the FD&C Act. In section III. D. of this order, FDA has determined that the generic PEG 3350 products are the same drug product as nonprescription MiraLAX (
Because the labeling for the PEG 3350 prescription products is false or misleading, the Agency has the authority to withdraw approval of the products under section 505(e)(3) of the FD&C Act. The “new information” in this case is the October 2006 approval of MiraLAX as an OTC drug, the change in status of MiraLAX from prescription to nonprescription, and the fact that the PEG 3350 ANDA holders have not submitted new ANDAs referencing OTC MiraLAX and including the same OTC labeling as the RLD after receiving written notice from FDA. Accordingly, the standard for withdrawal in section 505(e)(3) of the FD&C Act has been met.
This argument is unavailing. Section 505(e) states that the Secretary may, “after due notice and opportunity for hearing to the applicant,” withdraw approval of a drug application if the Secretary finds that the labeling of such drug is false or misleading in any particular and was not corrected within a reasonable time after receipt of written notice from the Secretary specifying the matter complained of. Schwarz's assertions regarding the April 20, 2007, letter are unavailing, as even if the Commissioner were to assume that the Buehler letter failed to satisfy the requirements of section 505(e), the NOOH itself also satisfies this requirement.
The NOOH issued in October 2008 proposed the withdrawal of the PEG 3350 ANDAs on the basis of the switch of MiraLAX from Rx to OTC. The NOOH noted that the FD&C Act does not permit both Rx and OTC versions of the same drug product to be marketed at the same time. Under the FD&C Act, a drug to which the prescription dispensing requirements do not apply (
Contrary to Schwarz's suggestion, there is nothing in the statute that requires written notice to “justify” the NOOH; the statute only requires written notice as a prerequisite to the withdrawal itself. The NOOH did not withdraw the applications; it merely initiated this proceeding during which the applicants were given ample opportunity to contest the proposed withdrawals. The Commissioner is withdrawing approval of the applications via this order, and the NOOH serves as written notice prior to this withdrawal under section 505(e) of the FD&C Act.
Paddock's comments contend that the Hatch-Waxman amendments do not authorize FDA to withdraw approval of an ANDA for nonsafety or noneffectiveness reasons. In fact, Paddock argues, by removing the prescription PEG 3350 products from the market, FDA is effectively awarding Braintree 6 years of exclusivity for its prescription product, which contravenes the Hatch-Waxman Amendments in section 505(c) and (j) of the FD&C Act. Paddock further argues that FDA's award of 3 years of exclusivity to OTC MiraLAX must have been based on studies in a new patient population and thus contravenes the proposal to find that there is not a meaningful difference between the prescription and OTC products (Paddock Comments at 5-6).
These allegations make incorrect statements about the Agency's authority under the FD&C Act regarding withdrawal of generic drug products and granting of market exclusivity. The Hatch-Waxman Amendments established new section 505(j) of the FD&C Act, which sets forth the ANDA approval process for generic drugs. The NOOH proposed withdrawal based upon the second sentence of section 505(e) of the FD&C Act, which explicitly references section 505(j), and vests the Secretary with the authority to withdraw an ANDA whenever new information establishes that “the labeling of such drug . . . is false or misleading in any particular.” The prescription PEG 3350 ANDAs are misbranded under section 503(b)(4)(B) of the FD&C Act and FDA's regulations because they are marketed for prescription use at the same time as a nonprescription product that FDA determines in this order is not meaningfully different. In this case, the use of the “Rx only” symbol on the labeling of the prescription PEG 3350 products is false or misleading because it implies that the products are required to be dispensed only with a prescription; whereas FDA has determined that the same product does not meet the criteria in section 503(b)(1) of the FD&C Act and can be used safely and effectively in the nonprescription setting.
FDA did not award Braintree 6 years of exclusivity for its prescription product. Braintree received 3 years of exclusivity under section 505(j)(5)(F) of the FD&C Act when the initial approval of prescription MiraLAX was supported by new clinical studies essential to its approval conducted by or on behalf of Braintree. It also received 3 years of exclusivity under the same provision when the OTC switch NDA was approved because Braintree supported its OTC MiraLAX application with new clinical studies conducted by or on behalf of Braintree that were essential to its approval. These are two separate awards of exclusivity earned by Braintree under the criteria set forth in the FD&C Act. Contrary to Paddock's contention, there were two separate bases for granting two 3-year periods of exclusivity, as is often the case when products switch from prescription to nonprescription status.
These allegations are inaccurate regarding the Agency's authority under the FD&C Act and the APA, neither of which requires the issuance of regulations before FDA can determine that a drug no longer meets the criteria at section 503(b)(1) of the FD&C Act. Paddock seemingly relies upon section 503(b)(3), which describes one procedure for exempting a drug from the prescription drug requirements of section 503(b)(1) of the FD&C Act. Specifically, section 503(b)(3) provides that FDA may, by regulation, remove a drug from the prescription dispensing requirements in section 503(b)(1) of the FD&C Act when the prescription status mandated by its NDA approval is no longer “necessary for the protection of the public health.” FDA has interpreted section 503(b) of the FD&C Act to allow the Agency to switch a drug product from prescription to nonprescription by approving an NDA submitted by a sponsor seeking such a change. In practice, FDA has exercised that authority and changed the status of numerous products from prescription to nonprescription through the submission of NDAs.
Further, in the absence of express statutory language requiring rulemaking, government agencies possess broad discretion in deciding whether to proceed by general rulemaking or case-by-case adjudication. (See,
As noted above, Paddock argues that withdrawal of the PEG 3350 ANDAs in the absence of notice and comment rulemaking constitutes a legislative rule. Under section 505(e) of the FD&C Act, FDA may withdraw approval of applications through adjudication, as the Agency is doing here; therefore, FDA's withdrawal of the PEG 3350 ANDAs does not constitute a legislative rule. Further, the issue of whether an FDA action involving an interpretation of the FD&C Act constitutes a legislative rule has been previously considered. In a matter challenging FDA's implementation of the pediatric exclusivity provisions of the Food and Drug Administration Modernization Act of 1997 (FDAMA), one of the arguments maintained that the “Guidance for Industry: Qualifying for Pediatric Exclusivity Under Section 505A of the Federal Food, Drug, and Cosmetic Act” was a legislative rule that should have been enacted through notice and comment rulemaking. To determine whether the rule in that case was legislative or interpretive, the court used the four-part test from
It is inappropriate, Paddock argues, for the Agency to issue a summary judgment order absent a hearing because the APA only authorizes a hearing officer to do so, and the Agency should be the party demonstrating that there is no genuine and substantial issue of fact (Paddock Comments at 16). If the Agency proceeds as it plans to according to the NOOH and issues an order for summary judgment, Paddock argues, it would be acting as prosecutor, judge, and jury, which is not authorized under the APA (Paddock Comments at 16).
Furthermore, both Nexgen and Paddock request that the Agency make all of the data from the clinical studies in the nonprescription MiraLAX NDA (22-015) available to the PEG 3350 ANDA holders (Nexgen Comments at 40 n. 37; Paddock Comments at 17-19; Nexgen Objection at 76-77). Not doing so, they claim, deprives them of due process because the data cited in the NOOH is not sufficient to understand the basis upon which FDA is acting to remove the PEG 3350 ANDAs from the market. Paddock argues that, under Rule 56(f) of the Federal Rules of Civil Procedure (FRCP), it has the right to review the protocols and data
These allegations mischaracterize the Agency's authority to issue summary judgment orders as set forth under the FD&C Act, its implementing regulations, and the APA, and as reflected in case law. The Agency is authorized under section 505(e) of the FD&C Act to withdraw a drug from the market, after notice and opportunity for a hearing, if its labeling is false and misleading. In addition, FDA's regulations set forth a regulatory procedure for withdrawing approval of drug marketing applications under 505(e) that is designed to provide due process, including notice and opportunity for a hearing, to application holders (see § 314.200(a)). FDA's regulations governing formal evidentiary public hearings set forth the grounds upon which a hearing may be denied and summary decision granted (see § 12.24). FDA regulations explicitly require the person requesting a hearing to show that the criteria in § 12.24(b) for granting a hearing are met. Likewise, where FDA serves a proposed order denying a hearing, the burden remains on the person requesting the hearing to respond with sufficient data, information, and analysis to justify a hearing (§§ 12.24 and 314.200(g)).
In fact, these administrative procedures have been previously upheld by the Supreme Court (
Based on the requirements of the FD&C Act, FDA's regulations, and the APA, Paddock and the other PEG 3350 ANDA holders have been afforded an appropriate opportunity to justify a hearing on the factual basis for the proposed withdrawal of approval for the ANDAs. They have been given specific instructions as to the type and detail of evidence required to support a request for hearing. As explained elsewhere in this order, the ANDA holders' approval relies on FDA's prior safety and efficacy findings for the RLD. The issue for resolution in this proceeding is whether there is a meaningful difference between OTC MiraLAX and the prescription PEG 3350 products as approved by FDA. Whether or not FDA should have approved MiraLAX Rx or MiraLAX OTC in the first place is not at issue here. Due process does not require FDA to provide the underlying data supporting the approval of prescription or OTC MiraLAX. The Agency is not obligated to provide the PEG 3350 ANDA holders additional or more detailed information with regard to its issuance of the NOOH.
Nexgen argues in its request for a hearing that FDA has never taken enforcement action to require the withdrawal of a prescription drug product simply because it lacks a meaningful difference from a later-approved nonprescription drug product (Nexgen Comments at 43). Thus, they contend that “
This argument does not have any legal merit. It is within FDA's purview to determine when and what enforcement actions are appropriate regarding specific drug products, taking into account Agency resources and public health priorities. Such individual enforcement-related decisions have no bearing on the lawfulness of the marketing of any particular product. Even if FDA were enforcing provisions of the FD&C Act it had not previously, FDA is not estopped from enforcing those provisions (
Gavis submitted comments arguing that changing their prescription PEG 3350 product to nonprescription status would open them up to product liability in many States because they would not have the benefit of the learned intermediary defense, which exists for prescription products (Gavis Comments at 005). Nexgen argues for the first time in its objection that the ANDA holders could be subject to design defect liability for use beyond 7 days and misbranding charges for promoting use beyond 7 days. Nexgen also maintains that physicians may be subject to tort
Potential liability issues are not among the factors FDA considers in determining whether an active ingredient may be simultaneously marketed in a prescription and nonprescription product. With regard to the decision to approve OTC MiraLAX, the Agency does not consider individual State tort law liability in its decisions regarding the safety and efficacy of drug products and whether the criteria for prescription products at section 503(b)(1) of the FD&C Act are met. As a matter of Federal law, FDA determines when approving an NDA whether a product meets the criteria for prescription drugs in the FD&C Act at section 503(b), or whether it can be safely and effectively marketed as a nonprescription product.
As noted in section III.A, the PEG 3350 ANDA holders submitted evidence and arguments to support the contention that there is a meaningful difference between the prescription and nonprescription PEG 3350 products and assert that FDA is incorrect in proposing to withdraw the prescription version from the market. The evidence and arguments submitted by the PEG 3350 ANDA holders are further addressed in this section.
Despite the fact that FDA considered the change of MiraLAX from prescription to nonprescription to be a “full” switch (and MiraLAX is no longer a RLD eligible to be marketed on a prescription basis), Nexgen, Gavis, and Paddock all assert that the difference in duration of use between the prescription and nonprescription versions of the PEG 3350 labeling constitutes a meaningful difference between the two products.
Nexgen and Gavis both argue that the words “or as directed by a physician” in the prescription MiraLAX labeling can be construed to mean that the PEG 3350 ANDA prescription products can be prescribed by a physician for an indefinite period of time or for chronic use; whereas the wording of the nonprescription MiraLAX labeling implies that FDA determined that use of PEG 3350 for longer than 7 days is unsafe for the consumer without supervision of a practitioner licensed by law (Gavis Comments at 003-004; Nexgen Comments at 6). Thus, they assert that because the prescription ANDA products are labeled for a longer duration of use with physician oversight, those products must be dispensed pursuant to prescription. They argue that because the PEG 3350 ANDAs are approved for prescription use, they should be allowed to remain on the market for those patients who need physician supervision (Gavis Comments at 003-004; Nexgen Comments at 8-9).
Furthermore, Nexgen and Gavis assert that the data submitted as part of the NDA for nonprescription MiraLAX support long-term use of the product, and withdrawing the prescription PEG 3350 ANDAs from the market would leave patients without a long-term option (see Gavis Comments at 004-005). Paddock and Nexgen claim that the data supporting the application for nonprescription use show that consumers taking PEG 3350 will experience increasing levels of effectiveness between 10 days and 1 month of use (Paddock Comments at 24; Nexgen Comments at 9; Nexgen Objection at 49-58). They believe this change in effectiveness over time is a material difference between the prescription and nonprescription products and shows that longer-term use with physician supervision is medically necessary (Nexgen Comments at 12; Paddock Comments at 20). Furthermore, Nexgen argues that the studies used to support the nonprescription MiraLAX NDA were conducted in chronically constipated patients and were designed to evaluate chronic use over the long term (Nexgen Comments at 14-15; Nexgen Objection at 49-58).
Nexgen also contends that FDA arbitrarily chose 7 days as a duration of use for the nonprescription MiraLAX product. This duration of use, Nexgen argues, was not based on FDA's medical judgment, but instead was a recommended time for OTC laxatives generally (Nexgen Comments at 7; Nexgen Objection at 56-57). Paddock agrees and claims that the statements in the NOOH are contrary to the recommendation in the TFM
When FDA approved nonprescription MiraLAX, it considered the change from prescription to nonprescription to be complete,
Although the words “or as directed by a physician” in the prescription ANDA labeling may be interpreted as contemplating extended use, in the prescription setting a physician would have been involved in making that determination. Thus, according to the
Although the studies supporting the approval of both the prescription and nonprescription versions of MiraLAX were of a longer duration than the duration of use for which the nonprescription product is labeled, when evaluating nonprescription labeling FDA determines what it believes to be the appropriate duration of use before recommending consumers seek assistance from a physician. The studies themselves are only one aspect of that determination. Furthermore, for approvals of both prescription and nonprescription products generally, long-term studies are often used to establish safety of the product. (See “Guidance for Industry: Premarketing Risk Assessment,” available at
FDA acknowledges that the study designs used in the trials that supported the change from prescription to nonprescription status were similar to study designs that could be used to support an indication of chronic idiopathic constipation, which is a long-term use indication that FDA would likely consider to be a prescription use. While the trials conducted to support the approval of MiraLAX as a nonprescription product were sufficiently long in duration to potentially have supported an indication for chronic idiopathic constipation (in addition to occasional constipation), such an indication was not sought by the sponsor. Because Braintree did not seek a chronic idiopathic constipation indication as a prescription product, and the ANDA prescription products were not approved for and are not labeled for that use, any argument that the studies support this use, or that their approvals should not be withdrawn because the product is used off-label, is irrelevant.
In determining whether a complete change from prescription to nonprescription status was appropriate, FDA found that there was no evidence in the three studies submitted in the MiraLAX NDA for nonprescription use that showed a different efficacy or safety profile in the treated population, compared with the studies that supported the prescription indication. With regard to the ANDA holders' assertions that the data supporting the nonprescription use demonstrates increased efficacy between 14 days and 1 month, the trials for the original prescription product were not designed to evaluate comparative efficacy over time. Therefore, there is no evidence from the studies that were used to support the approval of the prescription indication that establishes that MiraLAX is most effective when used for more than 7 days as the PEG 3350 ANDA holders claim. As to the longer-term studies supporting the nonprescription approval, as explained above, FDA considered the longer-term studies for nonprescription MiraLAX primarily to provide safety information. Specifically, these studies confirm that the drug would still be considered safe if a consumer chose to use it repeatedly before seeking advice from a physician. The studies cannot be used to support the assertions made by the PEG 3350 ANDA holders that the prescription product is most effective when used for a longer period of time. As reflected in their respective labeling, both products were expected to be effective in producing a bowel movement in less than 7 days, further confirming that there is no meaningful difference with respect to duration of use.
The ANDA holders also challenge decisions made during the course of FDA approval of OTC MiraLAX. They maintain that FDA's decision, made at the time of the OTC approval, to include a 7-day duration of use in the OTC labeling was arbitrary and was not based on FDA's medical judgment. As discussed above, the ANDA holders are not entitled to a hearing with regard to the decision to approve OTC MiraLAX or to decisions related to the content of the OTC label; those decisions are not at issue in this proceeding. Based on its studies and analyses submitted to support the nonprescription MiraLAX NDA, Braintree's proposed nonprescription labeling contained a 14-day duration of use, like the labeling for the prescription product. However, FDA, in conducting its own analysis, determined that the appropriate duration of use for the nonprescription MiraLAX product was 7 days with an instruction to consult a physician after that time. FDA determined that the 7-day duration of use was appropriate for a consumer self-medicating in the nonprescription setting and concluded that the nonprescription labeling should be consistent with earlier FDA determinations for other nonprescription laxatives. FDA issued a TFM for nonprescription laxative products in 1985. In this proposed regulation, the Agency agreed with the advisory panel regarding duration of use for laxatives in the OTC setting. The panel had previously stated that the reason for this recommendation is that a sudden change in bowel habits may be due to serious disease (
Gavis and Nexgen also attempt to fashion an argument out of a typographical error in the NOOH (Nexgen Comments at 5-6; Gavis Comments at 003-004). FDA wrote in the NOOH that the prescription indication is the following: “This product should be used for 2 weeks or less as directed by a physician.” The correct wording of the ANDA prescription labeling is, “This product should be used for 2 weeks or less
Nexgen also argues that the approval of nonprescription MiraLAX was an “Initial Marketing of a Drug Product OTC” and not an “Rx to OTC Switch” under the Center for Drug Evaluation and Research's Manual of Policies and Procedures (MAPP) 6020.5. Similar to their arguments described above, Nexgen contends that an “Rx to OTC switch” did not occur because the nonprescription MiraLAX has a different duration of use from the prescription product, which they suggest points to a meaningful difference between the two (Nexgen Comments at 16). Further, Nexgen accuses FDA of making an “after-the-fact effort to revise or re-write the actual history relating to the OTC application and its review, apparently to rationalize its unfounded and unprecedented proposed enforcement action [withdrawing the PEG 3350 ANDAs]” (Nexgen Comments at 17). Nexgen maintains that the switch of MiraLAX from prescription to nonprescription was not a complete switch because OTC MiraLAX was approved under a different NDA number, while, for other products, FDA has effectuated a partial switch with a new NDA and a complete switch with a supplemental NDA (Nexgen Objection at 44-46). Nexgen also maintains that the switch was not a complete switch because Breckenridge's prescription ANDA was approved only a few months prior to approval of OTC MiraLAX, Nexgen's prescription ANDA was approved 10 days prior to the approval of OTC MiraLAX, and the prescription MiraLAX NDA was not withdrawn until March 2009 (Nexgen Objection at 46).
These arguments have no validity. Nexgen's characterizations of FDA's actions are unfounded and incorrect. In assessing whether section 503(b)(4) allows the same active ingredient in products that are both prescription and nonprescription, FDA considers the products' approved indication, strength, route of administration, dosage form, and patient population and not the definitions in MAPP 6020.5 or MAPP processes that may have been followed prior to the approval. Facts related to the timing of a generic prescription PEG 3350 approval and the withdrawal of the prescription NDA likewise are not relevant to those considerations. While Braintree's NDA for nonprescription MiraLAX has a different NDA number, the issuance of a new NDA number is an administrative issue, which is irrelevant to the question of whether there is a meaningful difference between the prescription and nonprescription versions. Despite the difference in NDA numbers, FDA did consider the nonprescription MiraLAX NDA to be an “Rx to OTC switch” according to the MAPP.
In sum, the Commissioner has concluded that that there is not a meaningful difference between the prescription and nonprescription products based on the duration of use. The Commissioner does not find the arguments advanced by the PEG 3350 ANDA holders on this topic persuasive and is entering summary judgment against them.
Nexgen, Gavis, and Paddock also submitted comments regarding the use of PEG 3350 in high-risk populations. They argue that their prescription approvals should not be withdrawn because, in their opinion, the supervision of a licensed practitioner is necessary for the safe and effective use of this drug in high-risk populations (Nexgen Comments at 26-30). They believe that patients in higher-risk populations cannot self-diagnose and self-treat their constipation. Therefore, they argue that the product should be dispensed upon a prescription and that a physician should be involved in the care of such patients (Paddock Comments at 24-26).
Furthermore, they do not believe that the nonprescription product can be used correctly by all of the patients that regularly use PEG 3350 and contend that eliminating the prescription version promotes self-medication by chronically ill individuals (Nexgen Comments at 47; Paddock Comments at 20). Specifically, they argue that the studies submitted to support the approval of MiraLAX for nonprescription use do not reflect how the product will be used in high-risk populations because high-risk subjects were excluded from the study population (Nexgen Comments at 21; Paddock Comments at 24). The studies excluded children and patients with a history of heart failure, diabetes, kidney failure, gastrointestinal disease, and surgeries or obstruction. Paddock argues that these groups represent large segments of the population who need laxative therapy (Paddock Comments at 24). In addition, Nexgen, Paddock, and Gavis note that subpopulations like children and the elderly require close monitoring when using laxatives and are at risk when taking a nonprescription product (Paddock Comments at 25; Gavis Comments at 007; Nexgen Comments at 31-33).
Finally, Nexgen notes that FDA failed to consider the needs of pediatric patients in its analysis. The prescription labeling stated that “safety and effectiveness in pediatric patients has not been established”; whereas, the nonprescription labeling states, “children 16 years of age or under: ask a doctor.” Nexgen argues that the nonprescription labeling fails to consider that a physician's supervision is required for use in children. Nexgen also conjectures that by allowing Braintree to defer pediatric studies until 2016, FDA contemplated use of nonprescription MiraLAX in children (Nexgen Comments at 7-8).
FDA disagrees with the PEG 3350 ANDA holders' argument that there should be a prescription version of PEG 3350 available. As an initial matter, the ANDA holders' allegations regarding potential misuse by chronically ill individuals are simply a new iteration on their prior arguments about an off-label use of MiraLAX: Chronic constipation associated with these chronic illnesses. The data submitted by Braintree met the statutory and regulatory criteria for changing the product's status from prescription to nonprescription. In making this determination, FDA found that the product is safe and effective for use for self-medication as directed in the proposed nonprescription labeling. In this instance, and with all other nonprescription drug products, the labeling describes the patient population for which the product was found to be safe and effective, and suggests that other populations, such as children, should consult a physician. Nonprescription labeling is designed to assist consumers in appropriate self-selection and use. In addition, the nonprescription labeling is designed to instruct consumers regarding when they should seek the advice of a physician. Further, a physician is free to instruct a patient on how and whether to use a nonprescription product.
FDA disagrees with the contention that nonprescription MiraLAX is unsafe for use by elderly patients. In fact, the long-term clinical studies conducted to support the approval of MiraLAX as a nonprescription product enrolled a significant number of patients aged 65 years or older. In one study, 25 percent of the patients were over 65 years old, and in another study, 38 percent of
With regard to pediatric patients, the approved nonprescription MiraLAX labeling, like the prescription labeling, indicates that the product is for those 17 and older and explains that children under 16 should consult with a physician. No randomized, controlled studies were performed to properly assess the efficacy and safety of nonprescription MiraLAX in pediatric patients. In the absence of such data, it is common for nonprescription labeling to include age cutoffs and instruct consumers to talk to their doctor. Based on a particular patient's medical condition, a physician can choose to direct him or her on how to use a nonprescription product.
Nexgen and Paddock also argue that removing the prescription PEG 3350 products from the market would deprive physicians of important information that is included in the prescription labeling but not in the nonprescription labeling. Nexgen argues that the quality of information provided in the prescription labeling and package insert is helpful in treating high-risk patients (Nexgen Comments at 21). Paddock notes that the package insert more fully discusses the efficacy, safety, and risk profile of PEG 3350 for long-term use and in high-risk patients (Paddock Comments at 20). Nexgen maintains that FDA's TFM for laxative products proposed to require professional labeling for OTC laxatives (Nexgen Objection at 72). These differences, they argue, constitute a meaningful difference between the products and require that prescription PEG 3350 remain on the market.
It is true that prescription labeling contains more detailed information than is included on nonprescription products (see §§ 201.57 and 201.66 (21 CFR 201.57 and 201.66)). However, when FDA determines that a product meets the statutory and regulatory criteria for changing its status from prescription to nonprescription, the new nonprescription labeling is designed for consumer use as per § 201.66. Prescription labeling is designed to inform medical practitioners and thus contains more information than OTC labeling. Such additional detail would not be appropriate or useful in the OTC setting. Because FDA considered the change from prescription to nonprescription status to be a “full” switch, the prescription labeling is no longer appropriate. The fact that the prescription labeling is more detailed does not establish a meaningful difference between the prescription and nonprescription versions.
The factors FDA generally considers in determining whether there is a meaningful difference are indication, strength, route of administration, population, and dosage form. As the labeling for the prescription and nonprescription PEG 3350 products shows, they have the same indication, strength, route of administration, population, and dosage form. As explained in the NOOH, if FDA were to include the differences between prescription and nonprescription labeling requirements as a factor in determining whether there is a meaningful difference sufficient to allow the same active ingredient to be marketed in prescription and nonprescription products, FDA would never be able to exempt a drug product from the prescribing requirements of section 503(b). This result would be in contravention of the plain language of section 503 of the FD&C Act and the purpose of Congress in enacting that provision. Further, Nexgen's contention that FDA proposed to require professional labeling for nonprescription laxatives in the TFM for those products fails to establish a meaningful difference between the prescription and nonprescription PEG 3350 products.
Nexgen and Paddock do not agree that the examples FDA cited in the NOOH of active ingredients that are simultaneously marketed in prescription and nonprescription drugs that FDA considers to be meaningfully different (ranitidine hydrochloride (HCl), omeprazole, and ibuprofen) can be distinguished from PEG 3350. In addition, Nexgen and Paddock identified other examples of active ingredients that are simultaneously marketed in prescription and nonprescription products (butenafine HCl, terbinafine HCl, cimetidine, and loperamide) that they believe are analogous to PEG 3350. They argue that all of the examples of active ingredients being simultaneously marketed for prescription and nonprescription uses have less significant differences in conditions of use than those between the prescription and nonprescription versions of MiraLAX (Paddock Comments at 2 and 21; Nexgen Comments at 49-53). Furthermore, Nexgen argues that in the examples FDA cited in its NOOH, each of the active ingredients has a prescription version because of a need for continued physician oversight to treat certain patient populations. In this way, they contend, those products are analogous to the prescription PEG 3350 products. Thus, they argue that the ANDA PEG 3350 approvals should be retained to ensure the intervention and supervision of a physician of certain patients for which physicians commonly prescribe PEG 3350 (geriatric patients, pediatric patients, patients with chronic constipation) and for whom a serious disease or condition is the cause of constipation. They argue that, although PEG 3350 is not approved for chronic use and pediatric patients, FDA must consider that PEG 3350 is commonly prescribed for these uses (Nexgen Comments at 49-50). Nexgen also argues that meaningful differences exist between the prescription and nonprescription labels of MiraLAX and ranitidine products because the prescription labeling for the prescription MiraLAX and ranitidine includes information describing dosing in elderly patients, while the OTC labeling for both products does not (Nexgen Comments at 50).
Nexgen and Paddock's arguments that FDA's determinations regarding whether there are meaningful differences between the prescription and nonprescription versions of ranitidine HCl, omeprazole, and
The ANDA holders' reliance on FDA's decision to allow simultaneous prescription and nonprescription marketing of other active ingredients is misplaced because FDA makes these decisions on a case-by-case basis, based upon the merits of the individual application before the Agency. Nevertheless, the Commissioner will address the examples of simultaneous marketing raised by the ANDA holders. Furthermore, the permitted simultaneous prescription and nonprescription marketing of active ingredients, such as butenafine HCl (Mentax Rx and Lotrimin Ultra), terbinafine HCl (Lamisil), cimetidine, and loperamide are distinguishable from the prescription PEG 3350 products. Unlike MiraLAX, the differences in the cited examples are meaningful for the reasons set forth in this section. Moreover, none of the examples cited below rely upon duration of use alone to support the simultaneous marketing of Rx and OTC products. While some of the Rx and OTC products discussed below do have different durations of use, there is also an additional, more fundamental difference between the Rx and OTC products discussed below, such as different indication, patient population, or dose.
Tinea versicolor, the prescription indication, is usually diagnosed based on a medical history and physical examination. The symptoms may resemble other skin conditions and require the expertise of a physician for diagnosis using an ultraviolet light or other professional diagnostic tools. In contrast, FDA considers the indication for the treatment of athlete's foot and/or jock itch to be conditions that a consumer can self-diagnose and self-treat.
Thus, FDA determined that the prescription indication requires the supervision of a practitioner licensed by law and meets the criteria at section 503(b)(1) of the FD&C Act, while the nonprescription indications did not meet the criteria at section 503(b)(1). Thus, the differences in the indications for the active ingredient, butenafine HCl creams are meaningful in that the conditions for which they are indicated require different levels of expertise to diagnose and treat.
As noted in table 5, the nonprescription version of Lamisil (cream) is used for the treatment of athlete's foot (tinea pedis), ringworm (tinea corporis), and jock itch (tinea cruris)—common conditions a consumer can self-diagnose and self-treat. The prescription version of Lamisil is indicated for the treatment of tinea versicolor, which requires the expertise of a physician to diagnose and treat (as discussed above). Similar to butenafine HCl discussed in section III.D.4.a., the differences in the indication of Rx versus OTC terbinafine HCl are meaningful in that the conditions for which they are indicated require different levels of expertise to diagnose and treat (as discussed above).
Prescription loperamide is indicated for the control and symptomatic relief of acute nonspecific diarrhea and chronic diarrhea associated with inflammatory bowel disease and for reducing the volume of discharge from ileostomies. These conditions require the diagnostic skills and treatment intervention of a physician. In comparison, OTC loperamide is indicated for the treatment of diarrhea, including traveler's diarrhea, which can be self-diagnosed and treated. In addition, the total daily dose is 8 mg for OTC loperamide and 16 mg for Rx loperamide, and there are differences in dosing for children. Finally, the OTC version has a recommended duration of use of only 2 days, whereas the Rx version is used to treat chronic conditions for an unlimited period of time under the supervision of a physician.
The differences between Rx and OTC loperamide are meaningful in that the conditions for which they are indicated require different levels of expertise to diagnose and treat. In addition, they are dosed at different levels.
The conditions for which cimetidine Rx is indicated require a physician for diagnosis and treatment; they cannot be self-diagnosed and are not appropriate for self-treatment. They are also treated at a significantly higher dose (
Cimetidine OTC is indicated to relieve or prevent heartburn associated with acid indigestion and sour stomach that occurs after eating or drinking certain food or beverages, a condition that patients can self-diagnose and self-treat. Unlike cimetidine Rx, it is not indicated to be used on a regular dosing regimen to treat a permanent medical condition such as GERD or duodenal ulcers. Rather, the OTC product is used on an “as needed” basis to prevent or relieve a symptom, so consumers could take one or two doses (200 to 400 mg) on a day they experience heartburn. The OTC labeling limits use to no more than 2 weeks.
The Rx and OTC versions of cimetidine have meaningful differences in that the conditions for which they are indicated require different levels of expertise to diagnose and treat, and they
The conditions for which Rx omeprazole is indicated require the supervision of a physician for diagnosis and treatment. Depending on the indication, treatment duration could be months and even years. In the particular instance of the treatment of symptomatic GERD, the recommended dose is 20 mg daily for up to 4 weeks and of the treatment of erosive esophagitis due to acid-mediated GERD, the recommended dose is 20 mg once daily for 4 to 8 weeks. The Rx version allows titrating upward to achieve efficacy, especially for pathological hypersecretory conditions.
On the other hand, omeprazole OTC is approved for the treatment of frequent heartburn (defined as occurring 2 or more days per week). This product is to be taken once a day (every 24 hours) every day for 14 days. The product labeling notes that it may take 1 to 4 days for full effect, although some people may get complete relief of symptoms within 24 hours. The consumer is instructed not to take the drug for more than 14 days or use more than one course every 4 months unless otherwise directed by a doctor.
The Rx and OTC versions of omeprazole have meaningful differences in that the conditions for which they are indicated require different levels of expertise to diagnose and treat, and they have different durations of use and indications.
OTC ranitidine HCl is indicated for conditions that the patient may self-diagnose and self-treat and because of the ability to self-diagnose and self-treat, the dosing is on an “as needed” basis to prevent or relieve a symptom. For example, a consumer could take one or two doses (150 to 300 mg) on a day they experience heartburn. The OTC product limits time for which a consumer should use the product without consulting a doctor. In addition, the OTC product is only approved for use in adults and children 12 and over.
On the other hand, Rx ranitidine HCl is indicated for the treatment of more serious acid- related gastrointestinal disorders such as GERD and duodenal ulcers, which require a physician to diagnose. These conditions are chronic and require treatment over an extended period of time under the supervision of a physician. Further, the Rx ranitidine HCl is approved for use in children as young as 1 month old. Nexgen acknowledges that Rx ranitidine HCl remains approved because, among other reasons, it is indicated for much more severe medical conditions than the OTC ranitidine HCl (Nexgen Comments at
Both Rx ibuprofen forms allow for high doses to treat rheumatoid arthritis and juvenile arthritis, as well as other chronic conditions. The ibuprofen Rx suspension also allows for titration of doses to treat pain of varying severity in adults who cannot swallow pills and for pediatric patients depending on the severity of the symptoms. Neither Rx ibuprofen form limits the duration of use in patients. The labeled instructions to titrate the dosage and use the product for an unlimited duration support the necessity of physician oversight with both Rx ibuprofen forms.
On the other hand, the ibuprofen OTC suspension product has fixed age and weight range dosing divisions, does not exceed 15 mg/kg per dose, does not allow for dose titration, and limits use to 3 days. The ibuprofen OTC tablet label recommends a maximum daily dose of 1200 mg, whereas the ibuprofen
Unlike the meaningful differences in the examples provided in section III.D.4, and for the reasons discussed in other parts of this section, FDA does not consider there to be a meaningful difference between the prescription PEG 3350 products and the nonprescription MiraLAX product. The Commissioner finds that the meaningful differences between the other active ingredients that are marketed in drug products that are both prescription and nonprescription products described in section III.D.4 are distinguishable from the nonmeaningful differences between the prescription PEG 3350 products and the nonprescription MiraLAX product. The examples cited by the PEG 3350 ANDA holders significantly differ in one or more of their indications, dosage, or target population. In addition to these differences, some also have a different duration of therapy. All of these drugs were initially approved as prescription products, and then subsequently the active ingredients were also approved for use in a nonprescription product for different indications, or sometimes a subset of, the prescription indications—unlike MiraLAX where no different prescription indications remain. By definition, prescription products are approved for use for indications for which consumers cannot self-diagnose or self-treat, thus requiring the supervision of a licensed practitioner,
Other objections raised by the PEG 3350 ANDA holders regarding their contention that there is a meaningful difference between the prescription PEG 3350 products and nonprescription MiraLAX include those related to the wording of the indication, the exclusivity granted to Braintree, and the cost of OTC MiraLAX.
Gavis and Nexgen argue that the prescription ANDA PEG 3350 labeling states that the product is for the “treatment” of occasional constipation; whereas, nonprescription MiraLAX is for “reliev[ing]” occasional constipation. Gavis contends that nonprescription MiraLAX “relieves” constipation, rather than treating it, which is a meaningful difference requiring the prescription product to remain on the market (Gavis Comments at 006; Nexgen Objection at 66). Nexgen notes that “treats” and “relieves” may not be used interchangeably under FDA's regulation for OTC drug products at 21 CFR 330.1(i) (Nexgen Objection at 66). The NOOH explained that the approved OTC MiraLAX labeling uses the word “relieves” to ensure consistency with other OTC monograph laxative products. As noted, FDA, in considering whether there is a meaningful difference, compares the active ingredient, dosage form, strength, route of administration, indications, and patient population. In this case, because both the OTC and Rx products are indicated for occasional constipation, the different terms “relieves” and “treats” do not constitute a meaningful difference.
Paddock also argues that granting Braintree 3 years of exclusivity under section 505(j)(5)(F) of the FD&C Act indicates that there are meaningful differences between the prescription PEG 3350 labeling and the nonprescription MiraLAX labeling because the clinical data submitted to support nonprescription MiraLAX was in different populations (Paddock Comments at 2). In Paddock's opinion, 3-year exclusivity would only be authorized if the data were the result of “new clinical investigations,” which would indicate that nonprescription MiraLAX is different from the prescription PEG 3350 products (Paddock Comments at 6). It is true that Braintree conducted new clinical investigations to support its NDA for nonprescription MiraLAX. However, contrary to Paddock's contentions, the basis of approval for the prescription product consisted of two studies, 851-3 and 851-6, which demonstrated that at least one-third of subjects taking 17 g of MiraLAX per day have a bowel movement by Day 1, and at least three-fourths have a first bowel movement by Day 3. The three studies submitted in the nonprescription NDA, studies 851-CR1, 851-ZCC, and 851-CR3, did not show a different efficacy or safety profile in the treated populations when compared with the studies submitted in support of the prescription NDA (851-3 and 851-6). The three studies submitted with the nonprescription NDA simply provided evidence that nonprescription MiraLAX would be safe if used repeatedly over time in an OTC setting. As noted in section III.C.3, Braintree earned 3 years of exclusivity for the new clinical studies it conducted that supported approval of its OTC switch NDA. In the Commissioner's opinion, the fact that clinical data was necessary to provide assurance that nonprescription availability of the product was safe does not, in and of itself, support the contention that the product is meaningfully different from the previously approved prescription product. Sponsors of nonprescription drug products frequently perform additional studies that FDA concludes are essential to support a change from prescription to nonprescription status, such as actual use studies, for which they may receive exclusivity (if the statutory criteria for exclusivity are met).
Paddock also notes that removing the prescription PEG 3350 products from the market will nearly triple the cost of the product for the average insured patient (Paddock Comments at 2). Paddock maintains that this predicted cost increase is because consumers with insurance may pay less out of pocket for prescription drugs than for nonprescription drugs, and the exclusivity granted to Braintree for the nonprescription product would create a monopoly if all competing prescription products were withdrawn from the market (Paddock Comments at 30). Paddock and Nexgen argue that withdrawal of approval for prescription PEG 3350 products will reduce the availability of the products due to the absence of Medicaid and health insurance coverage (Nexgen Comments at 43; Paddock Comments at 30; Nexgen Objection at 41). Nexgen challenges FDA's conclusion in the draft order that cost is not a relevant consideration in this proceeding (Nexgen Objection at 42).
These arguments are irrelevant. In this instance, the prescription PEG 3350 products may no longer be lawfully marketed. In the ANPRM and NOOH, FDA set forth the factors it generally considers in determining whether the same active ingredient may be marketed in a prescription and nonprescription product: Issues related to the cost of drug products are not a relevant consideration.
Nexgen maintains that FDA should stay the withdrawal of the ANDAs pending the finalization of the TFM for OTC laxatives and FDA issuing a response on a pending citizen petition
Nexgen complains that FDA largely based its draft proposed order on a January 2013 letter from Merck rather than more carefully reviewing and responding to each argument raised by the ANDA holders, rendering the order suspect (Nexgen Objection at 75-76). In fact, both the Merck letter and the draft proposed order were written in response to the issues and evidence submitted by the ANDA holders. The draft proposed order provided a lengthy analysis addressing the arguments and evidence submitted by the ANDA holders. The fact that the draft proposed order ultimately reached the same conclusion urged by the NDA holder (and the result proposed by CDER in the NOOH) does not render that order “suspect.”
In sum, the Commissioner believes that the change in prescription to nonprescription status was a complete switch. In addition, the Commissioner concludes that there is not a meaningful difference between the prescription and nonprescription products approved by FDA based on the arguments discussed in this section. The Commissioner finds that the ANDA holders have failed to raise a genuine and substantial issue of fact regarding a meaningful difference between prescription and nonprescription MiraLAX that requires a hearing. The Commissioner does not find the arguments advanced by the PEG 3350 ANDA holders on the topics discussed in this section persuasive and is entering summary judgment against them.
Based upon the above, the Commissioner finds that the PEG 3350 ANDA holders have failed to raise a genuine and substantial issue of fact requiring a hearing in their responses to the NOOH. A hearing, therefore, is not required under § 12.24(b). The PEG 3350 ANDA holders did not submit any specifically identified reliable evidence demonstrating that a hearing is necessary. Other evidence submitted was not material to the issues in this proceeding. Even if the Commissioner were to accept these factual assertions as having some weight, such evidence does not present a sufficient area of disagreement to require an evidentiary hearing. Rather, the evidence is “so one-sided that [FDA] must prevail as a matter of law.” (See
In addition to finding that the ANDA holders have failed to raise a genuine and substantial issue of fact that requires a hearing, the Commissioner does not find the arguments advanced by the PEG 3350 ANDA holders persuasive and is entering summary judgment against them under § 314.200(g). There is no meaningful difference between the ANDA holders' PEG 3350 products and OTC MiraLAX. The labeling of the ANDA holders' PEG 3350 products is false and misleading because it bears the “Rx only” symbol when FDA has determined in approving OTC MiraLAX that the drug can be used safely and effectively in the nonprescription setting and does not meet the criteria for a prescription drug in 503(b)(1) of the FD&C Act. This false and misleading labeling was not corrected within a reasonable time after receipt of written notice from FDA. Therefore, under section 505(e) of the FD&C Act and under authority delegated to the Commissioner, the PEG 3350 ANDA holders' requests for a hearing are denied.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is withdrawing approval of five new drug applications (NDAs) from multiple applicants. The holders of the applications notified the Agency in writing that the drug products were no longer marketed and requested that the approval of the applications be withdrawn.
Approval is withdrawn as of May 2, 2018.
Florine P. Purdie, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6248, Silver Spring, MD 20993-0002, 301-796-3601.
The holders of the applications listed in the table have informed FDA that these drug products are no longer marketed and have requested that FDA withdraw approval of the applications under the process in § 314.150(c) (21 CFR 314.150(c)). The applicants have also, by their requests, waived their opportunity for a hearing. Withdrawal of approval of an application or abbreviated application under § 314.150(c) is without prejudice to refiling.
Therefore, approval of the applications listed in the table, and all amendments and supplements thereto, is hereby withdrawn as of May 2, 2018. Introduction or delivery for introduction into interstate commerce of products without approved new drug applications violates section 301(a) and (d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331(a) and (d)). Drug products that are listed in the table that are in inventory on May 2, 2018 may continue to be dispensed until the inventories have been depleted or the drug products have reached their expiration dates or otherwise become violative, whichever occurs first.
Health Resources and Service Administration (HRSA), Department of Health and Human Services (HHS).
Notice of meeting.
In accordance with the Federal Advisory Committee Act, notice is hereby given that a meeting is scheduled for the National Advisory Committee on Rural Health and Human Services (NACRHHS). This meeting will be open to the public. Information about the NACRHHS and the agenda for this meeting can be obtained by accessing the NACRHHS website at
The meeting will be held on April 16, 2018, from 8:45 a.m.-5:00 p.m. EDT, April 17, 2018, from 8:30 a.m.-5:15 p.m. EDT, and April 18, 2018, from 8:30 a.m.-11:00 a.m. EDT.
This meeting will be held at The Saratoga Hilton. The address for the meeting is 534 Broadway Saratoga Springs, NY 12866-2209, (855) 605-0316.
Steve Hirsch, MSLS, Administrative Coordinator, NACRHHS, HRSA, 17W29-C, 5600 Fishers Lane, Rockville, MD 20857, Telephone (301) 443-0835, Fax (301) 443-2803.
NACRHHS provides counsel and recommendations to the Secretary with respect to the delivery, research, development, and administration of health and human services in rural areas. During the meeting the Committee will examine the issues of Assessing and Mitigating the Effect of Adverse Childhood Experiences and Health Insurance Markets in Rural Areas; conduct site visits to the Adirondack Health Institute in Glens Falls, New York and St. Vincent de Paul Catholic Church in Cobleskill, New York, to visit the Head Start Program; and summarize key findings and develop a work plan for the next quarter. Members of the public will also have the opportunity to provide comments.
National Vaccine Program Office, Office of the Assistant Secretary for Health, Office of the Secretary, Department of Health and Human Services.
Notice.
As stipulated by the Federal Advisory Committee Act, the Department of Health and Human Services is hereby giving notice that a meeting is scheduled to be held of the National Vaccine Advisory Committee (NVAC). The meeting will be open to the public via teleconference; a public comment session will be held during the meeting.
The meeting will be held on May 3, 2018, from 10:30 a.m. to 12:30 p.m. ET. The confirmed meeting times and agenda will be posted on the NVAC website at
Instructions regarding attending this meeting will be posted one week prior to the meeting at:
National Vaccine Program Office, U.S. Department of Health and Human Services, Room 715H, Hubert H. Humphrey Building, 200 Independence Avenue SW, Washington, DC 20201. Phone: (202) 690-5566; email:
Pursuant to Section 2101 of the Public Health Service Act (42 U.S.C. 300aa-1), the Secretary of Health and Human Services was mandated to establish the National Vaccine Program to achieve optimal prevention of human infectious diseases through immunization and to achieve optimal prevention against adverse reactions to vaccines. The NVAC was established to provide advice and make recommendations to the Director of the National Vaccine Program on matters related to the Program's responsibilities. The Assistant Secretary for Health serves as Director of the National Vaccine Program. The public meeting will be dedicated to the deliberation of the draft recommendations written by
Members of the public will have the opportunity to provide comments at the NVAC meeting during the public comment periods designated on the agenda. Public comments made during the meeting will be limited to three minutes per person to ensure time is allotted for all those wishing to speak. Individuals are also welcome to submit their written comments. Written comments should not exceed three pages in length. Individuals submitting written comments should email their comments to the National Vaccine Program Office (
National Institutes of Health, Department of Health and Human Services.
Notice.
In compliance with the requirement of the Paperwork Reduction Act of 1995 to provide opportunity for public comment on proposed data collection projects, the National Institutes of Health (NIH), Office of the Director (OD) will publish periodic summaries of proposed projects to be submitted to the Office of Management and Budget (OMB) for review and approval.
Comments regarding this information collection are best assured of having their full effect if received within 60 days of the date of this publication.
To obtain a copy of the data collection plans and instruments, submit comments in writing, or request more information on the proposed project, contact: Dr. Dina Paltoo, Director, Division of Scientific Data Sharing Policy, Office of Science Policy, NIH, 6705 Rockledge Dr., Suite 750, Bethesda, MD 20892, or call nontoll—free number (301) 496-9838, or Email your request, including your address to:
Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires: Written comments and/or suggestions from the public and affected agencies are invited to address one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the function of the agency, including whether the information will have practical utility; (2) The accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) Ways to enhance the quality, utility, and clarity of the information to be collected; and (4) Ways to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
OMB approval is requested for 3 years. There are no costs to respondents other than their time. The total estimated annualized burden hours are 4,198.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable materials, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Substance Abuse and Mental Health Services Administration, HHS.
Notice.
The Department of Health and Human Services (HHS) notifies federal agencies of the laboratories and Instrumented Initial Testing Facilities (IITF) currently certified to meet the standards of the Mandatory Guidelines for Federal Workplace Drug Testing Programs (Mandatory Guidelines).
A notice listing all currently HHS-certified laboratories and IITFs is published in the
If any laboratory or IITF has withdrawn from the HHS National Laboratory Certification Program (NLCP) during the past month, it will be listed at the end and will be omitted from the monthly listing thereafter.
This notice is also available on the internet at
Giselle Hersh, Division of Workplace Programs, SAMHSA/CSAP, 5600 Fishers Lane, Room 16N03A, Rockville, Maryland 20857; 240-276-2600 (voice).
The Department of Health and Human Services (HHS) notifies federal agencies of the laboratories and Instrumented Initial Testing Facilities (IITF) currently certified to meet the standards of the Mandatory Guidelines for Federal Workplace Drug Testing Programs (Mandatory Guidelines). The Mandatory Guidelines were first published in the
The Mandatory Guidelines were initially developed in accordance with Executive Order 12564 and section 503 of Public Law 100-71. The “Mandatory Guidelines for Federal Workplace Drug Testing Programs,” as amended in the revisions listed above, requires strict standards that laboratories and IITFs must meet in order to conduct drug and specimen validity tests on urine specimens for federal agencies.
To become certified, an applicant laboratory or IITF must undergo three rounds of performance testing plus an on-site inspection. To maintain that certification, a laboratory or IITF must participate in a quarterly performance testing program plus undergo periodic, on-site inspections.
Laboratories and IITFs in the applicant stage of certification are not to be considered as meeting the minimum requirements described in the HHS Mandatory Guidelines. A HHS-certified laboratory or IITF must have its letter of certification from HHS/SAMHSA (formerly: HHS/NIDA), which attests that it has met minimum standards.
In accordance with the Mandatory Guidelines dated January 23, 2017 (82 FR 7920), the following HHS-certified laboratories and IITFs meet the minimum standards to conduct drug and specimen validity tests on urine specimens:
Upon finding a Canadian laboratory to be qualified, HHS will recommend that DOT certify the laboratory (
The following laboratory voluntarily withdrew from the NLCP effective March 16, 2018:
Federal Emergency Management Agency, DHS.
Notice and request for comments.
The Federal Emergency Management Agency (FEMA) will submit the information collection abstracted below to the Office of Management and Budget for review and clearance in accordance with the requirements of the Paperwork Reduction Act of 1995. The submission will describe the nature of the information collection, the categories of respondents, the estimated burden (
Comments must be submitted on or before May 2, 2018.
Submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the Desk Officer for the Department of Homeland Security, Federal Emergency Management Agency, and sent via electronic mail to
Requests for additional information or copies of the information collection should be made to Director, Information Management Division, 500 C Street SW, Washington, DC 20472, email address
This proposed information collection previously published in the
FEMA is also providing a clarification to both the ISP and RSP applications by modifying the first sentence in option B from question 8 on the CCP/ISP Crisis Counseling Assistance and Training Program, Immediate Services Program Application/FEMA Form 003-0-1 and option B from question 12 on the CCP/RSP Crisis Counseling Assistance and Training Program, Regular Services Program Application/FEMA Form 003-0-2 to include “local” service areas. The first sentence will now say:
The purpose of this notice is to notify the public that FEMA will submit the information collection abstracted below to the Office of Management and Budget for review and clearance.
Comments may be submitted as indicated in the
Office of the Chief Procurement Officer, HUD.
Notice.
HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comment from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.
Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB Control Number and should be sent to: Colette Pollard, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 7th Street SW, Room 4176, Washington, DC 20410-5000; telephone 202-402-3400 (this is not a toll-free number) or email at
Colette Pollard, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; email Colette Pollard at
Copies of available documents submitted to OMB may be obtained from Ms. Pollard.
This notice informs the public that HUD is seeking approval from OMB for the information collection described in Section A.
This notice is soliciting comments from members of the public and affected parties concerning the collection of information described in Section A on the following:
(1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the proposed collection of information;
(3) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(4) Ways to minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology,
HUD encourages interested parties to submit comment in response to these questions.
Section 3507 of the Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35.
Fish and Wildlife Service, Interior.
Notice of availability; request for comment.
We, the Fish and Wildlife Service (Service), announce the availability of our draft recovery plan for four invertebrate species—Noel's Amphipod, Koster's springsnail, Roswell springsnail, and Pecos assiminea—all of which are listed as endangered under the Endangered Species Act of 1973, as amended (Act). These invertebrate species are currently found in southeastern New Mexico and southwest Texas. The draft recovery plan includes specific recovery objectives and criteria to be met in order to enable us to remove these species from the list of endangered and threatened wildlife and plants. We request review and comment on this plan from local, State, and Federal agencies; Tribes; and the public. We will also accept any new information on the status of these species throughout their range to assist in finalizing the recovery plan.
To ensure consideration, we must receive written comments on or before June 1, 2018. However, we will accept information about any species at any time.
If you wish to review the draft recovery plan, you may obtain a copy by any one of the following methods:
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If you wish to comment on the draft recovery plan, you may submit your comments in writing by any one of the following methods:
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For additional information about submitting comments, see the “Request for Public Comments” section below.
Debra Hill, New Mexico Energy Streamlining Program Coordinator, at the above address and phone number, or by email at
Recovery of endangered or threatened animals and plants to the point where they are again secure, self-sustaining members of their ecosystems is a primary goal of our endangered species program and the Act (16 U.S.C. 1531
Noel's amphipod (
Water quantity decreases and associated spring flow declines are the primary threats to the four invertebrate species. Groundwater pumping in the
The overall strategy involves preserving, restoring, and managing their aquatic habitat, along with the water resources necessary to support resilient populations of these species and the ecosystems on which they depend. More specifically, the strategy is to: Ensure adequate water quantity; protect and improve water quality; protect and restore surface habitats; maintain and manage populations throughout each species' range, including conducting monitoring and research and establishing emergency programs necessary to maintain the species in captivity in case of catastrophic events; control invasive and predatory species; collaborate with partners to achieve conservation goals in balance with community water needs; and engage in community outreach to promote the importance of Bitter Lake National Wildlife Refuge and its diverse array of wildlife, including sensitive, rare aquatic invertebrates, worthy of preserving. Employment of this strategy will lead to preservation of the array of habitat types used by the invertebrates, and protection of genetic diversity (representation) of each of the four species.
The objective of an agency recovery plan is to provide a framework for the recovery of a species so that protection under the Act is no longer necessary. A recovery plan includes scientific information about the species and provides criteria and actions necessary for us to be able to reclassify the species to threatened status or remove it from the List. Recovery plans help guide our recovery efforts by describing actions we consider necessary for the species' conservation and by estimating time and costs for implementing needed recovery measures. This draft recovery plan identifies the following objectives to achieve the goal of species' recovery:
1. Securing the long-term survival of each species with the appropriate number, size, and distribution of populations;
2. Preserving sites that contain the necessary elements for each species' persistence, such as adequate water quantity and quality;
3. Reducing threats within management units so that the four invertebrate species' populations are capable of enduring stressors;
4. Conducting monitoring and research to understand population patterns, maintain genetic diversity, and identify new sites for species' introductions or repatriation; and
5. Working with others to develop long-term management plans and educational approaches that will protect the four invertebrates and inform the community about their habitat needs and ecological importance.
The draft recovery plan contains recovery criteria based on maintaining and increasing population numbers and habitat quality and quantity and mitigating significant threats to the species. Recovery actions to attain the recovery criteria focus on protecting populations, managing threats, maintaining habitat, monitoring progress, and building partnerships to facilitate recovery. When the recovery of the four species approaches these criteria, we will review the species' status and consider downlisting, and, ultimately, removal from the list of federally threatened and endangered species.
Section 4(f) of the Act requires us to provide public notice and an opportunity for public review and comment during recovery plan development. It is also our policy to request peer review of recovery plans (July 1, 1994; 59 FR 34270). In an appendix to the approved recovery plan, we will summarize and respond to the issues raised by the public and peer reviewers. Substantive comments may or may not result in changes to the recovery plan; comments regarding recovery plan implementation will be forwarded as appropriate to Federal or other entities so that they can be taken into account during the course of implementing recovery actions. Responses to individual commenters will not be provided, but we will provide a summary of how we addressed substantive comments in an appendix to the approved recovery plan.
We invite written comments on the draft recovery plan. In particular, we are interested in additional information regarding the current threats to the species and the implementation of the recommended recovery actions.
Before we approve our final recovery plan, we will consider all comments we receive by the date specified in
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Comments and materials we receive will be available, by appointment, for public inspection during normal business hours at our office (see
A complete list of all references cited herein is available upon request from the U.S. Fish and Wildlife Service, Branch of Recovery (see
We developed our draft recovery plan under the authority of section 4(f) of the Act, 16 U.S.C. 1533(f). We publish this notice under section 4(f) Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Bureau of Land Management, Interior.
Notice of public meeting.
In accordance with the Federal Land Policy and Management Act, the Federal Advisory Committee Act, and the Federal Lands Recreation Enhancement Act, the U.S. Department of the Interior, Bureau of Land Management's (BLM) Utah Resource Advisory Council (RAC)/Recreation Resource Advisory Council (RRAC) will meet as indicated below.
The Utah RAC/RRAC will hold a public meeting on May 21 and 22, 2018. The group will meet on May 21 from 1 p.m. to 5:00 p.m. and on May 22 from 8 a.m. to 4:00 p.m.
The meeting will be held at the BLM Utah State Office, 440 West 200 South, Suite 500, Salt Lake City, Utah 84101. Written comments may be sent to the BLM Utah State Office, 440 West 200 South, Suite 500, Salt Lake City, Utah 84101.
Lola Bird, Public Affairs Specialist, BLM Utah State Office, 440 West 200 South, Suite 500, Salt Lake City, Utah 84101; phone (801) 539-4033; or email
Agenda topics include BLM updates from the State Director, fire dispatch study implementation, 2018 fire season outlook, updates for the planning process of Grand Staircase-Escalante and Bears Ears National Monuments, Watershed Protection Task Force, Mountain Accord, Washington County issues, Lake Powell pipeline project, recreation fee proposals, and other planning updates.
A public comment period will take place on May 22 from 2:15 p.m. to 2:45 p.m., where the public may address the RAC/RRAC. Depending on the number of people who wish to speak, and the time available, the time for individual comments may be limited. Written comments may also be sent to the BLM Utah State Office at the address listed in the
The meeting is open to the public; however, transportation, lodging, and meals are the responsibility of the participating individuals.
Before including your address, phone number, email address, or other personal identifying information in your comments, please be aware that your entire comment, including your personal identifying information, may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
43 CFR 1784.4-2
National Park Service, Interior.
Notice.
The National Park Service is soliciting comments on the significance of properties nominated before March 10, 2018, for listing or related actions in the National Register of Historic Places.
Comments should be submitted by April 17, 2018.
Comments may be sent via U.S. Postal Service and all other carriers to the National Register of Historic Places, National Park Service, 1849 C St. NW, MS 7228, Washington, DC 20240.
The properties listed in this notice are being considered for listing or related actions in the National Register of Historic Places. Nominations for their consideration were received by the National Park Service before March 10, 2018. Pursuant to Section 60.13 of 36 CFR part 60, written comments are being accepted concerning the significance of the nominated properties under the National Register criteria for evaluation.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Nominations submitted by State Historic Preservation Officers:
Additional documentation has been received for the following resource:
Nominations submitted by Federal Preservation Officers:
The State Historic Preservation Officer reviewed the following nominations and responded to the Federal Preservation Officer within 45 days of receipt of the nominations) and supports listing the property in the National Register of Historic Places.
Section 60.13 of 36 CFR part 60.
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the scheduling of the final phase of antidumping and countervailing duty investigation Nos. 701-TA-584 and 731-TA-1382 (Final) pursuant to the Tariff Act of 1930 (“the Act”) to determine whether an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports of uncoated groundwood paper from Canada, provided for in subheadings 4801.00.01, 4802.61.10, 4802.61.20, 4802.61.31, 4802.61.60, 4802.62.10, 4802.62.20, 4802.62.30, 4802.62.61, 4802.69.10, 4802.69.20, and 4802.69.30
March 19, 2018.
Calvin Chang (202-205-3062), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained by accessing its internet server (
Specifically excluded from the scope are imports of certain uncoated groundwood paper printed with final content of printed text or graphic. Also excluded are papers that otherwise meet this definition, but which have undergone a supercalendering process. Additionally, excluded are papers that otherwise meet this definition, but which have undergone a creping process over the entire surface area of the paper.
Also excluded are uncoated groundwood construction paper and uncoated groundwood manila drawing paper in sheet or roll format. Excluded uncoated groundwood construction paper and uncoated groundwood manila drawing paper: (a) Have a weight greater than 61 grams per square meter; (b) have a thickness greater than 6.1 caliper,
Also excluded is uncoated groundwood directory paper that: (a) Has a basis weight of 34 grams per square meter or less; and (b) has a thickness of 2.6 caliper mils or 66 microns or less.
For further information concerning the conduct of this phase of the investigations, hearing procedures, and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A and B (19 CFR part 201), and part 207, subparts A and C (19 CFR part 207).
Additional written submissions to the Commission, including requests
In accordance with sections 201.16(c) and 207.3 of the Commission's rules, each document filed by a party to the investigations must be served on all other parties to the investigations (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
These investigations are being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.21 of the Commission's rules.
By order of the Commission.
Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
60-Day notice.
The Department of Justice (DOJ), Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
Comments are encouraged and will be accepted for 60 days until June 1, 2018.
If you have additional comments, particularly with respect to the estimated public burden or associated response time, have suggestions, need a copy of the proposed information collection instrument with instructions, or desire any additional information, please contact Desiree Dickinson either by mail at Firearms and Explosives Imports Branch, 244 Needy Road Martinsburg, WV 25405, by email at
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
—Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
—Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
—Evaluate whether and if so how the quality, utility, and clarity of the information to be collected can be enhanced; and
—Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
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If additional information is required contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE, 3E.405A, Washington, DC 20530.
On February 16, 2017, the Assistant Administrator, Diversion Control Division, Drug Enforcement Administration, issued an Order to Show Cause to Bernard Wilberforce Shelton, M.D. (hereinafter, Registrant), which proposed the revocation of his DEA Certificates of Registration Nos. BS9770961 and FS6457407, as well as the denial of any pending application to renew these registrations or for any other registration. GX 2, at 1. As grounds for the proposed actions, the Government alleged that Registrant's continued registration is “inconsistent with the public interest” and that he is without state authority to handle controlled substances in the State of Michigan, the State in which he holds his registrations.
With respect to the Agency's jurisdiction, the Show Cause Order alleged that Registrant holds two
As to the substantive grounds for the proceeding, the Show Cause Order alleged that the Michigan Department of Licensing and Regulatory Affairs (hereinafter, DLRA) summarily suspended Registrant's Michigan Medical License on January 12, 2017, and that pursuant to Mich. Comp. Laws § 333.7311(6), “a controlled substance license is automatically void if a licensee's license to practice is suspended or revoked under Article 15 of the Code.”
Next, the Show Cause Order alleged that Registrant violated Federal law on numerous occasions when he issued controlled substance prescriptions to four patients outside the usual course of professional practice and for other than a legitimate medical purpose, and that these “multiple instances of unlawful prescribing in violation of federal law weigh[] in favor of the revocation of [his registration].”
The Show Cause Order then alleged that between October 2013 and February 2016, Registrant failed to comply with Federal and State law and the Michigan minimal standards when he issued controlled substance prescriptions to an undercover investigator (hereinafter, UC) and three other patients, D.S., A.L. and R.H.
Specifically, the Show Cause Order alleged that on April 1, May 1 and June 15, 2015, Registrant issued prescriptions to the UC for hydrocodone-acetaminophen, a schedule II controlled substance, and alprazolam, a schedule IV controlled substance, which were not for a legitimate medical purpose and outside the scope of professional practice.
Next, the Show Cause Order alleged that Registrant issued a total of 73 prescriptions to patients D.S., A.L., and R.H., “despite failing in most instances to conduct an appropriate medical examination and meeting the minimal medical standards required under Michigan law in prescribing controlled substances (or documenting such in the patient's file),” in violation of Federal and Michigan law.
Specifically, the Show Cause Order alleged that “[f]rom on or about January 12, 2015, through on or about February 29, 2016,” Registrant issued to D.S. 14 prescriptions for oxycodone 30 mg, a schedule II controlled substance; two prescriptions for phendimetrazine tartrate 105 mg, a schedule III controlled substance; four prescriptions for phentermine 37.5 mg and five prescriptions for Ultram (tramadol) 50 mg, both schedule IV controlled substances.
With respect to A.L., the Show Cause Order alleged that between October 17, 2013 and May 6, 2014, Registrant issued to her three prescriptions for Norco (hydrocodone/acetaminophen), then a schedule III controlled substance; three prescriptions for Adipex (phentermine) 37.5 mg, two prescriptions for Xanax (alprazolam) 2 mg, and three prescriptions for Soma (carisoprodol) 350 mg, and authorized two refills for each prescription.
The Show Cause Order further alleged A.L.'s medical records show that she presented various red flags and that “there is no documentation in [her] medical records demonstrating that [Registrant] conducted any appropriate medical examination or review to address or resolve these indicators of possible abuse and/or diversion.”
The Order also alleged that on a “Health History Questionnaire” which A.L. completed when she first became Registrant's patient, she listed the drugs she was currently taking as including Roxicodone, Xanax and Soma, and that
With respect to patient R.H., the Show Cause Order alleged that from June 2015 through February 24, 2016, Registrant issued to him 10 prescriptions for Norco (hydrocodone-acetaminophen
The Show Cause Order also alleged that on six other occasions in 2011, Registrant prescribed other variations of this cocktail to R.H. despite the presence of red flags in his medical records.
The Show Cause Order further alleged that R.H.'s urine drug test results showed signs of dangerous drug use or drug dependency. The Order alleged that on seven occasions during 2015 through 2016, R.H. tested positive for amphetamines and that on three occasions during 2015, he tested positive for benzodiazepines and that Registrant “had not prescribed” either class of drugs to him in the months preceding the positive results.
The Show Cause Order then asserted that Registrant “fail[ed] in most instances to conduct an appropriate medical examination” and failed to meet “the minimal medical standards required under Michigan law in prescribing controlled substances (or documenting such in the patient's file).”
The Show Cause Order notified Registrant of his right to request a hearing on the allegations or to submit a written statement in lieu of a hearing, the procedure for electing either option, and the consequence for failing to elect either option.
On February 23, 2017, a DEA Special Agent and a Diversion Investigator (DI) personally served Registrant with the Order to Show Cause at his office located at 30140 Harper Avenue, Suite #300, Saint Clair Shores, Michigan. GX 31 (Declaration of Special Agent), at 4. According to the Agent, Registrant signed a DEA Receipt for the Show Cause Order.
On May 8, 2017, the Government filed its Request for Final Agency Action (RFAA) with my Office and forwarded the evidentiary record, stating that more than 30 days have passed since Registrant was personally served, and DEA has not received a request for a hearing or any other reply from Registrant. RFAA, at 1.
Based on the Government's representations that more than 30 days have now passed since the date of service of the Show Cause Order and that Registrant has not submitted a request for a hearing or any other reply including a Corrective Action Plan, I find that Registrant has waived his right to a hearing or to submit a written statement in lieu of a hearing. 21 CFR 1301.43(d). I therefore issue this Decision and Final Order based on relevant evidence contained in the record submitted by the Government. 21 CFR 1301.43(d) & (e). I make the following findings of fact.
Registrant is the holder of DEA Certificate of Registration No. FS6457407, pursuant to which he is authorized to dispense controlled substances in schedules II—V, at the registered location of 21700 Greenfield Road, Oak Park, Michigan. GX 1 (Copy of Registrations). This registration does not expire until February 29, 2020.
Registrant holds a license to practice medicine in the State of Michigan, as well as several controlled substance and drug control licenses issued by the Michigan Board of Pharmacy. GX 30, at 1-2. However, on January 12, 2017, the Director of the Bureau of Professional Licensing, Michigan Department of Licensing and Regulatory Affairs (DLRA), ordered the summary suspension of Registrant's medical license based on the Department's “find[ing] that the public health, safety, and welfare requires emergency action.”
According to the online records of the DLRA, of which I take official notice,
The DLRA also required that Registrant pay a $10,000 fine.
In January 2015, DEA began its investigation of Registrant after receiving information from the St. Clair Shores Police Department and Michigan Blue Cross/Blue Shield (MBCBS) about the investigation they were conducting of Registrant. GX 31, at 1 (Declaration of Special Agent). DEA then initiated this investigation, which included supervising three undercover visits by an MBC/BS investigator (hereinafter, also referred to as UC) to Registrant at his office in St. Clair Shores.
During the interview, Registrant informed the SA and DI about “his [patient] protocols . . . including how his office conducts drug screens and his new patient procedures, how he conducts physical exams on his patients, and how he determines what controlled substances to prescribe over time.”
The same day, the St. Clair Shores Police Department executed a state search warrant at Registrant's office and a second warrant at his residence.
On approximately February 22, 2016, the SA subpoenaed various patient records, and Registrant provided copies of the electronic patient records that were requested.
On April 1, 2015, the MBC/BS Investigator (UC) conducted the first of three undercover visits to Registrant at his St. Claire Shores Medical office. GX 12, at 5. During each visit, he posed as patient D.H., whose occupation was driving.
At the visit, the UC filled out new patient paperwork which included a registration form, a health history questionnaire, a pain questionnaire, and signed a narcotics contract. GX 12, at 5, 6-9, 11-12, 13-14. On the Health History Questionnaire, the UC wrote the name of a referring doctor and stated that his last exam had been in the “summer 2014,” and that “Nerves” and “Back” were “medical problems that other doctors have diagnosed.”
The UC also filled out a Pain Questionnaire.
UC also signed a narcotic contract, stating that he would use a Walgreens pharmacy.
The video recording and transcript of the visit show that after he filled out the paperwork, he saw a nurse in an exam room, who asked a series of questions from a form while taking notes, including: “Have anxiety? I noticed that you take uh . . . .” GX 4, at 3. UC stated “I don't know what you call it. . . uh . . . you know my nerves get jacked up and what not. I don't know what you call it.”
The nurse asked: “As far as your medical history goes you want me just . . . to put anxiety down?” GX4, at 3. UC stated: “Whatever you call that, I don't know what the word,” which prompted the nurse to ask: “What brings you here?”
Following a discussion of Registrant's background, the Nurse then told UC that Registrant “drug test[s] everybody.” GX 4, at 4. As the Nurse proceeded with obtaining his weight, UC said that he was “cool,” that he did not “want to cause any problems for anybody” including Registrant, and that he was “[m]ore or less healthy. You know what I'm saying?”
After determining UC's marital status, the nurse said: “So, basically, you don't even—you don't have any problems besides the little bit of anxiety and your back gets stiff because of driving.” GX 4, at 5. UC replied: “Yeah, yeah. You got it.”
The nurse continued to take UC's vitals as the two discussed his work as a driver, after which UC mentioned a patient in the lobby who, in UC's words, was “yip-yapping and jaw-jacking.” GX 4, at 6-7. The nurse denied that patients could easily get their prescriptions and stated that patients were tested and “if they have other stuff in their system they cannot get their script . . . because they could drop dead if they mix.”
As the nurse continued to review UC's medical history and discussed various subjects with him, UC noted that a sign on the wall “says our office is no longer writing prescriptions for . . . ah . . . oxycodone or [R]oxicodone. Is that what that says?” GX 4, at 11. The nurse replied: “I don't think it says that. He writes that.”
Registrant eventually entered the exam room, greeted UC while donning a headphone set connected to the computer, resolved an issue with another patient, and appeared to dictate and record into the computer while he spoke to UC. GX 4, at 14. The nurse informed Registrant that UC was a new patient, and Registrant read aloud UC's height, weight, age and occupation from the computer screen.
Registrant confirmed with UC that he drove for a living, and asked: “And you have pain or what?” “What is your problem mostly?” GX 4, at 17. UC stated: “My back gets stiff because I drive a lot so sitting down too much. My back, you know, so it's stiff pretty much.”
Registrant then asked: “So what can I give you today to help you out?”
Thereafter, Registrant resolved a problem with accessing the dictation software on his computer and began dictating into it, stating that UC “is here for his first visit. . . . He is suffering also from anxiety and back spasms due to his long sitting. He currently does not have a CDL.” GX 4, at 18. After UC told Registrant that he drove eight to 12 hours a day, Registrant stated: “He denies drinking or using any stimulants such as methadone.”
Registrant then asked UC if he “suffered from any childhood mental disorder” such as “attention deficit” disorder. GX 4, at 18. UC said: “Well . . . yeah. I don't know what they called it, but I didn't do very good in school.”
UC told Registrant that he was “[p]retty much a healthy guy” and “I try to take care of myself.” GX 4, at 19. Continuing, UC said: “Drink a little too much on the weekends sometimes, but you know.”
Registrant then told UC: “You know in this business of what I do, I don't know who is who. I have to be very careful when patients come in here.” GX 4, at 19. UC replied: “Oh you don't want trouble makers coming in here” and Registrant said:
Not the trouble makers. You know people come in here in all different shapes and forms. Sometimes they are investigators. Sometimes they are undercover cops.
Sometimes they're anything and when I miss something it's just the right time for them to jump on me for something. So don't be worried that I'm paying attention to almost everything, you know. Did they give you a urine screen and test?
Again looking at his computer screen, Registrant stated: “Your last physician recorded here was Dr. Vora Kandarp. He gave you Norco. He also gave you Xanax 0.5mg. He also gave you Naproxen. You saw a Dr. Miky in September.” GX 4, at 19. UC said, “I did,” after which Registrant named three other doctors who he believed UC had seen in July and May of the previous year, noted that one of doctors had prescribed Adderall, and named the drug store which had filled this prescription.
UC then asked Registrant: “How do you see that on there? You guys on the
Registrant then moved on to UC's use of Xanax, noting that “it seems like you started with .25 Xanax. You're up to .5 now, double it, to 60, that's in December. Is that sufficient for you?” GX 4, at 20. UC said “Yeah . . . Probably,” and Registrant said: “Okay. I will do that for you, sir.”
Registrant further noted, “And . . . you did get a few pain medication” and asked: “You want that too?” GX 4, at 20. UC said “[y]es” and Registrant said “[a]lright.”
Registrant then stated: “It's just the good thing is nothing is hidden anymore, you know. You can't come and hide anything.” GX 4, at 20. Continuing, Registrant said: “And these medications are good medications.” Registrant then discussed the dosing of two non-controlled medications he was prescribing (Baclofen and Naproxen).
Registrant proceeded to dictate dosing instructions for the prescriptions and asked UC which pharmacy he used. GX 4, at 22. UC asked if there was “a good pharmacy around here” or if he could “take them on paper and go wherever I want?”
As the visit was about to end, Registrant noted that “we need to get a urine from him” and added: “All the new patients—did they draw blood from you? You'll give a urine on the way out.” GX 4, at 23. UC said he wasn't “too good with needles” and avoided the blood test but provided a urine sample.
In the subjective section of the visit note, Registrant documented UC's chief complaint as: “I drive for a living my back gets very stiff anxiety as well.” GX 12, at 16. Under “History of Present Illness,” Registrant wrote that UC:
The visit note's Review of Systems section contained fourteen different areas.
In the “Physical Examination” section, Registrant noted UC's “General Appearance” as: “Patient appears to be appropriate for age dressed appropriate for work responded to questions and no acute distress at this time.”
Yet Registrant then noted diagnoses of “Spasm of Muscle,” “Anxiety State not Otherwise Specified,” as well as “Attention or Concentration Deficit.”
As for Registrant's treatment plan, he listed only medications, which included “naproxen 500 mg,” “hydrocodone 7.5 mg-acetaminophen 325 mg,”
UC's medical file includes the report of the urine drug screen obtained at his April 1 visit, as well as a report run on the same date from the Michigan Automated Prescription System (MAPS). GX 12, at 20 (UDS report);
As for the MAPS report, it showed that on December 15, 2014, UC had last filled prescriptions which were issued by Dr. Vora of Gladwin, Michigan for 90 tablets of hydrocodone/apap 7.5/325 mg and 60 tablets of alprazolam .5 mg.
The Government also submitted a declaration by the UC. GX 32. With respect to the April 1 visit, UC stated that Registrant reviewed his alias's purported medical history and saw that he had seen at least three other doctors in the months prior to his first visit, but did not conduct any further inquiry or follow up with him on that issue.
UC further stated that he reviewed Registrant's patient records for him and determined that portions of it either
For instance, the patient record lists “spasm of muscle” as one diagnosis, even though I did not complain of spasms during the visit. And the record states that I “den[ied] drinking” even though I indicated that I do drink. The record also documents findings from a physical exam in categories such as “Eyes,” “ENT,” “Cardiovascular,” “Muscoskeletal” and “Neurologic” even though other than the taking of my vitals no physical exam was performed during the visit.
On May 1, 2015, UC again saw Registrant at the St. Claire Shores clinic. GX 12, at 22; GX 6 (video recording of visit). After UC provided a urine sample, a medical assistant (MA) took his vitals and UC asked if he could get paper prescriptions. GX 7, at 12 (transcript of recording). The MA asked what medications he was taking, UC said “Norco and Xanax” and that he had gotten them last month.
The MA then asked: “[W]hat's bothering you actually?” GX 7, at 12. UC replied: “Just refills. I'm just here for refills. I'm just here for my back pills and my nerves.”
After she confirmed that “just your back is [the] problem,” the MA asked UC if he “had a back injury before?” GX 7, at 13. UC said that he didn't know and didn't “know what it was.”
The MA then asked if he had an “anxiety problem?” GX 7, at 13.
UC filled out the questionnaire, and after the MA asked him if he had undergone various tests and had his blood drawn, UC was escorted to Registrant's office where the visit took place. Notably, the video shows that Registrant sat behind his desk for the duration of the visit, which lasted approximately three and a half minutes.
Registrant greeted the UC, confirmed his name, checked his computer screen, and discussed his lunch order with an unidentified employee, after which he asked UC about his insurance, and finally inquired if “the medication [he] had last time went well?” GX 7, at 16-17; UC replied “Yep.” After commenting about UC's blood pressure and height, Registrant asked: “So you're okay with what we have?”
Registrant and UC proceeded to discuss the latter's job as a driver for a car transporter and cars in general, and were interrupted by the MA. GX 7, at 18-20. While Registrant discussed another patient with the MA, she handed several paper prescriptions to Registrant. Registrant signed the prescriptions and handed them to UC, saying, “Here, sir” and “Alright, Take care.”
The evidence includes a visit note dated May 1, 2015, which lists UC's Chief Complaint as: “I am having lower back pain with anxiety problem[.]” GX 12, at 22. In the note's Review of Systems section, Registrant documented: “BJE/Musculoskeletal: “Back Pain:—.Negative for Arhitis [sic], Joint Pain, Joint Swelling, Muscle Cramps, Muscle Weakness, Stiffness, Leg Cramps.”
In the Physical Examination section, Registrant noted under “General Appearance,” that “patient doesn't seems [sic] to be in any distress, appropriate to respond to questions alert,” and under “Muscoskeletal,” he noted “Limited Motion:—Arthritis.”
In the Plan section of the note, Registrant did not list any prescriptions.
A result sheet for the urine drug screen which was done on this date and apparently tested by Registrant's clinic
In his declaration, UC stated that Registrant “did not conduct any physical examination” and “sat behind his [office] desk the entire time we talked” which “lasted only a few minutes.” GX 32, at 3. He also stated that he had reviewed Registrant's patient records for the May 1, 2015 visit and determined that “portions of them either misstate my statements during the visit or falsely indicate the extent to which I received (or did not receive) a medical examination.”
On June 15, 2015, UC again saw Registrant. GX 9 (Video Record), GX 10 (transcript), GX 32 (UC's Declaration);
After UC noted that the last visit had taken place in Registrant's office and that he had “sat across from the doctor who wrote me up,” the nurse asked: “you just needed your refills?” GX 10, at 5. UC said: “Yeah. That's all I need. I'm easy. Easy for sure.”
The nurse accessed UC's electronic medical record and asked: “So you're here for meds?”
The nurse had UC fill out some paperwork, after which she proceeded to question UC as to whether he had experienced various symptoms including appetite problems, chills, fatigue, fevers, night sweats, weight gain or loss, ringing ears (which prompted UC to say that “[m]y ears only ring after I drink a jug of moonshine”), blurry or double vision, coughing, difficulty breathing, wheezing, snoring, chest pain, or heart skippings; UC answered “no” to each of these. GX 10, at 9-10; GX 9, VR 3, at 13:39:26-13:43:52.
Continuing, the nurse asked UC if he had “[a]ny muscular skeletal problems? Pain? Back pain, joint pain, and arthritis? No? No back pain?” GX 10, at 10. UC stated: “I got like, you know, the normal,” to which the nurse said, “No, I don't” and asked again: “You got back pain?”
The nurse then asked: “Any anxiety, depression?” GX 10, at 10. UC replied: “No. Just my nerves get jacked up a little bit, but,” prompting the nurse to ask: “Panic attacks?”
The nurse stated: “Makes perfect sense” and asked if UC had “[a]ny memory loss?”
The nurse then asked what medications UC was taking; he answered “Norco, Xanax, Baclofen” and “sometimes” Naproxen. GX 10, at 11. The Nurse asked UC about his daily dosing for each drug, before asking if he had “been out of some of these meds?”
The nurse and UC discussed what pharmacy he used, stating that Registrant wanted to have one in case UC needed to have something called in, and that it was easier for e-scripting. GX 10, at 12. The nurse then encountered some difficulty with the electronic records and stated she was “just putting no symptoms, because I'm not going through all that again. We already went through it.”
After a discussion of the use of suboxone, the nurse asked: “Did you say you have joint pain, back pain?” GX 10, at 15. UC replied: “My back's stiff, but when I take that Norco, I'm cool” and asked if “[t]that make[s] sense?”
UC and the nurse then went to Registrant's office, where the latter was seated behind his desk and an MA was seated facing him. During this period, the nurse and MA remained in the office, and Registrant asked UC if he was a new patient. GX 9, at 16. After UC said “No,” Registrant asked: “You a regular? How many times?”
After several minutes of discussing whether Registrant remembered UC, the nurse told Registrant, “he just needs these four,” and that “he needs them printed.” GX 10, at 17. Apparently referring to the pharmacy UC wanted to use, Registrant asked UC if he didn't know which pharmacy he normally went to and whether he went “to different people?”
Registrant and UC then discussed where the latter worked as well as Registrant's car and its gas mileage, after which Registrant demonstrated the versatility of a Bluetooth speaker system in his office, followed by the MA, Registrant and UC discussing their musical tastes and sharing stories about Registrant's daughter. GX 10, at 17-20. As the video shows, during the course of this conversation, Registrant checked his computer screen, signed the prescriptions which he handed to the nurse, who in turn handed them to the UC saying “[y]ou're all set,” UC asked “Am I good, ok?” and Nurse said “yep.”
The visit note lists UC's chief complaint as “I am having lower back pains and anxiety.” GX 12, at 28. In the Review of Systems section, Registrant again noted “Stiffness” under BJE/Muscoskeletal; however, he also noted “negative” for each of the symptoms that were listed including “back pain” and “muscle cramps.”
In the Physical Exam section, Registrant noted under “General Appearance” that “patient states hes [sic] very anxious appears to be in mild pain alert to question and appropriate with his response.”
As for his diagnoses, Registrant again listed “Attention or Concentration Deficit,” “Spasm of Muscle” and “Anxiety State Not Otherwise Specified,” and noted “7/22/2015” as the date of both diagnosis and onset for
As for his plan, Registrant listed hydrocodone/apap 7.5/325 mg, Xanax 0.5 mg, as well as Baclofen 10 mg and Naproxen 500 mg.
UC's patient file includes a report for a urine drug sample collected from him at the June 15, 2015 visit which was tested at Registrant's clinic the same day. The report noted that neither benzodiazepines or opiates were detected and listed the results as “normal.”
In his declaration, UC stated that he told Registrant's staff that when he ran out of medication, he obtained controlled substances from a neighbor to fill the gap between visits and that neither Registrant nor his staff conducted any further inquiry on this issue. GX 32, at 3. UC also stated that Registrant did not conduct any physical examination and that the portion of his visit with Registrant occurred in Registrant's office, where Registrant “sat behind his desk the entire time.”
The Government retained Dr. R. Andrew Chambers, M.D., to review the videos, transcripts and prescriptions related to the undercover visits made by the UC investigator, as well as the medical files for three patients, D.S., A.L. and R.H., which were obtained during the investigation. Dr. Chambers is an addiction psychiatrist in Indiana. GX 33 (Expert's Declaration). He is also an Associate Professor of Psychiatry at the Indiana University (IU) School of Medicine in the IU Neuroscience Center where he trains psychiatrists and physicians on the diagnosis and treatment of mental illness and drug addiction.
Dr. Chambers stated that he reviewed various materials to familiarize himself with the standard of care for the prescribing of controlled substances in Michigan, including the Michigan Board of Medicine's Guidelines for the Use of Controlled Substances for the Treatment of Pain, (hereinafter, “Michigan Guidelines”), as well as various state laws, a document of the Michigan Board of Pharmacy entitled “Pharmacy—Controlled Substances,” and information posted by the Michigan Advisory Committee on Pain and Symptom Management.
Dr. Chambers stated that “as a professor and practicing psychiatrist, I have an understanding of how to prescribe controlled substances and the risks associated with doing so. I am also familiar with how doctors and practitioners should conduct themselves when prescribing controlled substances for a legitimate medical purpose in the usual c[o]urse of their profession.”
First, in accordance with Michigan state law, any controlled substance must be prescribed for a legitimate or professionally recognized therapeutic purpose. To determine that, the practitioner must take a complete medical history of the patient and conduct an adequate physical examination to determine if there is a legitimate medical basis for so prescribing. Second, as explained in the Michigan Guidelines, “when evaluating the use of controlled substances for pain control, . . . [a] complete medical history and physical examination must be conducted and documented in the medical record. The medical record should document the nature and intensity of the pain, current and past treatments for pain, underlying or coexisting diseases or conditions, the effect of the pain on physical and psychological function, and history of substance abuse.” The guidelines also instruct on providing a written treatment plan, obtaining informed consent and agreement for treatment, conducting a periodic review at “reasonable intervals based on the individual circumstances of the pain,” and “referring the patient as necessary for additional evaluation and treatment in order to achieve treatment objectives.” Third, practitioners must keep accurate and complete records of the forgoing and other aspects of medical care. Although that requirement is explicitly stated in the Michigan Guidelines, I can also [] attest based on my knowledge and experience that keeping accurate and complete patient records is required to meet the standard of care for the prescribing of any controlled substance, not just that which relate to pain control.
Dr. Chambers also stated that he was “aware of red flags, or possible indicators of potential abuse, addiction or diversion, and the need for red flags to be addressed and resolved by a practitioner.”
I find that Dr. Chambers is qualified to provide an expert opinion on the standards of professional practice for prescribing controlled substances under the Michigan Board's Guidelines and Michigan law, as well as the standard of care generally with respect to the treatment of both pain and anxiety. I also find that Dr. Chambers is qualified to provide expert testimony as to the risks associated with prescribing controlled substances.
Dr. Chambers provided a written report regarding Registrant's prescribing of controlled substances to UC and three other patients (D.S., R.H., and A.L.). With respect to UC, Dr. Chambers stated that he “reviewed the undercover videos, transcripts, and prescriptions,” as well as the medical records related to each of the three visits.
Dr. Chambers opined that Registrant prescribed both hydrocodone, an opioid, and alprazolam, a
Dr. Chambers opined that at UC's first visit, Registrant failed to do a “proper evaluation of current substance use symptoms or substance disorder history.” GX 33, Attachment B, at 19. As Dr. Chambers explained, UC had admitted to significant alcohol use at this visit yet Registrant did not further question UC about his alcohol use.
With respect to Registrant's diagnoses, Dr. Chambers opined that none of them was properly supported. As for the diagnosis of muscle spasm, Dr. Chambers noted that “there was no physical exam . . . to confirm muscle spasm or any other somatic source of pain or muscular-skeletal disorder.”
As for the diagnosis of anxiety, Dr. Chamber reiterated that Registrant did not perform an “adequate psychiatric evaluation.”
Dr. Chambers observed that while Registrant went over the dosing instructions, he did not caution UC about the risks of combining opioids and benzodiazepines, which “may produce serious hazards for driving”' even though UC said he was professional driver.
Addressing UC's second visit, Dr. Chambers noted that “there [was] no physical examination.”
With respect to UC's third visit, Dr. Chambers noted that UC had “again ma[de] comments that he engage[d] in significant drinking.”
Dr. Chambers also noted that UC stated that because his third appointment was two weeks late, he had run out of medications and had obtained controlled substances from his neighbor.
As for UC's interaction with Registrant, Dr. Chambers noted that this occurred in Registrant's office, that the entire encounter lasted eight minutes, during which “there [was] essentially no clinical evaluation of the patient to assess symptoms, illness course or treatment response,” and “the only questions” asked by Registrant were “where the patient work[ed] and what pharmacy he use[d].”
In addition, Dr. Chambers noted that Registrant falsified the visit note in various respects. These include: (1) The statement that UC “appears to be in mild pain,” which Dr. Chambers opined was inconsistent with the UC's “voice, affect and thought content,” notwithstanding that the video does not show how UC appeared; (2) the statement that “patient states he is very anxious,” which UC “never stated”; and (3) the exam findings of “limited motion, spasm, tenderness,” as well as “abnormal reflexes” and “weakness/atrophy,” as Registrant “never performed a physical exam or touched the patient.”
Dr. Chambers thus concluded that “the controlled substances prescriptions that [Registrant] issued to the investigator during the undercover visits were not issued for any legitimate medical basis and were issued outside of the standard of care in . . . Michigan.” GX 33, at 4.
Dr. Chambers reviewed the patient file for D.S., whose “typical chief complaints were back and neck pain, and sometimes knee pain” during the five years she was treated by Registrant. GX 33, at 4. According to the patient file, D.S.'s initial appointment with Registrant was on August 31, 2011. GX 14, at 5.
Dr. Chambers found that documented prescription records from Registrant's electronic patient file showed a prescribing pattern which rapidly escalated from D.S.'s initial visit. GX 33, Attachment B, at 7. Dr. Chambers specifically expert found that on August 31, 2011, Registrant prescribed 90 mg/day morphine, yet only two weeks later (September 14, 2011), Registrant doubled the dosage to 180 mg/day.
Dr. Chambers also found that in two years of appointments between January 2014 and February 2016, Registrant's records show diagnoses of pain and depression.
Registrant also repeatedly prescribed other controlled substances including stimulants such as Adipex-P (phentermine) and Bontril (phendimetrazine), which are schedule III and IV controlled substances. GX 13, at 6. Dr. Chambers further found that Registrant's introduction of these stimulants into D.S.'s medication regimen was “not accompanied by a diagnosis or clinical indication in the charting.” GX 33, Attachment B, at 8.
Dr. Chambers identified multiple instances in which D.S.'s medical records indicated that she was suffering from addiction. These include notes on April 11 and May 9, 2012 documenting “dependence,” a note on June 8, 2012 that “she constantly needs more [pain medications],” a note on September 28, 2012 of “medication dependence,” a note on October 26, 2012 of “[m]edication dependence illness,” and a note on November 20, 2012 of “patient continues to display dependence.” GX 33, at 6.
Dr. Chambers also identified multiple instances in which D.S. provided aberrant urine drug screens. These included tests which showed the presence of methadone on February 14, 2014 and buprenorphine on November 10, 2014, neither of which were prescribed to D.S.; the presence of cocaine on March 14, 2014; the presence of psychostimulants (amphetamines) on March 14, April 14, and May 12, 2014 which were not prescribed by Registrant; instances in which the tests were negative for drugs prescribed by Registrant (Nov. 10, 2014 negative test for oxycodone and morphine and June 22, 2015 negative test for oxycodone); and four tests which found levels of oxycodone which were above the recommended therapeutic range of those drugs.
Dr. Chambers explained that the drug test results show “a number of different problems that represent serious warning signs of dangerous drug use and or addiction.”
Dr. Chambers concluded that “D.S. was very likely suffering from drug addiction that was not adequately diagnosed or treated, and [Registrant] failed to act on an overall lack of treatment response to the controlled substance combinations he was prescribing.” GX 33, at 6. He further opined that Registrant “was prescribing dangerous combinations of controlled substances without documenting a medical need for so doing, and he failed to adequately document ongoing examinations and treatment planning . . . and/or he failed to perform these professional functions altogether.”
Registrant treated patient A.L. from January 17, 2011 through April 30, 2014.
Dr. Chambers reviewed 11 controlled substance prescriptions Registrant issued to A.L. between October 17, 2013 and May 6, 2014.
Dr. Chambers observed that “[f]or the most part there are no physical examinations documented in the medical records.” GX 33, at 7. Dr. Chambers also noted that “the combination of Hydrocodone, Alprazolam and Carisoprodol drugs . . . is a prescription `cocktail' known among users and law enforcement as the `Trinity,'” and that it “is widely known to be used non-therapeutically as part of a substance disorder and/or diverted.”
Dr. Chambers also found that “[t]here are numerous signs of addiction” in A.L.'s patient file, beginning with her initial visit with Registrant on January 17, 2011.
Dr. Chambers further noted that A.L.'s medical records documented that she “was possibly engag[ed] in diversion.”
Based on his review of A.L.'s record and the prescriptions, Dr. Chambers concluded that that she “was suffering from a drug addiction that was not adequately diagnosed or treated; [that Registrant] was prescribing extremely dangerous combinations of controlled substances without documenting an appropriate medical context or justification for so doing, and [that he] failed to adequately document ongoing examinations and treatment planning . . . and/or he failed to perform these professional functions altogether.” GX 33, at 8. Dr. Chambers thus opined that “the prescriptions [Registrant] issued to A.L. were not issued for any legitimate medical basis and were issued outside of the standard of care in the state of Michigan.”
Dr. Chambers also reviewed the controlled substances Registrant issued to R.H. from June 2, 2015 through February 24, 2016. According to Dr. Chambers, during this time period, R.H. presented a variety of chief complaints which “included complaints of lower back and hand joint pain, anxiety,
During this period, Registrant issued to R.H. 10 prescriptions for 90 du of hydrocodone/apap 10/325 mg; 10 prescriptions for 60 du of morphine sulfate 100 mg; 10 prescriptions for 120 du of morphine sulfate 30 mg; five prescriptions for 60 du of alprazolam 1 mg, including one which provided for two refills; and two prescriptions for 60 du of carisoprodol 350 mg, each of which provided for two refills.
Dr. Chambers found that “[f]or the most part there are no physical exams documented in the medical records.”
Dr. Chambers noted that R.H.'s records contain “numerous signs of possible addiction or abuse.”
Based upon his review of R.H.'s patient file and prescriptions, Dr. Chambers concluded that he “was suffering from drug addiction that was not adequately diagnosed or treated.”
With respect to the UC and the three other patients, Dr. Chambers opined that:
The evidence reveals that [Registrant] has been engaged in prescribing dangerous levels and combinations of opioid and benzoid drugs to multiple patients in chronic patterns that have no legitimate medical purpose, and are not supported by the evidence base. Moreover, it is precisely these types of controlled substance patterns that are shown by a wealth of biomedical, clinical and epidemiological evidence to produce diversion and to contribute to addiction, worsening mental illness, and premature death. The case evidence suggests to various degrees that all of these outcomes have happened as a result of [Registrant's] prescribing and clinical practices.
This prescribing was also occurring in the absence of minimally adequate practice standards of care by [Registrant], including failures to appropriately evaluate, diagnose and monitor disease processes, and treatment outcomes or treatment side effects. All 4 cases presented strong evidence that patients were suffering with mental illness and addiction of some kind when initially presenting for treatment. In 3 cases, these conditions did not change and/or worsened over time even as they were not appropriately treated, or referred elsewhere for treatment, and even as these conditions were adversely contributed to by the benzoid-opioid combination of drugs [Registrant] was prescribing.
Dr. Chambers further opined that Registrant was not practicing in “good faith” as defined by Michigan Code § 333.7333(1).
The prescribing or dispensing of a controlled substance by a practitioner licensed under section 7303 in the regular course of professional treatment to or for an individual who is under treatment by the practitioner for a pathology or condition other than that individual's physical or psychological dependence upon or addiction to a controlled substance, except as provided in this article.
Mich. Code § 333.7333(1). Dr. Chambers thus concluded that “rather than providing legitimate medical care, [Registrant] was actually using the guise of medical practice . . . to deal addictive drugs to patients with untreated addictions and mental illness.” GX 33, Attachment B, at 5.
Dr. Chambers also evaluated the evidence in light of the Michigan Guidelines for the Use of Controlled Substances for the Treatment of Pain. Dr. Chambers explained that the Guidelines “set forth six key components of legitimate medical practice that should be observed in the use of controlled substance for the treatment of pain,” to “include appropriate:
(1) Evaluation (history taking and physical examination, psychiatric screening);
(2) Treatment Planning;
(3) Informed consent (discussion of risks and benefits of medications . . .);
(4) Periodic Review (evaluate and monitoring of treatment progress);
(5) Consultation; and
(6) Medical record keeping.”
Dr. Chambers opined that “there are 2 other key aspects of the evidence that highlight the particularly malignant nature of [Registrant's] practices and prescribing pattern.”
Dr. Chambers thus concluded that “this evidence shows that [Registrant] is performing well below the standard of care, and is a danger to []his patients and the public at large with respect to his prescribing of controlled substances. The evidence is highly suggestive that he is providing prescriptions for addictive substances, not in `good faith' consistent with medical norms, but as a distribution business,
In its Request for Final Agency Action, the Government seeks revocation on two independent grounds. First, it argues that revocation is warranted because Registrant lacks authority under state law to dispense controlled substances. RFAA, at 6 (citing 21 U.S.C. 824(a)(3)). Second, it
Pursuant to 21 U.S.C. 824(a)(3), the Attorney General is authorized to suspend or revoke a registration issued under section 823, “upon a finding that the registrant . . . has had his State license . . . suspended [or] revoked . . . by competent State authority and is no longer authorized by State law to engage in the . . . dispensing of controlled substances.” Moreover, DEA has held repeatedly that the possession of authority to dispense controlled substances under the laws of the State in which a practitioner engages in professional practice is a fundamental condition for obtaining and maintaining a practitioner's registration.
This rule derives from the text of two provisions of the CSA. First, Congress defined “the term `practitioner' [to] mean[] a . . . physician . . . or other person licensed, registered or otherwise permitted, by . . . the jurisdiction in which he practices . . . to distribute, dispense, [or] administer . . . a controlled substance in the course of professional practice.” 21 U.S.C. 802(21). Second, in setting the requirements for obtaining a practitioner's registration, Congress directed that “[t]he Attorney General shall register practitioners . . . if the applicant is authorized to dispense . . . controlled substances under the laws of the State in which he practices.” 21 U.S.C. 823(f). Because Congress has clearly mandated that a practitioner possess state authority in order to be deemed a practitioner under the Act, DEA has held repeatedly that revocation of a practitioner's registration is the appropriate sanction whenever he is no longer authorized to dispense controlled substances under the laws of the State in which he practices medicine.
Here, while the Michigan Board's Consent Order suspended Registrant's medical license for 15 months, the Board's Order further provides that “reinstatement shall not be automatic,” and that Registrant must petition for reinstatement by demonstrating, “by clear and convincing evidence,” that he: (1) Is of “good moral character”; (2) has “the ability to practice the profession with reasonable skill and safety”; (3) has satisfied “the guidelines on reinstatement adopted by the Department”; and (4) “that it is in the public interest for the license to be reinstated.” Consent Order, at 2. Thus, it is far from certain that Registrant will be able to satisfy these conditions and be reinstated to the practice of medicine.
More importantly, this Agency has held that even where a State has imposed a suspension of finite duration of a practitioner's medical license, revocation is nonetheless warranted because the controlling question is not whether a practitioner's license to practice medicine in the State is suspended or revoked; rather, it is whether the Registrant is currently authorized to handle controlled substances in the State.
Thus, because Registrant is no longer currently authorized to dispense controlled substances in Michigan, the State in which he is registered with the Agency, I find that he is not entitled to maintain a DEA registration in the State. Accordingly, I will order the revocation of his existing registration on this ground.
Section 304(a) of the Controlled Substances Act (CSA) provides that a registration to “dispense a controlled substance * * * may be suspended or revoked by the Attorney General upon a finding that the registrant * * * has committed such acts as would render his registration under section 823 of this title inconsistent with the public interest as determined under such section.” 21 U.S.C. 824(a)(4). With respect to a practitioner, the Act requires the consideration of the following factors in making the public interest determination:
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing * * * controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
“These factors are * * * considered in the disjunctive.”
In short, this is not a contest in which score is kept; the Agency is not required to mechanically count up the factors and determine how many favor the Government and how many favor the registrant. Rather, it is an inquiry which focuses on protecting the public interest; what matters is the seriousness of the registrant's misconduct.
Even in a non-contested proceeding, the Government has the burden of producing substantial evidence to support the allegations and its proposed sanction.
With respect to Factor Three, I acknowledge that there is no evidence that Respondent has been convicted of an offense under either Federal or Michigan law “relating to the manufacture, distribution or dispensing of controlled substances.” 21 U.S.C. 823(f)(3). However, there are a number of reasons why even a person who has engaged in criminal misconduct may never have been convicted of an offense under this factor, let alone prosecuted for one.
The Government makes no argument that Factor Five is implicated in this matter.
Under a longstanding DEA regulation, a prescription for a controlled substance is not “effective” unless it is “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” 21 CFR 1306.04(a).
Under the CSA, it is fundamental that a practitioner must establish a bonafide doctor-patient relationship in order to act “in the usual course of . . . professional practice” and to issue a prescription for a “legitimate medical purpose.”
As the Supreme Court has explained, “the prescription requirement . . . ensures patients use controlled substances under the supervision of a doctor so as to prevent addiction and recreational abuse. As a corollary, [it] also bars doctors from peddling to patients who crave the drugs for those prohibited uses.”
Both this Agency and the federal courts have held that establishing a violation of the prescription requirement “requires proof that the practitioner's conduct went `beyond the bounds of any legitimate medical practice, including that which would constitute civil negligence.' ”
Thus, in
However, as the Sixth Circuit has explained, “[o]ne or more of the foregoing factors, or a combination of them, but usually not all of them, may be found in reported decisions of prosecutions of physicians for issuing prescriptions for controlled substances exceeding the usual course of professional practice.”
“Accordingly, under the public interest standard, DEA has authority to consider those prescribing practices of a physician, which, while not rising to the level of intentional or knowing misconduct, nonetheless create a substantial risk of diversion.”
The evidence shows that Registrant unlawfully distributed controlled substances by issuing prescriptions to the UC on multiple occasions outside the usual course of professional practice and for other than a legitimate medical purpose, in violation of 21 U.S.C. 841(a)(1) and 21 CFR 1306.04(a).
The Michigan Guidelines set forth the applicable standards of professional practice for the prescribing of controlled substances in the State. GX 28. The Guidelines provide that:
GX 28. The Guidelines also state that the physician is to keep “accurate and complete records” of the forgoing and other aspects of medical care.
The Government's evidence shows that Registrant dispensed controlled substances to the UC on multiple occasions, notwithstanding his failure to conduct an adequate evaluation, including any physical examination to support a finding that the prescribing of both hydrocodone and the Xanax was medical necessary to treat the UC. GX 3-4, 6-7, 9-10. Dr. Chambers explained that Registrant failed to do a proper evaluation of the UC's substance use even though he admitted to significant alcohol use, did not properly evaluate his psychiatric symptoms even though he said he was using Xanax and the PMP report showed that he had obtained this drug from multiple providers, failed to perform a physical examination of the [UC] at any point, and failed to perform adequate treatment planning. Dr. Chambers further explained that Registrant falsified the medical record by fraudulently documenting in it that the UC denied drinking, as well as by making physical exam findings such as “[l]imited motion, spasm, tenderness, weakness, atrophy, abnormal reflexes,” when he did not perform the tests necessary to make these findings. GX 33, Attachment B, at 22.
Moreover, on the pain questionnaire, the UC did not circle any of the descriptors, did not rate his pain, nor indicate whether his pain interfered with various life activities listed on the form. Yet Registrant made no inquiry as to why the UC left most of the form blank.
Most significantly, during his visit with Registrant, the UC never complained of anything more than back stiffness, made no complaint that he suffered from anxiety and stated that he took Xanax because it kept him from drinking too much on the weekends. Here again, Registrant falsified the medical record by documenting: “Today [the UC] is complaining mostly of [ ] some level of anxiety.” Dr. Chambers further concluded that there was no basis for the various diagnoses which Registrant documented in the UC's record, including anxiety and muscle spasms; he also noted that Registrant made no diagnosis of pain and that opioids are not indicated for muscle spasms.
The UC's second visit with Registrant lasted all of three and a half minutes. As Dr. Chambers explained, the most substantial questions Registrant asked the UC for evaluating his need for the (hydrocodone and alprazolam, were: “Doing OK?” and “Med went well?” Moreover, Registrant did not perform a physical exam during the visit and yet, he again falsified the medical record by noting various exam findings.
As for the third visit, Dr. Chambers noted that Registrant did not address the UC's statements regarding his drinking and statements that he had run out of medication and obtained controlled substances from his neighbor. Dr. Chambers further opined that there was essentially no clinical evaluation of the UC's symptoms, illness course or treatment response. Registrant again falsified the visit note by indicating that the UC “appears to be in mild pain” and “states he is very anxious,” as well as by making physical exam findings of “limited motion, spasm, tenderness,” “abnormal reflexes” and “weakness/atrophy,” when he did not perform the tests necessary to make these findings.
I thus conclude that Registrant acted outside of the usual course of professional practice and lacked a legitimate medical purpose when he issued the prescriptions for hydrocodone and alprazolam at each of the UC's visits. 21 CFR 1306.04(a); 21 U.S.C. 841(a)(1);
I also find that Registrant failed to comply with the Michigan Guidelines, and violated both Michigan Law and the CSA in that he acted outside of the usual course of professional practice and lacked a legitimate medical purpose when he prescribed controlled substances to patients D.S., A.L. and R.H. 21 CFR 1306.04(a);
With respect to D.S., Dr. Chambers found that over the two-year period between January 2014 and February 2016, there was no evidence in the patient file that Registrant performed physical exams other than to take vital signs and that his treatment plan was essentially non-existent. He also found that D.S.'s chart contained multiples notations that she was suffering from addiction but no evidence that Registrant addressed this with her. Most significantly, as Dr. Chambers observed, D.S. provided multiple aberrational drug tests which included: (1) The presence of controlled substances which he did not prescribe on six occasions, including methadone, buprenorphine, cocaine, and amphetamines; (2) the non-presence of controlled substances (oxycodone and morphine) which he had prescribed on two occasions; and (3) the presence of oxycodone above the recommended therapeutic range on four occasions. Yet there is no evidence that Registrant addressed any of these aberrational test results with D.S.
As for A.L., Dr. Chambers found that “for the most part,” Registrant did not document the performance of a physical exam and there is no documentation in the patient file to support Registrant's prescribing of the combinations of narcotics, benzodiazepines, and carisoprodol that he did. GX 33, at 7. Moreover, A.L.'s MAPS report showed that she had seen eight other providers in the year prior to her first visit with Registrant and that she had obtained controlled substances on 50 occasions
With respect to R.H., Dr. Chambers found that “[f]or the most part there are no physical exams documented in the medical records” and “[t]here is no documentation in R.H.'s medical records demonstrating a legitimate medical justification . . . for [Registrant's] prescribing” the “dangerous combination[s]” of narcotics, benzodiazepines, and carisoprodol to R.H. GX 33, at 10. Dr. Chambers also found that R.H.'s urine drug screens showed the presence of controlled substances including amphetamines and benzodiazepines that Registrant did not prescribe to him and that Registrant had also documented that R.H. was overmedicating with respect to Valium. However, R.H.'s medical record contains no indication that Registrant resolved these red flags.
Accordingly, I agree with Dr. Chambers that Registrant lacked a legitimate medical purpose and acted outside of the usual course of professional practice when he issued the various controlled substance prescriptions identified above to D.S., A.L., and R.H. 21 CFR 1306.04(a); 21 U.S.C. 841(a)(1). I also agree with Dr. Chambers that Registrant's prescribing to D.S., A.L. and R.H. violated Mich. Comp. Laws § 333.7401(1) and did not comply with the Michigan Guidelines.
I thus conclude that Registrant's multiple violations of 21 CFR 1306.04 (a), 21 U.S.C. 841(a)(1), and Mich. Comp. Laws § 333.7401(1) are egregious and support the conclusion that he “has committed such acts as would render his registration . . . inconsistent with the public interest.” 21 U.S.C. 824(a)(4).
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 824(a), as well as 28 CFR 0.100(b), I order that DEA Certificate of Registration No. FS6457407 issued to Bernard Wilberforce Shelton, M.D., be, and it hereby is, revoked. I further order that any pending application of Bernard Wilberforce Shelton to renew or modify the above registration, as well as any other pending application for registration be, and it hereby is, denied. This Order is effective immediately.
On December 18, 2017, the Acting Assistant Administrator, Diversion Control Division, Drug Enforcement Administration (DEA), issued an Order to Show Cause to Angela L. Lorenzo, P.A. (Registrant), of Las Vegas, Nevada. The Show Cause Order proposed the revocation of Registrant's Certificate of Registration No. ML0901985 on the ground that she lacks “authority to handle controlled substances in the State of Nevada, the State in which [she is] registered with the DEA.” Order to Show Cause, Government Exhibit (GX) A-3, at 1 (citing 21 U.S.C. 824(a)(3)).
With respect to the Agency's jurisdiction, the Show Cause Order alleged that Registrant is registered as a practitioner in schedules II through V, pursuant to DEA Certificate of Registration No. ML0901985, at the address of 811 N Buffalo Road, Suite 113, Las Vegas, Nevada.
As substantive grounds for the proceeding, the Show Cause Order alleged that on September 29, 2017, the Nevada State Board of Medical Examiners (hereinafter NSBME) “issued an Order of Summary Suspension immediately and indefinitely suspending [her] license to practice medicine in the State of Nevada.”
The Show Cause Order notified Registrant of her right to request a hearing on the allegations or to submit a written statement in lieu of a hearing, the procedure for electing either option, and the consequence for failing to elect either option.
The Government states that on December 19, 2017, a Data Analyst in DEA's Office of Chief Counsel sent a copy of the Show Cause Order by first-class mail to (1) the post office box address provided by Registrant as the “mail to” address on her DEA registration, P.O. Box 36190, Las Vegas, Nevada, and (2) her registered address of 911 N Buffalo Road, Suite 113, Las Vegas, Nevada. Government's “Request for Final Agency Action” (RFFA), at 2 n.2, 3; GX B (Declaration of Data Analyst) at 1-2. The Government also states that only the mailing to the registered address was returned as undeliverable.
On February 1, 2018, the Government forwarded its Request for Final Agency Action and an evidentiary record to my Office. Therein, the Government represents that it has received neither a hearing request nor a written statement from Registrant regarding the Show Cause Order. RFFA, at 2. Based on the Government's representation and the record, I find that more than 30 days have passed since the Order to Show Cause was served on Registrant, and she has neither requested a hearing nor submitted a written statement in lieu of a hearing.
Registrant is a physician's assistant who is registered as a practitioner in schedules II-V pursuant to Certificate of Registration No. ML0901985,
Under the Administrative Procedure Act (APA), an agency “may take official notice of facts at any stage in a proceeding—even in the final decision.” U.S. Dept. of Justice, Attorney General's Manual on the Administrative Procedure Act 80 (1947) (Wm. W. Gaunt & Sons, Inc., Reprint 1979). In accordance with the APA and DEA's regulations, Registrant is “entitled on timely request to an opportunity to show to the contrary.” 5 U.S.C. 556(e); see also 21 CFR 1316.59(e).
On September 28, 2017, the Investigative Committee (IC) of the NSBME issued an “Order of Summary Suspension” to Registrant that “IMMEDIATELY SUSPENDS [her] license to practice medicine.” GX A-1, at 1. Specifically, the IC suspended Registrant's license to practice medicine in the State of Nevada because “the health, safety and welfare of the public is at imminent risk of harm by [Registrant's] continued performance of medical services without supervision, including the prescription of controlled substances, . . . her dishonest conduct, and . . . her continued refusal to comply with the lawful Orders of the [NSBME].”
Thus, I find that that the IC's Order suspending Registrant from practicing medical services, which it stated includes dispensing controlled substances, independently bars Registrant from dispensing controlled substances in Nevada.
Pursuant to 21 U.S.C. 824(a)(3), the Attorney General is authorized to suspend or revoke a registration issued under section 823 of Title 21, “upon a finding that the registrant . . . has had his State license . . . suspended [or] revoked . . . by competent State authority and is no longer authorized by State law to engage in the . . . dispensing of controlled substances.” With respect to a practitioner, DEA has long held that the possession of authority to dispense controlled substances under the laws of the State in which a practitioner engages in professional practice is a fundamental condition for obtaining and maintaining a registration.
This rule derives from the text of two provisions of the CSA. First, Congress defined “the term `practitioner' [to] mean[] a . . . physician . . . or other person licensed, registered or otherwise permitted, by . . . the jurisdiction in which he practices . . . to distribute, dispense, [or] administer . . . a controlled substance in the course of professional practice.” 21 U.S.C. 802(21). Second, in setting the requirements for obtaining a practitioner's registration, Congress directed that “[t]he Attorney General shall register practitioners . . . if the applicant is authorized to dispense . . . controlled substances under the laws of the State in which [s]he practices.” 21 U.S.C. 823(f). Because Congress has clearly mandated that a practitioner possess state authority in order to be deemed a practitioner under the Act, DEA has held repeatedly that revocation of a practitioner's registration is the appropriate sanction whenever she is no longer authorized to dispense controlled substances under the laws of the State in which she engages in professional practice.
Thus, “the controlling question” in a proceeding brought under 21 U.S.C. 824(a)(3) is whether the holder of a practitioner's registration “is currently authorized to handle controlled substances in the [S]tate,”
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 824(a), as well as 28 CFR 0.100(b), I order that DEA Certificate of Registration No. ML0901985, issued to Angela L. Lorenzo, P.A., be, and it hereby is, revoked. I further order that any pending application of Angela L. Lorenzo to renew or modify the above registration, or any pending application of Angela L. Lorenzo for any other registration in the State of Nevada, be, and it hereby is, denied. This Order is effective immediately.
Notice of availability; request for comments.
The Department of Labor (DOL) is submitting the Mine Safety and Health Administration sponsored information collection request (ICR) proposal titled, “Mine Safety and Health Administration Grant Performance Reports,” to the Office of Management and Budget (OMB) for review and approval for use in accordance with the Paperwork Reduction Act (PRA) of 1995. Public comments on the ICR are invited.
The OMB will consider all written comments that agency receives on or before May 2, 2018.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the
Submit comments about this request by mail to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for DOL-MSHA Office of Management and Budget, Room 10235, 725 17th Street NW, Washington, DC 20503; by Fax: 202-395-5806 (this is not a toll-free number); or by email:
Michel Smyth by telephone at 202-693-4129 (this is not a toll-free number) or by email at
This ICR seeks PRA authority for the Performance Reports for Mine Safety and Health Administration Grants information collection. Mine Safety and Health Administration grantees are required by DOL regulations to submit project and final reports.
A grantee submits a technical project report to the MSHA no later than 30 days after quarterly deadlines. A technical project report provides both quantitative and qualitative information and a narrative assessment of performance for the preceding three-month period. This includes the current grant progress against the overall grant goals. Between reporting dates, the grantee informs MSHA of significant developments or problems affecting the organization's ability to accomplish the work.
A grantee provides (1) a final report that summarizes the technical project reports, (2) an evaluation report, and (3) a closeout financial report at the end of the grant period project. These final reports are due no later than 90 days after the end of the 12-month performance period. Federal Mine Safety and Health Act of 1977 section 103(h) authorizes this information collection.
This proposed information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by the OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information if the collection of information does not display a valid Control Number.
Interested parties are encouraged to send comments to the OMB, Office of Information and Regulatory Affairs at the address shown in the
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Notice.
Division of Coal Mine Workers' Compensation, Office of Workers' Compensation Programs, DOL.
The Department of Labor, as part of its continuing effort to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and/or continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA95). This program helps to ensure that requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements on respondents can be properly assessed.
Currently, the Office of Workers' Compensation Programs is soliciting comments concerning the proposed collection: Request to be Selected as Payee (CM-910). A copy of the proposed information collection request can be obtained by contacting the office listed below in the
Written comments must be submitted to the office listed in the
You may submit comments by mail, delivery service or by hand to Ms. Yoon Ferguson, U.S. Department of Labor, 200 Constitution Ave. NW, Room S-3323, Washington, DC 20210; by fax to (202) 354-9647; or by Email to
* Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
* evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
* enhance the quality, utility and clarity of the information to be collected; and
* minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they will also become a matter of public record.
Legal Services Corporation.
Notice of revisions to guidelines.
To provide grantees with the most effective guidance, in 2018 the Legal Services Corporation revised Performance Area Four to refine and expand the areas of inquiry to focus on those criteria for which LSC has found the most deficiencies, particularly Criteria 1 (Board Governance), 4 (Financial Administration), and 7 (General Resource Development). The 2018 revisions codify the work of LSC staff with numerous grantees and provide evidence-based guidance to recipients on how to run a high-performing nonprofit organization.
Lynn Jennings, Vice President for Grants Management, Legal Services Corporation, 3333 K Street NW, Washington, DC 20007, (202) 295-1645,
LSC's Performance Criteria indicate that legal services programs should be led and managed effectively with high-quality governance, administrative systems, procedures, and policies. Good leadership and strong internal operations increase the likelihood of effective program services for clients.
Over the past several years, LSC has observed some areas of weakness in grantee governance through performance quality visits, compliance reviews, and Office of Inspector General (OIG) visits. The 2018 revisions codify the work of LSC staff with numerous grantees and provide evidence-based guidance to recipients on how to run a high-performing nonprofit organization.
Since 2010, LSC's Office of Program Performance has conducted 133 Program Quality Visits of 124 grantees. LSC issued 1,901 Tier One
• Tier One Recommendations are those recommendations that are determined to be significant and will be included in the next Request for Proposal to the grantee.
• Tier One Recommendations are those that
A Tier One Recommendation must:
• be stated in simple straightforward terms such that there is no doubt by the program that a response is required; and
• have an objective, the value of which equals or outweighs any additional burden that the recommendation imposes on the program (does not apply to statutory or regulatory requirements).
This is the background against which LSC evaluated the existing criteria for Performance Area 4. The statistics above gave LSC valuable information about which areas of grantee administration, leadership, and governance needed more rigorous evaluation.
These Performance Criteria are guidelines for ensuring high program quality. They are not requirements. They reflect best practices to which programs should aspire and which they should, to the extent possible and consistent with program resources, attempt to achieve. These revisions do not reflect a change in the purposes of the Performance Criteria stated in the Introduction to the 2007 revised version. The purposes of the Performance Criteria are twofold. First, the Performance Criteria “guide LSC's assessments of program performance generally and in the competitive grants process.” Second, the Performance Criteria serve as a “useful framework for internal program self-evaluations, planning, and program development, as well as external peer reviews and expert assessments by other funding sources.”
LSC will begin using the revised Performance Area 4 on June 1, 2018. LSC management recognizes that it may take time, guidance, and experience for all grantees to adjust to the revisions. LSC will, therefore, provide training and forums to discuss the implementation of the changes. When conducting program assessments, LSC staff will take the scope of the revisions and each program's capacity into consideration when making recommendations.
As the table below indicates, LSC reorganized the order of the Performance Criteria. The current Criterion 3—Overall Management and Administration—includes a limited review of a grantee's technology infrastructure and administration. To more accurately reflect the role technology plays in the daily operations of an organization and in providing efficient and effective client services, LSC proposed creating a separate, new technology criterion, Criterion 3: Technology Infrastructure and Administration. The criterion for Overall Administration and Management would now be Criterion 6, with Internal Communication being folded into the proposed Criterion 6.
Criterion 3.
The Legal Services Corporation's Board of Directors and its six committees will meet April 8-10, 2018. On Sunday, April 8, the first meeting will commence at 2:00 p.m., Eastern Daylight Time (EDT). On Monday, April 9, the first meeting will commence at 9:00 a.m., EDT, with the next meeting commencing promptly upon adjournment of the immediately preceding meeting. On Tuesday, April 10, the first meeting will commence at 9:00 a.m., EDT and will be followed by the closed session meeting of the Board of Directors that will commence promptly upon adjournment of the prior meeting.
Legal Services Corporation, 3333 K Street NW, 3rd Floor F. William McCalpin Conference Center, Washington, DC 20007.
Unless otherwise noted herein, the Board and all committee meetings will be open to public observation. Members of the public who are unable to attend in person but wish to listen to the public proceedings may do so by following the telephone call-in directions provided below.
• Call toll-free number: 1-866-451-4981;
• When prompted, enter the following numeric pass code: 5907707348
• Once connected to the call, your telephone line will be
• To participate in the meeting during public comment press #6 to “UNMUTE” your telephone line, once you have concluded your comments please press *6 to “MUTE” your line.
Members of the public are asked to keep their telephones muted to eliminate background noises. To avoid disrupting the meeting, please refrain from placing the call on hold if doing so will trigger recorded music or other sound. From time to time, the presiding Chair may solicit comments from the public.
Open, except as noted below.
Board of Directors—Open, except that, upon a vote of the Board of Directors, a portion of the meeting may be closed to the public to hear briefings by management and LSC's Inspector General, and to consider and act on the General Counsel's report on potential and pending litigation involving LSC, and on a list of prospective funders.
Institutional Advancement Committee—Open, except that, upon a vote of the Board of Directors, the meeting may be closed to the public to consider and act on recommendation of new Leaders Council invitees and to receive a report on Development activities.
Audit Committee—Open, except that the meeting may be closed to the public to hear a briefing on the Office of Compliance and Enforcement's active enforcement matters.
Governance and Performance Review Committee—Open, except that the meeting may be closed to the public to hear a report on the President's evaluation of other officers.
A verbatim written transcript will be made of the closed session of the Board, Institutional Advancement Committee, and Audit Committee meetings. The transcript of any portions of the closed sessions falling within the relevant provisions of the Government in the Sunshine Act, 5 U.S.C. 552b(c)(6) and (10), will not be available for public inspection. A copy of the General Counsel's Certification that, in his opinion, the closing is authorized by law will be available upon request.
Katherine Ward, Executive Assistant to the Vice President & General Counsel, at (202) 295-1500. Questions may be sent by electronic mail to
Non-confidential meeting materials will be made available in electronic format at least 24 hours in advance of the meeting on the LSC website, at
LSC complies with the American's with Disabilities Act and Section 504 of the 1973 Rehabilitation Act. Upon request, meeting notices and materials will be made available in alternative formats to accommodate individuals with disabilities. Individuals who need other accommodations due to disability in order to attend the meeting in person or telephonically should contact Katherine Ward, at (202) 295-1500 or
U.S. Merit Systems Protection Board.
Notice and request for comments.
This notice announces that the U.S. Merit Systems Protection Board (MSPB) will submit the information collection abstracted below, OMB No. 3124-0015, to the Office of Management and Budget (OMB) for review and clearance of an extension, without
Consideration will be given to all comments received by May 2, 2018.
Submit written comments on the proposed information collection to the MSPB Desk Officer, Office of Information and Regulatory Affairs, Office of Management and Budget, 735 17th Street NW, Washington, DC 20503.
Written comments may also be submitted by Fax: 202-395-5806; or by email to
Jennifer Everling, Acting Clerk of the Board, Merit Systems Protection Board, 1615 M Street NW, Washington, DC 20419; phone: (202) 653-7200; fax: (202) 653-7130; or email:
This proposed information collection previously was published in the
The ACRS Subcommittee on Planning and Procedures will hold a meeting on April 4, 2018, 11545 Rockville Pike, Room T-2B3, Rockville, Maryland 20852.
The meeting will be open to public attendance.
The agenda for the subject meeting shall be as follows:
The Subcommittee will discuss proposed ACRS activities and related matters. The Subcommittee will gather information, analyze relevant issues and facts, and formulate proposed positions and actions, as appropriate, for deliberation by the Full Committee.
Members of the public desiring to provide oral statements and/or written comments should notify the Designated Federal Official (DFO), Quynh Nguyen (Telephone 301-415-5844 or Email:
Information regarding changes to the agenda, whether the meeting has been canceled or rescheduled, and the time allotted to present oral statements can be obtained by contacting the identified DFO. Moreover, in view of the possibility that the schedule for ACRS
If attending this meeting, please enter through the One White Flint North building, 11555 Rockville Pike, Rockville, Maryland 20852. After registering with Security, please contact Mr. Theron Brown at 301-415-6702 to be escorted to the meeting room.
Nuclear Regulatory Commission.
Renewal of existing information collection; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) invites public comment on the renewal of Office of Management and Budget (OMB) approval for an existing collection of information. The information collection is entitled, “Requests to Non-Agreement States for Information.”
Submit comments by June 1, 2018. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
You may submit comments by any of the following methods:
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
David Cullison, Office of the Chief Information Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-2084; email:
Please refer to Docket ID NRC-2017-0210 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
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Please include Docket ID NRC-2017-0210 in the subject line of your comment submission, in order to ensure that the NRC is able to make your comment submission available to the public in this docket.
The NRC cautions you not to include identifying or contact information in comment submissions that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the NRC is requesting public comment on its intention to request the OMB's approval for the information collection summarized below.
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The NRC is seeking comments that address the following questions:
1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility?
2. Is the estimate of the burden of the information collection accurate?
3. Is there a way to enhance the quality, utility, and clarity of the information to be collected?
4. How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology?
For the Nuclear Regulatory Commission.
Office of Personnel Management.
30-Day notice and request for comments.
Retirement Operations, Retirement Services, Office of Personnel Management (OPM) offers the general public and other Federal agencies the opportunity to comment on a revision of a currently approved information collection, Standard Form 2800—Application for Death Benefits (CSRS) and Standard Form 2800A—Documentation and Elections in Support of Application for Death Benefits When Deceased Was an Employee at the Time of Death (CSRS).
Comments are encouraged and will be accepted until May 2, 2018.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW, Washington, DC 20503,
A copy of this information collection, with applicable supporting documentation, may be obtained by contacting the Retirement Services Publications Team, Office of Personnel Management, 1900 E Street NW, Room 3316-L, Washington, DC 20415, Attention: Cyrus S. Benson, or sent via electronic mail to
As required by the Paperwork Reduction Act of 1995 OPM is soliciting comments for this collection. The information collection (OMB No. 3206-0156) was previously published in the
1. Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Standard Form 2800 is needed to collect information so that OPM can pay death benefits to the survivors of Federal employees and annuitants. Standard Form 2800A is needed for deaths in service so that survivors can make the needed elections regarding military service.
Office of Personnel Management.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing for the Commission's consideration concerning negotiated service agreements. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the
Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request's acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request.
The public portions of the Postal Service's request(s) can be accessed via the Commission's website (
The Commission invites comments on whether the Postal Service's request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II.
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This Notice will be published in the
2:00 p.m. on Wednesday, April 4, 2018.
Closed Commission Hearing Room 10800.
This meeting will be closed to the public.
Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present.
The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting.
Commissioner Peirce, as duty officer, voted to consider the items listed for the closed meeting in closed session.
The subject matters of the closed meeting will be:
Institution and settlement of injunctive actions;
Institution and settlement of administrative proceedings; and
Other matters relating to enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting items.
For further information and to ascertain what, if any, matters have been added, deleted or postponed; please contact Brent J. Fields from the Office of the Secretary at (202) 551-5400.
On February 2, 2018, Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
CBOE Options Rule 6.53C(c)(i) allows the Exchange to determine which classes and which complex order origin types (
Second, the proposal will allow market-makers and options specialists to enter their complex orders in the COB if their orders are on the opposite side of order(s) for the same strategy on the same side that initiated a Complex Order Auction (“COA”) if there are “x” number of COAs within “y” milliseconds, counted on a rolling basis (the Exchange will determine the number “x” (which must be at least two) and time period “y” (which may be no more than 2,000)).
The rule will require market-makers and specialists to cancel any unexecuted complex orders in the COB no later than a specified time (which the Exchange will determine and may be no more than five minutes) after the time the COB receives the order.
The Exchange states that it will have surveillance to enforce the proposed rule change, which will monitor whether market-maker and away market-maker orders have been entered only in the circumstances permitted under the proposal, and whether any unexecuted orders have been cancelled by the deadline imposed by the proposal.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission believes that allowing market-makers and specialists to enter orders in the COB on the opposite side of the market from priority customer orders resting in the COB, or on the opposite side of the market when orders on the same side of the market for a particular strategy have initiated a number of COAs within a short time period, as described more fully above, is designed to result in the provision of additional liquidity to trade with customer orders, potentially providing additional execution and price improvement opportunities for those customer orders. As noted above, CBOE believes that allowing market-makers and specialists to rest orders in the COB opposite priority customer interest in the COB that is not outside the NSM could provide an execution opportunity for a priority customer order that has not executed against other complex order or leg market interest by providing the customer with information concerning the price at which a market maker is willing to trade with the customer's order; this information currently is not available because the COB has no market maker quotes indicating the price at which liquidity providers are willing to trade against
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Securities and Exchange Commission (“Commission”).
Notice.
Notice of application for an order under sections 6(c) and 17(b) of the Investment Company Act of 1940 (“Act”) for exemptions from section 17(a) of the Act, and under section 17(d) of the Act and rule 17d-1 thereunder to permit certain joint transactions.
Applicants requests an order to permit certain registered open-end and closed-end management investment companies or series thereof to invest in a private investment vehicle established by their investment advisers for the purpose of investing in China A Shares and certain other Chinese securities.
Aberdeen Asset Management Inc. (“AAMI”), Aberdeen Asset Managers Limited, (“AAML”), Aberdeen Asset Management Asia Limited (“AAMAL,” and together with AAMI and AAML, the “Initial Advisers”), Aberdeen Funds (the “Trust”), Aberdeen Greater China Fund, Inc. (“GCH”), and Aberdeen Institutional Commingled Funds, LLC (the “Commingled LLC”).
The application was filed on July 20, 2016, and amended on February 10, 2017, September 22, 2017, January 18, 2018, and March 19, 2018.
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on April 23, 2018, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0-5 under the Act, hearing requests should state the nature of the writer's interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. Applicants: 225 Liberty Street, New York, NY 10281.
Kieran G. Brown, Senior Counsel, at (202) 551-6773, or Robert H. Shapiro, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
The following is a summary of the application. The complete application may be obtained via the Commission's website by searching for the file number, or an applicant using the Company name box, at
1. The Trust is a Delaware statutory trust and is registered under Act as an open-end management investment company. GCH is a Maryland corporation and is registered under the Act as a closed-end management investment company. Each of Aberdeen Asia-Pacific (ex-Japan) Equity Fund, Aberdeen Emerging Markets Fund and Aberdeen China Opportunities Fund (together with GCH, collectively, the “Initial Funds”) is a series of the Trust.
2. The Commingled LLC is a limited liability company under the Delaware Limited Liability Company Act, which relies on the exemption from registration under the Act provided by section 3(c)(7) of the Act.
3. Each Adviser is registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”), and AAMI, AAML and AAMAL are wholly-owned subsidiaries of Aberdeen Asset Management PLC. AAMI serves as the investment adviser to the series of the Trust pursuant to an investment advisory agreement between AAMI and the Trust, on behalf of its series (the “AAMI Agreement”). AAMAL and AAML both serve as sub-advisers (collectively, and in this capacity, the “Sub-Advisers”) to certain series of the Trust, including Aberdeen Asia-Pacific (ex-Japan) Equity Fund, Aberdeen Emerging Markets Fund and Aberdeen China Opportunities Fund, pursuant to sub-advisory agreements by and among the Trust, AAMI and the respective Sub-Adviser (the “Sub-Advisory Agreements”). The Initial Advisers also serve as sub-adviser to a number of other registered management investment companies or series thereof.
4. The Advisers also advise or may advise collective investment trusts, private pooled investment vehicles and investment companies registered in other jurisdictions (together, the “Other Vehicles”), as well as separately managed accounts (together with the Other Vehicles, “Other Accounts”).
5. The Funds desire to purchase and redeem limited liability company interests (“Interests”) of separately identified series of the Commingled LLC (each separate series of the Commingled LLC, an “Aberdeen China A Fund Series”). Each Aberdeen China A Fund Series invests in securities of Chinese companies, including without limitation, class A Shares listed on People's Republic of China (“PRC”) stock exchanges, rights to invest in such class A Shares or other equivalent securities authorized by the China Securities Regulatory Commission for purchase by non-Chinese investors or “qualified foreign institutional investors” (“QFII”), corporate or government bonds listed on PRC stock exchanges or traded in the over-the-counter markets of the PRC and warrants listed on PRC stock exchanges (together, “Chinese Securities”).
6. Applicants assert that, for a variety of reasons, it is not practical or economical for the Funds to invest a significant amount of assets directly in Chinese Securities. Applicants state that, until 2002, the Chinese government restricted investment in China A Shares and other Chinese Securities to domestic (
7. Applicants state that while some of the Initial Funds currently invest in China A Shares (pursuant to quota allocated by AAMAL) and other Chinese Securities, the use of the Aberdeen China A Fund Series would allow the Funds, and Other Accounts, to gain dedicated exposure to Chinese Securities and provide numerous additional investment opportunities for the Funds that are consistent with their investment objectives and policies. Additionally, being able to pool investments into China A Shares with Future Funds and Other Accounts will provide more diversification with respect to China A Share investments. Future Funds would obtain access to China A Shares without having to obtain individual licenses as QFIIs or RQFIIs, and without having to comply with the reporting required for each fund or account that is allocated quota from an Adviser with an existing QFII or RQFII license. Applicants state that each Aberdeen China A Fund Series will invest only in Chinese securities and cash and cash equivalents.
8. The Commingled LLC is organized as a Delaware limited liability company. AAMI serves as the managing member of the Commingled LLC. The Commingled LLC does not have a board of directors or trustees. Each Fund or Other Account may purchase interests of an Aberdeen China A Fund Series; if there is more than one Aberdeen China A Fund Series, a Fund or Other Account may invest in some or all of the different Aberdeen China A Fund Series.
9. The Advisers will not charge advisory fees to an Aberdeen China A Fund Series used by the Funds. The Advisers will, however, be entitled to receive applicable advisory fees from the Funds or Other Accounts. Expenses of the Aberdeen China A Fund Series will be charged to the Aberdeen China A Fund Series as a whole and accrue on a daily basis.
10. A Fund's decision to invest in an Aberdeen China A Fund Series will be made by a Fund's portfolio manager(s). Although daily repatriation is permitted under the RQFII open ended fund model, it is possible that proceeds from sales of portfolio investments in liquid or illiquid Chinese Securities may not be able to immediately be repatriated to a foreign investor such as an Aberdeen China A Fund Series at the approximate value at which the Aberdeen China A Fund Series has valued the investment. Accordingly, each Fund will treat its entire investment in an Aberdeen China A Fund Series as an investment that is not liquid for purposes of any applicable rules or guidance of the Commission or its staff regarding the management of liquidity with respect to open-end and/or closed-end funds, as applicable, and will otherwise be subject to the limits described in condition 4.
11. Applicants state that access by the Funds and Other Accounts to the quota (
12. Applicants state that AAMI contemplates making a nominal investment (
1. Section 17(a) generally provides, in part, that it is unlawful for any affiliated person of a registered investment company (“first-tier affiliate”), or any affiliated person of such person (“second tier affiliate”), acting as principal, to sell or purchase any security or other property to or from such investment company. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include (a) any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with the power to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. Section 2(a)(9) defines “control” to mean “the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.”
2. Applicants state that the Funds and the Aberdeen China A Fund Series are expected to be affiliated persons under section 2(a)(3) of the Act, because it is expected that one or more Funds and Other Vehicles will own at least 5%, and potentially, more than 25% of the Interests of an Aberdeen China A Fund Series. While Interests of an Aberdeen China A Fund Series will be non-voting interests, a Fund or Other Vehicle could have power to exercise a controlling influence over the management or policies of an Aberdeen China A Fund Series and be deemed an affiliated person of the Aberdeen China A Fund Series under section 2(a)(3)(C). Furthermore, as the investment advisers to the Funds, the Advisers are affiliated persons of the Funds that they advise under section 2(a)(3)(E) and, because AAMI is the managing member of the Commingled LLC, an Aberdeen China A Fund Series may be deemed to be under AAMI's control under section 2(a)(3)(C), resulting in each Aberdeen China A Fund Series being deemed an affiliated person of an affiliated person of certain, if not all, of the Funds. Since the Funds and the Aberdeen China A Fund Series may share a common investment adviser or investment advisers that are wholly-owned by the same parent company, they may be deemed to be first-tier affiliates by virtue of arguably being under common control for purposes of section 2(a)(3)(C).
3. If a Fund and an Aberdeen China A Fund Series are deemed affiliates of each other, or even second-tier affiliates, the sale of Interests of the Aberdeen China A Fund Series to the Fund, and the redemption of such Interests by the Fund, would be prohibited under section 17(a) of the Act.
4. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if the terms of the proposed transaction, including the consideration to be paid or received, are fair and reasonable and do not involve overreaching on the part of any person concerned, and the proposed transaction is consistent with the policies of each registered investment company involved and with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provisions of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act.
5. Applicants submit that the proposed arrangement satisfies the standards for relief under sections 17(b) and 6(c) of the Act. For the reasons discussed below, Applicants submit that the terms of the arrangement, including the consideration to be paid, are fair and reasonable and do not involve overreaching on the part of any person concerned, and that the proposed transactions are consistent with the policy of each registered investment company concerned and with the general purposes of the Act. Applicants further submit that the Funds' participation in the Aberdeen China A Fund Series will be necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policies and provisions of the Act.
6. Applicants state that each Fund and Other Account will be treated identically as a holder of Interest in the Aberdeen China A Fund Series, and each Fund and Other Account will purchase and sell Interests of an Aberdeen China A Fund Series on the same terms and on the same basis as each other Fund and Other Account that invests in that Aberdeen China A Fund Series. Applicants note that no Adviser, Aberdeen Affiliate, or investment manager to a Sub-Advised Fund that is not an Initial Adviser or Aberdeen Affiliate or any person controlling, controlled by or under common control with such investment manager (any such investment manager to a Sub-Advised Fund or control affiliate of such investment manager, an “Unaffiliated Manager”) will receive an advisory fee from an Aberdeen China A Fund Series used by the Funds. The Funds, as holders of Interests of the Aberdeen China A Fund Series, will not be subject to any sales load, redemption fee, distribution fee or service fee, except that the Aberdeen China A Fund Series will have the discretion to impose a redemption fee in accordance with applicable law or regulation for the purpose of offsetting brokerage, tax or other costs. If a redemption fee is charged by an Aberdeen China A Fund Series, such fee will be limited in accordance with the then-current requirements of the Commission applicable to management investment companies offering redeemable securities as if the Aberdeen China A Fund Series were an open-end investment company. The financial statements of the Aberdeen China A Fund Series will be audited. Moreover, administrative fees and transfer agent fees will be paid by an Aberdeen China A Fund Series used by the Funds to an Adviser, Aberdeen Affiliate, or Unaffiliated Manager only upon the determination by each Fund's Board, including a majority of Independent Board Members, that the fees are (i) for services in addition to, rather than duplicative of, services rendered to the Funds directly and (ii) fair and
7. Section 17(d) of the Act and rule 17d-1 under the Act generally prohibit joint transactions involving registered investment companies and their affiliates unless the Commission has approved the transaction. In considering whether to approve a joint transaction under rule 17d-1, the Commission considers whether the proposed transaction is consistent with the provisions, policies, and purposes of the Act, and the extent to which the participation of the investment companies is on a basis different from or less advantageous than that of the other participants.
8. Applicants state that the Funds (by purchasing Interests of the Aberdeen China A Fund Series), the Advisers (by managing the portfolio securities of the Aberdeen China A Fund Series and the Funds at the same time that the Funds are invested in Interests of the Aberdeen China A Fund Series and/or by providing a nominal tax matters partner investment in the Aberdeen China A Fund Series), and the Aberdeen China A Fund Series (by selling its Interests to, and redeeming its Interests from, the Funds), could be deemed to be participants in a joint enterprise or arrangement within the meaning of section 17(d) and rule 17d-1.
9. Applicants request an order pursuant to section 17(d) and rule 17d-1 to permit the proposed transactions with the Aberdeen China A Fund Series. Applicants submit that the investment by the Funds in the Aberdeen China A Fund Series on the basis proposed is consistent with the provisions, policies and purposes of the Act, and that each Fund will invest in Interests of the Aberdeen China A Fund Series on the same basis as any other shareholder (
10. Applicants do not believe that AAMI's nominal investment as tax matters partner in the Initial Aberdeen China A Fund poses any potential conflict of interest not addressed by the conditions contained in the application. AAMI will acquire Interests having rights, duties and obligations that are identical in all respects to Interests purchased by other investors in the Initial Aberdeen China A Fund.
11. Applicants propose that the Funds be permitted to continue to engage in certain purchase and sale cross transactions in securities (“Cross Transactions”) between a Fund seeking to implement a portfolio strategy and an Other Vehicle seeking to raise or invest cash. The Funds currently rely on rule 17a-7 to engage in such Cross Transactions; however, if a Fund and an Other Vehicle were deemed to be second-tier affiliates of each other by virtue of their ownership or control affiliations with an Aberdeen China A Fund Series, the Funds may not be entitled to rely on rule 17a-7 because they would no longer be affiliated solely for the reasons permitted by the rule.
12. Applicants assert that the potential affiliations created by the Aberdeen China A Fund Series structure do not affect the other protections provided by the rule, including the integrity of the pricing mechanism employed, and oversight by each Fund's Board. Applicants represent that the Funds and Other Vehicles will comply with the requirements set forth in rule 17d-(7)(a) through (g). Applicants thus believe that Cross Transactions will be reasonable and fair, and will not involve overreaching, and will be consistent with the purposes of the Act and the investment policy of each Fund.
Applicants agree that any order granting the requested relief shall be subject to the following conditions:
1. The Funds' investments in Interests of an Aberdeen China A Fund Series will be undertaken only in accordance with the Funds' stated investment restrictions and will be consistent with their stated investment policies.
2. The Advisers, their affiliated persons and Unaffiliated Managers will receive no advisory fee from an Aberdeen China A Fund Series in connection with the Funds' investment in the Aberdeen China A Fund Series. The Advisers, their affiliated persons and Unaffiliated Managers will receive no commissions, fees, or other compensation (except for administrative and/or transfer agent fees that are paid in accordance with condition 3 as described in the application) from a Fund or an Aberdeen China A Fund Series in connection with the purchase or redemption by the Funds of Interests in the Aberdeen China A Fund Series. Interests of an Aberdeen China A Fund Series will not be subject to a sales load, redemption fee, distribution fee or service fee, except that the Aberdeen China A Fund Series will have the discretion to impose a redemption fee in accordance with applicable law or regulation for the purpose of offsetting brokerage, tax or other costs. If a redemption fee is charged by an Aberdeen China A Fund Series, such fee will be limited in accordance with the then-current requirements of the Commission applicable to management investment companies offering redeemable securities as if the Aberdeen China A Fund Series were an open-end investment company registered under the Act.
3. Administrative fees and transfer agent fees will be paid by an Aberdeen China A Fund Series used by the Funds to an Adviser, Aberdeen Affiliate or Unaffiliated Manager only upon a determination by each Fund's Board, including a majority of its Independent Board Members, that the fees are (i) for services in addition to, rather than duplicative of, services rendered to the Funds directly and (ii) fair and reasonable in light of the usual and customary charges imposed by others for services of the same nature and quality. If such determination is not made by a Fund's Board, the Fund's Adviser will reimburse to that Fund the amount of any administrative fee and transfer agent fee borne by that Fund as an investor in the Aberdeen China A Fund Series.
4. Each Fund will treat its entire investment in an Aberdeen China A Fund Series as an investment that is not liquid for purposes of any applicable rules or guidance of the Commission or its staff regarding the management of liquidity. For example, under current guidelines, each Fund that is an open-end fund must not purchase an illiquid security if, as a result, more than 15% of its net assets would be invested in illiquid assets, which for purposes of the requested relief include any investments in an Aberdeen China A Fund Series. In addition, each Fund will, at all times, limit its holdings in the Aberdeen China A Fund Series to no more than 15% of its net assets.
5. Each Fund's Board, including a majority of the Independent Board Members, will determine initially and no less frequently than annually that the Fund's investment in the Aberdeen China A Fund Series is, and continues to be, in the best interests of the Fund and the Fund's shareholders. As part of this determination, each Fund's Board will consider the custody arrangements for the Aberdeen China A Fund Series' foreign securities (under rule 17f-5) and the bonding arrangements in place for certain of the Aberdeen China A Fund Series' officers and employees (under rule 17g-1).
6. The Advisers will make the accounts, books and other records of each Aberdeen China A Fund Series available for inspection by the Commission staff and, if requested, will furnish copies of those records to the Commission staff.
7. Each Aberdeen China A Fund Series will comply with the following sections of the Act as if the Aberdeen China A Fund Series were an open-end management investment company registered under the Act, except as noted: Section 9; section 12 (except that each Aberdeen China A Fund Series shall be permitted to sell Interests to Funds in excess of the limits set out in section 12(d)(1)(B)); section 13 (the Interests issued by the Aberdeen China A Fund Series will be regarded as voting securities under section 2(a) (42) of the Act for purposes of applying this condition and the offering memorandum utilized by the Aberdeen China A Fund Series to offer and sell Interests will be regarded as a registration statement for purposes of applying this condition); section 17(a) (except as described in the application); section 17(d) (except as described in the application); section 17(e); section 17(f); section 17(h), section 18 (the Interests issued by the Aberdeen China A Fund Series will be regarded as voting securities under section 2(a)(42) of the Act for purposes of applying this condition); section 21; section 36; and sections 37-53. In addition, the Aberdeen China A Fund Series will comply with the rules under section 17(f)
The Advisers will adopt procedures designed to ensure that each Aberdeen China A Fund Series complies with the aforementioned sections of the Act and rules under the Act. The Advisers will periodically review and periodically update as appropriate such procedures and will maintain books and records describing such procedures, and maintain the records required by rules 31d-1(b)(1), 31d-1(b)(2)(ii) and 31d-1(b)(9) under the Act. In addition, in connection with the determination required by condition 5 above, the Advisers will provide annually to each Fund's Board a written report about the Advisers' and the Aberdeen China A Fund Series' compliance with this condition.
All books and records required to be made pursuant to this condition will be maintained and preserved for a period of not less than six years from the end of the fiscal year in which any transaction occurred, the first two years in an easily accessible place, and will be subject to examination by the Commission and its staff.
For purpose of implementing condition 7, any action that the above-referenced statutory and regulatory provisions require to be taken by the directors, officers and/or employees of a registered investment company will be performed by AAMI (or its successor)
8. To engage in Cross Transactions, the Funds will comply with rule 17a-7 under the Act in all respects other than the requirement that the parties to the transaction be affiliated persons (or affiliated persons of affiliated persons) of each other solely by reason of having a common investment adviser or investment advisers which are affiliated persons of each other, common officers, and/or common directors, solely because a Fund and Other Vehicle might become affiliated persons within the meaning of section 2(a)(3)(A), (B) or (C) of the Act because of their investments in an Aberdeen China A Fund Series.
9. An Aberdeen China A Fund Series in which a Fund invests will not engage in leverage or borrow except that an Aberdeen China A Fund Series may borrow in amounts not exceeding 5% of its total assets for temporary or emergency purposes or for the clearance of transactions, but not for speculative investment purposes, and may pledge its assets to secure such borrowings.
10. A Sub-Advised Fund may not invest in an Aberdeen China A Fund Series in reliance on the order unless the Sub-Advised Fund's Unaffiliated Manager has executed an agreement with the Aberdeen China A Fund Series stating that the Unaffiliated Manager understands the terms and conditions of the order and agrees to comply with conditions 1, 2, 3, 4, 5 and 8 of the order.
For the Commission, by the Division of Investment Management, under delegated authority.
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 11a-2 (17 CFR 270.11a-2) under the Investment Company Act of 1940 (15 U.S.C. 80a-1
There are currently 673 registrants governed by Rule 11a-2. The
The estimate of average burden hours is made solely for the purposes of the PRA, and is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules or forms. With regard to Rule 11a-2, the Commission includes the estimate of burden hours in the total number of burden hours estimated for completing the relevant registration statements and reported on the separate PRA submissions for those statements (see the separate PRA submissions for Form N-3, Form N-4 and Form N-6).
The information collection requirements imposed by Rule 11a-2 are mandatory. Responses to the collection of information will not be kept confidential. 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 control number.
The public may view the background documentation for this information collection at the following website,
Pursuant to Section 19(b)(1)
Pursuant to the provisions of Section 19(b)(1) under the Act of 1934,
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
On June 17, 2016, the Commission granted the Exchange's application for registration as a national securities exchange under Section 6 of the Act,
The Exchange is proposing to adopt rules to facilitate the creation of a new optional listing category on the Exchange for common equity securities, referred to as the “LTSE Listings on IEX” or “LTSE Listings.” The proposed rules for LTSE Listings, to be contained in new Chapter 14A of the Exchange's rules (the “LTSE Listings Rules”), were initially developed by LTSE Holdings, Inc. (together with its affiliates, “LTSE”), and provide a differentiated choice for issuers and investors that prefer listing standards explicitly designed to promote long-term value creation. The Exchange understands that LTSE anticipates separately registering a subsidiary as a national securities exchange in the future, but has entered into an arrangement with the Exchange in order to make the LTSE Listings Rules available to potential interested companies in advance of its own subsidiary's registration as a national securities exchange.
Becoming subject to the LTSE Listings Rules would be an optional election. Companies listed on the Exchange that do not elect to be subject to the LTSE Listings Rules would not be required to comply with Chapter 14A. However, companies that list on LTSE Listings (“LTSE Listings Issuers”) would be subject to the LTSE Listings Rules, as well as the quantitative listing requirements set forth in IEX Rule Series 14.300, and all other applicable listing rules of the Exchange set forth in Chapter 14 of the IEX Rulebook, except
At this time, the Exchange is limiting the availability of LTSE Listings to companies seeking to list on LTSE Listings concurrently with their initial public offering (whether listing on LTSE Listings only or dually listing on LTSE Listings and another national securities exchange). The Exchange would not permit issuers already listed on another national securities exchange to transfer to LTSE Listings.
The Exchange believes that the new LTSE Listings category will introduce a differentiated choice for issuers and investors that prefer listing standards explicitly designed to promote long-term value creation, potentially enhancing opportunities for capital formation, as well as contributing to greater competition for listings among national securities exchanges. At the same time, as LTSE Listings will be an entirely optional listing category, the introduction of LTSE Listings will not impact companies that elect to list on the Exchange under its existing listing rules.
Many academics, commentators, market participants,
Commenters have pointed to the dramatically declining average amount of time that an investor holds a stock as evidence of a greater short-term focus.
Some commenters believe that current public market dynamics subject public companies to intense pressure to meet quarterly performance targets, resulting in negative consequences for long-term value creation.
The greater focus on short-term financial performance noted by these commenters also coincides with a reduction in the number of private companies seeking to undertake initial public offerings (“IPOs”) and list their shares on the U.S. public markets. From 2001 through 2016, the U.S. averaged approximately one-third of the IPOs per year than it did each year between 1998 and 2000.
This decline is driven by fewer companies going public, existing public companies going private or merging with other public companies, and those companies that undertake an IPO doing so at a much later stage. Between 1980 and 2000, companies that went public typically did so about 7.6 years after founding.
The Exchange believes that these trends have significant consequences for companies, investors, and the economy as a whole. A 2011 report by the IPO Task Force reported that “up to 22 million jobs may have been lost” as a result of the decline in IPOs.
Although there are a number of potential causes for the decline in the number of IPOs and the number of public companies,
The Exchange believes that companies should be able to maintain a public listing on an exchange that provides a differentiated choice for issuers and investors that prefer listing standards explicitly designed to promote long-term value creation. While all companies that may list on the Exchange can focus on long-term value creation, providing a listing category with listing rules that address some of
The Exchange understands that LTSE engaged in a multiyear effort to develop the LTSE Listings Rules based on its analysis of academic research, market experience, and input from a wide variety of long-term focused stakeholders. The LTSE Listings Rules are designed to promote the interests of companies that seek to focus on long-term value creation as well as the transparency and governance concerns of long-term focused investors. LTSE's analysis found that, although individual stakeholders may favor or disfavor particular LTSE Listings Rules, long-term focused companies and investors' concerns with particular LTSE Listings Rules were offset by the benefits they saw from the package of the LTSE Listings Rules as a whole.
The Exchange acknowledges that many, if not all, of the proposed requirements contained in the LTSE Listings Rules could be undertaken voluntarily by any company even in the absence of the LTSE Listings category. However, the Exchange understands that many long-term focused investors indicated to LTSE that they would view a company that affirmatively chose to list on an exchange (or listing category thereof) that required compliance with these rules, therefore subjecting itself to compliance as a regulatory condition to continued listing, as demonstrating a greater commitment to long-term focus than one that voluntarily undertook to abide by similar practices, but could readily choose to change its practices thereafter. In addition, because an exchange, as a self-regulatory organization, is required to monitor and enforce compliance with its rules,
The Exchange has entered into an arrangement with LTSE to authorize the Exchange to make the LTSE Listings Rules available as a listing category of the Exchange. Through extensive discussions, LTSE has provided the Exchange with background information on the purpose of each of the LTSE Listings Rules, with which the Exchange agrees. As a result, statements herein that describe the Exchange's belief are informed by information provided by LTSE. Although the LTSE Listings Rules were developed by LTSE, the Exchange will retain full self-regulatory responsibility for determining initial and continuing compliance with the Exchange's listing standards, including for those companies that elect to be subject to the LTSE Listings Rules. In conducting its LTSE Listings business, IEX will retain, as its agents, a small number of staff that also are employed by LTSE (the “LTSE Listings Agents”), but will not receive regulatory services from LTSE itself. The sole responsibility of LTSE Listings Agents will be to provide IEX with expertise in interpreting the LTSE Listings Rules and assistance in conducting the LTSE Listings business, and their involvement will not extend to other matters within the Exchange's jurisdiction. The LTSE Listings Agents will be subject to the Exchange's oversight and regulatory authority as the responsible self-regulatory organization.
The proposed LTSE Listings Rules that would apply to LTSE Listings Issuers fall into five general categories: (i) Board of directors and committee requirements, (ii) rules requiring supplemental long-term disclosures, (iii) rules requiring long-term alignment of executive compensation, (iv) rules requiring long-term shareholder voting structure, and (v) certain other rules that further encourage LTSE Listings Issuers to focus on long-term value creation. In addition, the Exchange is proposing rules that would clarify the application of certain existing Exchange rules to LTSE Listings Issuers.
The proposed LTSE Listings Rules would create new requirements for the boards of directors and board committees of LTSE Listings Issuers designed to align the board with the objectives of the LTSE Listings Rules. Specifically, the LTSE Listings Rules would require each LTSE Listings Issuer to establish a board committee dedicated to overseeing the issuer's strategies for creating and sustaining long-term growth and a committee dedicated to selecting or recommending qualified director nominees. The LTSE Listings Rules would also impose
Proposed Rule 14A.405(c)(1) would require that each LTSE Listings Issuer's board of directors maintain a committee specifically dedicated to overseeing the LTSE Listings Issuer's strategic plans for long-term growth (the “LTSP Committee”). Proposed Rule 14A.405(c)(3) would require that an LTSE Listings Issuer adopt a formal written LTSP Committee charter (and that the LTSP Committee will review and reassess the adequacy of the charter on an annual basis) specifying, among other things, the scope of the LTSP Committee's responsibilities, and how it will carry out those responsibilities, including structure, processes and membership requirements, and that the LTSP Committee must report regularly to the board of directors. The requirement to report regularly is intended to ensure that the board of directors has insight into the LTSP Committee's work and input into the LTSE Listings Issuer's strategic objectives.
Although LTSE Listings Issuers would have some flexibility in designing their LTSP Committee, in order to ensure that adequate board focus is placed on long-term strategy, proposed Rule 14A.405(c)(4) would require that the LTSP Committee include a minimum of three members of the board and that a majority of the LTSP Committee members be independent. This majority independence requirement is intended to mitigate potential conflicts of interest and ensure that outside perspectives are brought into discussions and decisions regarding the company's long-term strategy.
Proposed Rule 14A.405(c)(3)(C) would require that the LTSP Committee's charter be made available on or through the LTSE Listings Issuer's website. The Exchange believes that increased transparency about the LTSP Committee's functions and policies is in the best interest of investors, and companies that hold themselves to a set of long-term standards should make such information available. The Exchange notes that Item 407 of Regulation S-K
Proposed Rule 14A.405(c)(2) would provide LTSE Listings Issuers with additional flexibility by permitting the board of directors to allocate the LTSP Committee's responsibilities to committees of their own denomination, provided that the committee (i) is subject to a formal written charter that satisfies the requirements of proposed Rule 14A.405(c)(3), including that such committee report regularly to the board of directors, and (ii) complies with the committee composition requirements set forth in proposed Rule 14A.405(c)(4). However, proposed Rule 14A.405(c)(1) would prohibit the LTSP Committee from assuming any roles or responsibilities that are required to be undertaken by an LTSE Listings Issuer's independent board committees, since the LTSP Committee is not required to be composed of all independent directors.
IEX Rule 14.405(e)(1)(A) requires that director nominees may be selected (or recommended for selection by the board of directors) by either independent directors constituting a majority of the board's independent directors or a nominations committee compromised solely of independent directors. With respect to LTSE Listings Issuers, proposed Rule 14A.405(d)(1) would require that director nominees must be selected (or recommended for selection by the board of directors) by a nominating/corporate governance committee comprised solely of independent directors, rather than independent directors constituting a majority of the board's independent directors. The Exchange believes that, in view of the differentiated focus of the LTSE Listings category, requiring LTSE Listings Issuers to maintain a separate, independent nominating/corporate governance committee would better facilitate selection of directors that are aligned with such focus. In addition, another national securities exchange has a substantially similar requirement, requiring that listed companies select director nominees through a separate nominating committee composed entirely of independent directors.
Notwithstanding the requirement that the nominating/corporate governance committee be comprised solely of independent directors, proposed Rule 14A.405(d)(2) would provide that the nominating/corporate governance committee may include a non-independent director if the board, under exceptional and limited circumstances, determines that such individual's membership on the committee is required by the best interests of an LTSE Listings Issuer and its shareholders and certain other conditions are satisfied. In addition, proposed Rule 14A.405(d)(3) would provide that exclusively independent director oversight of director nominations shall not be required in cases where the right to nominate a director legally belongs to a third party; provided that an LTSE Listings Issuer would still be obligated to comply with all committee composition requirements. These limited exceptions are consistent with exceptions contained in the Exchange's corresponding rules for companies other than LTSE Listings Issuers.
IEX Rule 14.405(e)(5) provides that the requirements regarding director nominations set forth in IEX Rule 14.405 do not apply if the issuer is subject to a binding obligation that requires a director nomination structure inconsistent with IEX Rule 14.405 and such obligation pre-dates the approval of IEX Rule 14.405. Proposed Rule 14A.405(d)(4), however, would provide that LTSE Listings Issuers may not rely on this exception. The Exchange believes that this provision, which would permit a nomination process and board composition based on a pre-existing obligation that pre-dates when the IEX rules were approved, is inconsistent with the goal of allowing longer-term shareholders to gain voting rights over time and the flexibility is unnecessary given that the required timing for the pre-existing obligation is so limited.
Proposed Rule 14A.405(d)(6)(A) would require that each LTSE Listings Issuer adopt a formal written nominating/corporate governance committee charter (and that the nominating/corporate governance committee review and reassess the adequacy of the formal written charter
Proposed Rule 14A.405(d)(6)(B) would require that the nominating/corporate governance committee's charter be made available on or through an LTSE Listings Issuer's website. The Exchange believes that increased transparency about the nominating/corporate governance committee's functions and policies is in the best interest of long-term investors, and companies that hold themselves to a set of long-term standards should make such information available. The Exchange notes that Item 407 of Regulation S-K
Proposed Rule 14A.405(d)(5) would provide LTSE Listings Issuers additional flexibility by permitting the board of directors to allocate the nominating/corporate governance committee's responsibilities to committees of their own denomination, provided that the committee is comprised entirely of independent directors and that such committee is subject to a formal written charter that satisfies the requirements of proposed Rule 14A.405(d)(6), including that such committee report regularly to the board of directors.
As is the case with all issuers listed on the Exchange, LTSE Listings Issuers are required to comply with the audit committee and compensation committee requirements set forth in IEX Rules 14.405(c) and (d). LTSE Listings Issuers, however, would additionally be required to comply with audit committee and compensation committee requirements set forth in proposed Rule 14A.405.
Specifically, under proposed Rules 14A.405(a) and 14A.405(b)(2), the audit committee and compensation committee charters must specify that each committee will report regularly to the board of directors. While the Exchange believes that it is inherent in any public company's board and committee organizational structure that board committees report regularly to the board, in view of the focus of the LTSE Listings category, the Exchange also believes it is appropriate to make this requirement explicit for LTSE Listings Issuers. In addition, the charters of each of the audit committee and compensation committee must be made available on or through an LTSE Listings Issuer's website. The Exchange notes that Item 407 of Regulation S-K
In addition to the foregoing charter requirements, proposed Rule 14A.405(b)(2)(A)(ii) would require that the compensation committee charter specify that the compensation committee must adopt executive compensation guidelines. Proposed requirements with respect to executive compensation guidelines are described under “Long-Term Alignment of Executive Compensation” below. Proposed Rule 14A.405(b)(1) would provide LTSE Listings Issuers additional flexibility by permitting the board of directors to allocate the compensation committee's responsibilities to committees of their own denomination, provided that the committee is comprised entirely of independent directors and that such committee is subject to a formal written charter that satisfies the requirements of IEX Rule 14.405(d)(1) and proposed Rule 14A.405(b)(2), including that such committee report regularly to the board of directors.
Pursuant to proposed Rule 14A.409, each LTSE Listings Issuer would be required to adopt and disclose corporate governance guidelines. These corporate governance guidelines would be required to address director qualification standards, director responsibilities, director access to management, and director orientation and continuing education, among other things. In view of the differentiated focus of the LTSE Listings category, the Exchange believes that increased disclosure about the company's approach to corporate governance through the adoption and disclosure of corporate governance guidelines is appropriate for LTSE Listings Issuers. In addition, the Exchange notes that the proposed corporate governance guideline requirements are similar to the requirements imposed by the listing rules of another national securities exchange.
Although proposed Rule 14A.409 would generally track the New York Stock Exchange's (“NYSE”) corporate governance guidelines requirements, the LTSE Listings Rules would deviate from these requirements in certain respects. Specifically, proposed Rule 14A.409(a)(4) would require that a significant portion—no less than 40%—of director compensation be paid in stock-based compensation tied to long-term periods. An LTSE Listings Issuer would be required to disclose in its corporate governance guidelines what it considers to be “long-term” for this purpose. In addition, this proposed rule would require that LTSE Listings Issuers adopt director stock ownership guidelines, which must include minimum ownership requirements that can be met over the length of board service. These provisions are designed to ensure that LTSE Listings Issuers
The Exchange understands that LTSE's analysis indicated that long-term investors generally value information regarding a company's long-term plans and objectives, that may not otherwise be required to be disclosed. In particular, this information could (i) provide long-term investors with greater information upon which to evaluate a company's progress toward long-term goals and (ii) allow companies to be evaluated based on whether they are making prudent management and strategic decisions that investors believe enhance long-term growth. The proposed LTSE Listings Rules would therefore require—in addition to and separate from all disclosures required under applicable securities laws, the Commission's rules and the Exchange's other rules—that LTSE Listings Issuers provide certain supplemental disclosures regarding an LTSE Listings Issuer's long-term strategy and products (the “LTSP Disclosures”).
Proposed Rule 14A.207(c) would require each LTSE Listings Issuer to include in its LTSP Disclosures a discussion of the company's “Long-Term Growth Strategy.” Long-Term Growth Strategy would be defined for these purposes as “the strategy, as determined by management and the board of directors and approved by the LTSP Committee, that is focused on achieving long-term growth.”
Proposed Rule 14A.207(c)(1)(A) would require that each Long-Term Growth Strategy disclosure describe how the LTSE Listings Issuer defines “long-term” for purposes of its Long-Term Growth Strategy and how it made this determination.
LTSE Listings Issuers must also discuss key milestones that the LTSE Listings Issuer aims to achieve with respect to its Leading Indicators and must report on the progress the LTSE Listings Issuer has made in achieving these key milestones. The LTSP Disclosures require use of Leading Indicators and key milestones so that companies may define and share with investors those long-term metrics that the company itself views as critical to measuring its success, providing investors insight into the company's internal analysis and allowing investors to consider the company's progress towards these long-term goals.
Proposed Rule 14A.207(c)(1)(C) would require that each Long-Term Growth Strategy disclosure include a discussion of any changes to an LTSE Listings Issuer's Long-Term Growth Strategy since its last publication, including changes to Leading Indicators and/or key milestones. An LTSE Listings Issuer's Long-Term Growth Strategy may evolve as its business develops and new goals are created or changed. This disclosure requirement would provide greater transparency by ensuring that long-term investors are made aware of any such changes to the issuer's Long-Term Growth Strategy and are able to measure an LTSE Listings Issuer's progress toward these goals.
Pursuant to proposed Rule 14A.207(c)(2), the Long-Term Growth Strategy must include details relating to different businesses of the LTSE Listings Issuer if the information is material to the overall strategy. The purpose of this proposed rule is to account for the fact that issuers may have diverse businesses with different strategic objectives. For example, a company may operate in multiple industries or have products tailored to different markets. This rule requires LTSE Listings Issuers to provide information relating to different strategies if such information is material to the broader long-term strategy.
While transparency into long-term strategy is an important goal and critical for long-term focused investors, in certain situations the Exchange understands that public disclosure of this information could risk competitive harm to the company. In these limited situations, proposed Rule 14A.207(c)(3) would provide an exemption. Specifically, if an LTSE Listings Issuer's LTSP Committee makes a determination that disclosure of any aspect of the LTSE Listings Issuer's Long-Term
As noted above,
Proposed Rule 14A.207(e) would require that each LTSE Listings Issuer disclose in its LTSP Disclosures the extent to which the LTSE Listings Issuer's selling, general and administrative expenses (“SG&A”) (as reported in the LTSE Listings Issuer's most recent Annual Report)
Each LTSE Listings Issuer must also disclose the amount spent on Human Capital Investment per full-time equivalent employee. The Exchange understands that long-term investors generally are interested in this metric, and the disclosure requirement is thus designed to enable long-term investors to conduct a comparative analysis of Human Capital Investment per employee across LTSE Listings Issuers of different sizes.
The costs related to Human Capital Investment are generally accounted for within SG&A, and therefore considered an expense rather than an investment. The Exchange understands that long-term focused investors and companies believe that it is in the long-term interest of companies to make investments in their workforce to retain them and improve their skills. Although, as an accounting matter, these may be viewed as a short-term costs, the Exchange believes that long-term focused investors value information regarding the extent to which companies are making investments in the long-term development and success of its employees.
The Exchange understands that investments in research and development (“R&D”) are generally considered long-term investments for companies. LTSE's analysis indicated that additional data on R&D investment is particularly sought after by long-term focused investors. Therefore, proposed Rule 14A.207(f) would require that each LTSE Listings Issuer disclose in its LTSP Disclosures the amount of R&D spending that is short-term focused and the amount that is long-term focused. This requirement is intended to provide investors with greater transparency into an LTSE Listings Issuer's planning and goals around R&D programs, particularly in light of the risk that a company may under-invest in R&D in order to meet shorter-term financial metrics. Because each company and industry differs in its definition of long-term and short-term time horizons, proposed Rule 14A.207(f) provides flexibility by allowing LTSE Listings Issuers to determine their own definitions of short-term and long-term R&D programs, provided that an LTSE Listings Issuer disclose the definitions used and the process by which they determined them.
Proposed Rule 14A.207(b) would require an LTSE Listings Issuer to make its LTSP Disclosures publicly available pursuant to a supplement to the LTSE Listings Issuer's Annual Report (an “Annual Report Supplement”). The Annual Report Supplement must be distributed to shareholders along with, and in the same manner as, the LTSE Listings Issuer's Annual Report. In addition, an LTSE Listings Issuer would
Pursuant to proposed Rule 14A.207(b), the LTSP Disclosures would be required to be reviewed and approved by the LTSP Committee on at least an annual basis. Based on its review, the LTSP Committee must determine whether to recommend to the board of directors that the LTSP Disclosures be included in the Annual Report Supplement.
As described above, an LTSE Listings Issuer would be required to include its LTSP Disclosures in its Annual Report Supplement. However, a newly public LTSE Listings Issuer may not provide its Annual Report Supplement to shareholders until months after its initial public offering. Therefore, to ensure that shareholders obtain information on a timely basis, the LTSE Listings Rules would include transitional disclosure provisions for newly listed issuers. Specifically, proposed Rule 14A.207(g)(1) would provide that, no later than at the time of its initial listing, an LTSE Listings Issuer must make the disclosure required by proposed Rule 14A.207(c)(1) (Disclosure of Long-Term Growth Strategy) publicly available on its website. Such disclosure must be made in compliance with applicable rules and regulations relating to the dissemination of free writing prospectuses. After its initial listing, an LTSE Listings Issuer would provide this disclosure in its Annual Report Supplement, as described above. Similarly, proposed Rule 14A.207(g)(2) would provide that, after initial listing, an LTSE Listings Issuer must make the disclosures required by proposed Rule 14A.207(d) (Disclosure Related to Buybacks), Rule 14A.207(e) (Disclosure Related to Human Capital Investment) and Rule 14A.207(f) (Disclosure Related to Research and Development) publicly available on its website by the earlier of when the company files its next Form 10-K or Annual Report Supplement.
The Exchange believes that long-term focused companies seek to align the compensation of their Executive Officers
Proposed Rule 14A.405(b)(3)(A) would require that the compensation committee ensure that the time periods and performance metrics used to determine Incentive-Based Compensation
In addition, an LTSE Listings Issuer would be required to disclose in its proxy statement or, if no proxy statement is filed, its Annual Report Supplement, whether or not the compensation committee has determined that the time periods and performance metrics used to determine Incentive-Based Compensation for Executive Officers are consistent with LTSE Listings Issuer's Long-Term Growth Strategy.
Proposed Rule 14A.405(b)(3)(B)(i) would prohibit an LTSE Listings Issuer from providing Executive Officers with any Incentive-Based Compensation that is tied to a financial or performance metric that is measured over a time period of less than one year, or grant any time-based equity compensation that has any portion that vests in less than a year from the grant date (or from the hire date, in the case of new hire grants). By requiring Incentive-Based Compensation and time-based equity compensation to be tied to time periods of at least one year, the LTSE Listings Rules are designed to require that LTSE Listings Issuers avoid creating potential incentives to manage for short-term results, encouraging management to focus on longer-term time horizons.
Proposed Rule 14A.405(b)(3)(B)(ii) would require that equity compensation awarded to Executive Officers vest over a period (the “Vesting Period”) of at
The Exchange understands, however, that there may be certain situations in which accelerated vesting would be appropriate and would not undermine the underlying purpose of this provision. As a result, proposed Rule 14A.405(b)(3)(B)(ii) would allow for accelerated vesting upon the death of an Executive Officer or the occurrence of a disability that renders an Executive Officer permanently unable to remain employed at the LTSE Listings Issuer in any capacity. Whether to adopt exceptions of this type would be left to the discretion of the LTSE Listings Issuer and would be required to be outlined in the agreement providing the equity grant.
While the LTSE Listings Rules seek to maintain a long-term focus in compensation, there may be exceptional circumstances in which the payment of shorter-term Incentive-Based Compensation or shorter-term Vesting Periods are consistent with this focus and may be required for specific business purposes. Therefore, proposed Rule 14A.405(b)(3)(B)(iii) would provide that the compensation committee may provide alternative time periods for incentive and equity compensation if there is a business necessity and the LTSE Listings Issuer discloses and explains such business necessity in the LTSE Listings Issuer's proxy statement, or if the LTSE Listings Issuer does not file a proxy statement, in the LTSE Listings Issuer's Annual Report Supplement. To ensure that this exception remains limited, the rule would also prohibit the amount of equity awards granted in the aggregate that vests before the first anniversary of the grant date, or that does not meet the minimum five-year vesting schedule, from exceeding 5% of the total number of shares authorized for grant in any fiscal year.
Proposed Rule 14A.405(b)(3)(B)(iv) would provide that the compensation committee must determine appropriate Vesting Periods and amounts, as well as holding periods, for equity compensation awarded to Executive Officers that apply following an Executive Officer's retirement or resignation. Such Vesting Periods and amounts would also be required to be consistent with the requirements set forth in proposed Rule 14A.405(b)(3)(B)(ii) described above. The compensation provisions of the LTSE Listings Rules are premised on the idea that Executive Officers having financial interests in the long-term performance of the company—even after their departure from the company—will have a greater incentive to conduct business with long-term performance in mind and to undertake efforts for effective succession and departure planning. The Exchange understands that business needs and market practice may vary for different companies in different industries and sectors. Therefore, the specific schedule for vesting and holding is left for determination by the individual LTSE Listings Issuer, but each LTSE Listings Issuer is required to provide such a schedule to promote these underlying purposes.
The Exchange appreciates that an issuer may have entered into compensation arrangements prior to deciding whether to list on LTSE Listings and recognizes that it may impose an undue burden on such companies if they were required to unwind executive compensation plans that have been in effect for an extended period of time in order to list on LTSE Listings. Therefore, proposed Rule 14A.405(b)(3)(C) would provide an exemption from the executive compensation requirements contained in the LTSE Listings Rules for any executive compensation that is subject to an existing written agreement entered into at least one year prior to the initial listing of an LTSE Listings Issuer on the Exchange. The proposed exemption for preexisting compensation arrangements contains a one-year look-back period that is designed to assure that the exempted compensation arrangements were bona fide preexisting arrangements, and not entered into shortly before applying for listing on LTSE Listings in order to avoid the restrictions contained in the LTSE Listings Rules. In addition, the use of this exemption must be disclosed in the Annual Report Supplement.
IEX Rule 14.405(d)(5) exempts “Smaller Reporting Companies,” as defined in Rule 12b-2 under the Act,
Consistent with the focus of the LTSE Listings category to provide a differentiated choice for issuers and investors that prefer listing standards explicitly designed to promote long-term value creation, proposed Rule 14A.413(b) would require that LTSE Listings Issuers maintain certain voting rights provisions in their corporate organizational documents that provide all shareholders with the ability, at the shareholders' option, to accrue additional voting power over time. As described more fully below, these provisions are designed to align with the long-term focus of the LTSE Listings category by providing long-term investors in an LTSE Listings Issuer with a greater role in corporate governance than short-term shareholders. The Exchange believes that long-term investors in a public company are more likely than short-term shareholders to exercise their voting rights in a manner that prioritizes long-term growth over short-term results.
Specifically, as of the date of the company's initial listing on LTSE
The Exchange notes that tracking the ultimate beneficial ownership and length of continued ownership may be difficult or impossible for shares held through the common “street name” ownership system. Shares held in street name are registered on the books of an issuer's transfer agent in the name of a nominee selected by the Depository Trust Company's (“DTC”), with DTC maintaining records of the number of shares held for its various brokerage firm participants, and those brokerage firms each maintaining records of the number of shares held for its particular customers.
In order to track ownership for purposes of those shareholders opting to accrue additional voting power, the LTSE Listings Rules require that LTSE Listings Issuers look to whether a beneficial owner is also the holder of the shares in the LTSE Listings Issuer's records,
Although requiring that shares be held in record ownership in order to accrue additional voting rights may raise administrative burdens on shareholders, the Exchange believes the ability for LTSE Listings Issuers to verify and track the ownership of these shareholders for purposes of calculating voting rights outweighs these burdens. In addition, because only those shareholders that expect to hold their shares for the long-term would opt to do so, the Exchange does not believe that electronically transferring the shares through a DRP would present a significant burden.
Calculating voting rights in accordance with the provisions of proposed Rule 14A.413(b) will be novel to LTSE Listings Issuers and their shareholders and may present challenges. However, the Exchange understands that several transfer agents have indicated to LTSE that they are able to develop software or systems to assist LTSE Listings Issuers with tracking their shareholder voting rights as calculated in accordance with proposed Rule 14A.413(b). In order to ensure that LTSE Listings Issuers have such tools available to them and facilitate accurate calculation of their shareholders' voting rights, proposed Rule 14A.413(b)(5) would require that, prior to listing securities on LTSE Listings, a prospective LTSE Listings Issuer must obtain from its transfer agent a certification confirming that the transfer agent has software or other systems or processes available to the LTSE Listings Issuer that will enable the transfer agent and the LTSE Listings Issuer to determine, as of a particular record date, the LTSE Listings Issuer's shareholders' voting rights calculated in accordance with LTSE Listings Rule 14A.413(b).
As noted above, in order to track ownership for purposes of those shareholders opting to accrue additional voting power, the LTSE Listings Rules require that LTSE Listings Issuers look to whether a beneficial owner is also the holder of the shares in the LTSE Listings Issuer's records,
Because of the mechanics of tracking long-term ownership, the term of ownership for purposes of LTSE Listings Issuers calculating a shareholder's increased voting rights is tied not to the actual date of a shareholder's acquisition or disposition of beneficial ownership, but the date the shares are transferred into or out of record ownership,
The ability to accrue long-term voting is intended to incentivize those beneficial owners with voting and investment discretion over an LTSE Listings Issuer's shares to become long-term shareholders, provide a mechanism by which such long-term shareholders can evidence their long-term ownership (
To address this situation, proposed Supplementary Material .01(c) to proposed Rule 14A.413 would permit (but not require) an LTSE Listings Issuer to include provisions in its governance documents such that if its board of directors adopted a resolution reasonably determining that, notwithstanding technical compliance with the provisions of an LTSE Listings Issuer's governance documents relating to the increasing voting power of long-term shareholders and continuity of record ownership, there has in fact been a change in beneficial ownership with respect to shares held of record that would evade the purposes of LTSE Listings Rule 14A.413(b), such shares may be treated as being entitled only to their Initial Voting Power. Any LTSE Listings Issuer that provides for such a process in its governance documents must also provide a process through which a shareholder directly affected by such a determination may challenge it. The Exchange believes that, together, this should protect LTSE Listings Issuers from an attempt by shareholders to improperly sell increased voting rights to new shareholders, while affording affected shareholders with an opportunity to present additional information demonstrating that a change of beneficial ownership has not occurred.
The Exchange believes that LTSE Listings Rule 14A.413(b) is fully consistent with IEX Rule 14.413 (the Exchange's “Voting Rights Policy”). The Voting Rights Policy provides that the voting rights of existing shareholders of publicly traded common stock registered under Section 12 of the Act may not be disparately reduced or restricted through any corporate action or issuance. The Voting Rights Policy provides examples of corporate actions or issuances that could violate this policy, including the adoption of time-phased voting plans, which could encompass structures whereby investors gain additional voting rights over time.
In addition to the fact that the voting rights structure required under LTSE Listings Rule 14A.413(b) must be in place prior to listing on the Exchange, Supplementary Material .01 to IEX Rule 14.413 provides that the Exchange's “interpretations under the policy will be flexible, recognizing that both the capital markets and the circumstances and needs of the Exchange Companies change over time.” Accordingly, the Exchange will interpret the policy flexibly with regard to its consistency with an LTSE Listings Issuer's voting structures designed to meet LTSE Listings Rule 14A.413(b). As the Commission recognized in approving the voting rights policies of other self-regulatory organizations that are substantively identical to IEX Rule 14.413, “there may be valid business or economic reasons for corporations” for companies to provide different voting rights to different shareholders, and that the voting rights policies “provide issuers with a certain degree of flexibility in adopting corporate structures, so long as there is a reasonable business justification to so doing, and such transaction is not taken or proposed primarily with the intent to disenfranchise.”
The Exchange is proposing to include in the LTSE Listings Rules certain other rules also designed to encourage LTSE Listings Issuers to focus on long-term value creation. These proposed rules are described further below.
Proposed Rule 14A.420(a) would provide that LTSE Listings Issuers are generally prohibited from providing earnings guidance more frequently than annually. For these purposes, “Earnings Guidance” would be defined as any public disclosure made to shareholders containing a projection of the LTSE Listings Issuer's revenues, income (including income loss), or earnings (including earnings loss) per share.
Notwithstanding the general prohibition on providing Earnings Guidance more frequently than annually, proposed Rule 14A.420(a) would permit an LTSE Listings Issuer to update previously issued Earnings Guidance at any time if it believes that such disclosure would be required (i) by IEX Rule 14.207(b)(1), which requires an issuer to promptly disclose to the public any material information that would reasonably be expected to affect the value of the issuer's securities or influence investors' decisions; (ii) by other applicable law (including any of the Commission reporting rules); or (iii) to make the previously issued Earnings Guidance not misleading.
Proposed Rule 14A.420(b) would clarify that any Earnings Guidance provided by an LTSE Listings Issuer, including updates and supplementary disclosure related to Earnings Guidance, shall be considered material information for purposes of IEX Rule 14.207(b)(1). As a result, LTSE Listings Issuers would be required to comply with the disclosure and notification requirements set forth therein when disseminating such information.
Proposed Rule 14A.425(a) would require that each LTSE Listings Issuer develop and publish a policy regarding the LTSE Listings Issuer's impact on the environment and community, and a policy explaining the LTSE Listings Issuer's approach to diversity. The Exchange believes that effective long-term planning is enhanced when companies consider their impact on various stakeholders and the sustainability of their business, and that long-term investors generally value such information. Each LTSE Listings Issuer may have different stakeholders and different views on these issues. The LTSE Listings Rules would not impose any requirements on the content of these policies. Rather, proposed Rule 14A.425(a) would only require that LTSE Listings Issuers adopt and publish a policy, providing LTSE Listings Issuers with flexibility in developing what they believe to be appropriate policies for their business, and providing investors with insight into an LTSE Listings Issuer's management of these issues.
Proposed Rule 14A.425(b) would require that each LTSE Listings Issuer review the policies required by proposed Rule 14A.425(a) at least annually and make such policies available on or through its website. In addition, each LTSE Listings Issuer would be required to disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its Annual Report Supplement, that these policies are available on or through its website and provide the website address. These requirements are intended to ensure that investors are aware of and have access to an LTSE Listings Issuer's stakeholder policies. Although these policies must be made publicly available, proposed
Proposed Rule 14A.430 would require LTSE Listings Issuers to have and maintain a publicly accessible website. In addition, to the extent that an LTSE Listings Issuer would be required under any applicable provision of the LTSE Listings Rules to make documents available on or through its website, an LTSE Listings Issuer would be required to ensure that the website is accessible from the United States, the website clearly indicates in the English language the location of such documents on the website and that such documents are available in a printable version in the English language. The Exchange understands that many long-term focused investors expect to be able to access corporate governance and other information regarding companies in which they have invested through the company's website, and accordingly the Exchange believes that it is appropriate to explicitly impose this website requirement. For transparency purposes, various proposed LTSE Listings Rules, as discussed above, would require that materials be made available on an LTSE Listings Issuer's website.
Proposed Rule 14A.430 is intended to specify in further detail the manner in which LTSE Listings Issuers may satisfy these website posting requirements. The Exchange notes that the foregoing website requirements are substantially similar to the requirements imposed by the listing rules of another national securities exchange.
Proposed Rule 14A.435 would require that LTSE Listings Issuers make certain certifications to the Exchange. Specifically, proposed Rule 14A.435(a) would require LTSE Listings Issuers certify [sic], at or before the time of listing, that all applicable listing criteria have been satisfied. This requirement is substantively identical to IEX Rule 14.202(b), which requires all issuers listed on the Exchange to submit such a certification. The Exchange proposes to repeat this requirement in the LTSE Listings Rules to clarify that the certification must include compliance with the LTSE Listings Rules, in addition to the Exchange's other listing rules.
Proposed Rule 14A.435(b) would require that the CEO of each LTSE Listings Issuer certify annually to the Exchange that the LTSE Listings Issuer is in compliance with proposed Rule Series 14A.400, which contain the corporate governance requirements of the LTSE Listings Rules, qualifying the certification to the extent necessary. Various IEX listing rules impose certification requirements,
The Exchange proposes to permit an LTSE Listings Issuer to list a class of securities that, in connection with its initial public offering, has been approved for listing on another national securities exchange (“Dually-Listed Securities”). The Exchange expects that this would foster competition among markets and further the development of the national market system. The Exchange would make an independent determination of whether such companies satisfy applicable listing standards and would require such companies to enter into a dual-listing agreement with the Exchange.
Pursuant to proposed Rule 14A.210(b), an LTSE Listings Issuer that has Dually-Listed Securities would be required to notify the Exchange promptly if it receives oral or written notification from the other national securities exchange on which the LTSE Listings Issuer's Dually-Listed Securities are listed that such class of listed securities has fallen below the continued listing requirements of such other market. In addition, such an LTSE Listings Issuer would also be required to notify the other national securities exchange on which its Dually-Listed Securities are listed if it receives oral or written notification that such class of listed securities has fallen below the continued listing requirements of Chapter 14 of the IEX Rules or the LTSE Listings Rules contained in Chapter 14A of the IEX Rules.
Proposed Supplementary Material .01 to proposed Rule 14A.210 would clarify the application of certain IEX Rules, such as rules governing trading halts, for Dually-Listed Securities, given the fact that the Exchange would not be the Primary Listing Market. These proposed rules are designed to avoid creating potential confusion for investors and market participants with respect to Dually-Listed Securities. The Exchange notes that these provisions are substantially consistent with the rules of other national securities exchanges.
In addition to proposed rules that would encourage LTSE Listings Issuers to focus on long-term value creation, the Exchange is also proposing rules that would clarify the application of certain existing Exchange rules to LTSE Listings Issuers. These proposed rules are described further below.
Proposed Rule 14A.001(a) would provide that the LTSE Listings Rules are supplemental listing standards applicable to LTSE Listings Issuers and that LTSE Listings Issuers must also fully qualify for listing under Chapter 14 of the Exchange's rules and the LTSE Listings Rules on an initial and ongoing basis. This provision is intended to clarify that LTSE Listings Issuers would be subject to the LTSE Listings Rules, as well as all other applicable listing rules of the Exchange, except as they may be specifically modified for LTSE Listings Issuers.
Proposed Rule 14A.001(b) would provide that LTSE Listings Issuers may only list common equity securities on LTSE Listings. Although the Exchange maintains listing rules relevant for other types of securities, such as American Depositary Receipts, preferred stock, rights and warrants, among others, such securities would not be eligible for listing on LTSE Listings. The Exchange is proposing to establish an LTSE Listings category to provide a differentiated choice for issuers and investors that prefer listing standards explicitly designed to promote long-term value creation. At this time, the Exchange believes that, given that corporate governance and voting rights are more typically associated with common equity than other securities, it is most appropriate for a company electing to become subject to the LTSE Listings Rules to list its common equity on LTSE Listings.
IEX Rule 14.102(a) provides that an Exchange-listed company must apply for initial listing in connection with a transaction whereby the Exchange-listed company combines with, or into, an entity that is not listed on the Exchange, resulting in a change of control of the company and potentially allowing such entity to obtain an Exchange listing. The rule enumerates certain factors that the Exchange will consider in determining whether a change of control has occurred, including, but not limited to, changes in management, board of directors, voting power, ownership and financial structure. Proposed Rule 14A.102(a)(1) would impose an analogous requirement on LTSE Listings Issuers combining with, or into, an entity that is not listed on LTSE Listings, including an entity that is a not an LTSE Listings Issuer that is otherwise listed on the Exchange. The Exchange would consider the same factors enumerated in IEX Rule 14.102(a) when determining whether a change of control has occurred for purposes of proposed Rule 14A.201(a)(1). Proposed Rule 14A.102(a)(1) would also require that any combined entity applying for initial listing as permitted by this rule must agree to comply with all applicable requirements of Chapter 14A, including requirements relating to long-term voting set forth in proposed Rule 14A.413.
Proposed Rule 14A.102(a)(2) would clarify the impact of a change of control transaction on the proposed long-term voting provisions of LTSE Listings. Specifically, proposed Rule 14A.102(a)(2) would provide that if an initial listing following a change of control meets applicable listing requirements and the LTSE Listings Issuer is the surviving entity following the business combination, any shares of the LTSE Listings Issuer that have accrued additional voting power pursuant to proposed Rule 14A.413(b) prior to the business combination would retain such additional voting power following the business combination. On the other hand, if the non-LTSE Listings Issuer is the surviving entity or a new entity is formed following the business combination, all shares of the class or classes of securities to be listed on LTSE Listings will have voting power equal to their Initial Voting Power at the time of such listing. Any additional voting power accrued pursuant to Rule 14A.413(b) by the shareholders of the non-surviving LTSE Listings Issuer prior to the business combination would not be retained.
IEX Rule 14.102(c) provides that a company that is formed by a Reverse Merger
Proposed Rule 14A.200 would establish general procedures and prerequisites for initial and continued listing on LTSE Listings. This rule series is intended to supplement and clarify the application of the general procedures and prerequisites set forth in the IEX Rule Series 14.200.
IEX Rule 14.200(a) requires a company seeking the initial listing of one or more classes of securities on the Exchange to participate in a free confidential pre-application eligibility review by the Exchange in order to determine whether it meets the Exchange's listing criteria. If, upon completion of this review, the Exchange determines that a company is eligible for listing, the Exchange will provide the company with a clearance letter, notifying the company that it has been cleared to submit an original listing application. Proposed Rule 14A.200(a) would clarify that if a company is seeking a listing on LTSE Listings, prior to providing a clearance letter, the Exchange must determine that the company is eligible for listing under the LTSE Listings Rules, in addition to the Exchange's other listing criteria.
IEX Rule 14.200(b) outlines the applications and qualifications process for companies that have received a clearance letter. A company seeking to list on LTSE Listings would be required to follow this process, including executing a listing agreement and listing
IEX Rule 14.200(c) provides prerequisites for applying to list on the Exchange. A company seeking to list on LTSE Listings would be required to satisfy these prerequisites, except as otherwise provided by proposed Rule 14A.200(c). For example, IEX Rule 14.203(c) provides that all securities initially listed on the Exchange, but for securities which are in any event book-entry only, must be eligible for a DRP, except that a foreign issuer is not subject to this requirement if it submits to the Exchange a written statement from an independent counsel in such company's home country certifying that a law or regulation in the home country prohibits compliance with this requirement. Because eligibility for a DRP is essential to the proper functioning of LTSE Listings' long-term shareholder voting provisions, proposed Rule 14A.200(c)(1) would provide that foreign issuers may not rely on the exception in IEX Rule 14.203(c) from the DRP eligibility requirement.
IEX Rule 14.203(d) provides that a company applying to list on the Exchange must pay all applicable fees as described in Rule Series 14.600. Proposed Rule 14A.200(c)(3) would provide that in lieu of paying all applicable fees as described in IEX Rule Series 14.600, a company seeking the initial listing of one or more classes of securities on LTSE Listings would be required to pay all applicable fees as described in LTSE Listings Rule Series 14A.600. This provision is intended to clarify that companies seeking to list on LTSE Listings are not required to pay two separate listing fees.
Proposed Rule 14A.200(c)(2) would provide that at the time that a company initially lists on LTSE Listings, the company may not already have any security listed for trading either on the Exchange (
IEX Rule 14.407 provides exemptions from the Exchange's corporate governance rules for certain types of companies, sets forth phase-in schedules for, among other things, initial public offerings and companies emerging from bankruptcy and describes the applicability of the corporate governance rules to Controlled Companies.
IEX Rule 14.407(a) provides exemptions to certain of the Exchange's corporate governance requirements for asset-backed issuers and other passive issuers, cooperatives, Foreign Private Issuers,
IEX Rule 14.407(b) allows a company listed on the Exchange to phase-in its compliance with certain Exchange rules over a period of time in certain situations, including for initial public offerings, companies emerging from bankruptcy, transfers from other markets, and companies ceasing to be a Smaller Reporting Company. These phase-in schedules would apply to LTSE Listings Issuers in the same manner as they would apply to other companies listed on the Exchange. In addition to these phase-in schedules, proposed Rule 14A.407(b) would provide that an LTSE Listings Issuer that is listing in connection with its initial public offering or that is emerging from bankruptcy is permitted to phase-in its compliance with the requirement that the LTSP Committee be comprised of a majority of independent directors. Specifically, this rule would provide that at least one member of the LTSP Committee must be an independent director at the time of listing and a majority of the members of the LTSP Committee must be independent within 90 days of listing. This phase-in schedule is substantially similar to the corresponding phase-in schedules applicable to other board committees.
IEX Rule 14.407(c) outlines how the Exchange's listing rules apply to a Controlled Company. This rule provides that a Controlled Company is generally exempt from requirements to establish a compensation committee and requirements relating to independent director oversight of director nominations. These exemptions would apply to LTSE Listings Issuers in the same manner as they would apply to other companies listed on the Exchange. In addition to these exemptions, proposed Rule 14A.407(c)(1) would provide that a Controlled Company is exempt from the additional compensation committee and nominating/corporate governance committee requirements under proposed LTSE Listings Rules 14A.405(b) and 14A.405(d), except for the requirement to adopt executive compensation guidelines under proposed Rule 14A.405(b)(3). Proposed Rule 14A.407(c)(2) would provide that to the extent that a Controlled Company does not have a compensation committee, the independent directors on the LTSP Committee or the independent directors of the board of directors must be responsible for adopting the executive compensation guidelines.
IEX Rule 14.410 provides that a company listed on the Exchange must provide the Exchange with prompt notification after an Executive Officer of the company becomes aware of any noncompliance by the company with the requirements of Rule Series 14.400, which outlines the general corporate governance requirements for companies listed on the Exchange. Proposed Rule 14A.410 would supplement this requirement by requiring an LTSE Listings Issuer to provide the Exchange
IEX Rule 14.412 sets forth the circumstances in which an Exchange-listed company is required to obtain shareholder approval prior to the issuance of securities in connection with the (1) the acquisition of the stock or assets of another company; (2) a change of control; (3) equity-based compensation of officers, directors, employees, or consultants; and (4) private placements. In some cases, such approval is required, among other potential triggers, if the common stock being issued “has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance . . .” (the “Shareholder Approval Threshold”).
Ordinarily, determining whether an issuance equals or exceeds the Shareholder Approval Threshold would be a simple calculation: The issuer would multiply the number of shares to be issued by the voting power of such shares and divide by the voting power of the shares outstanding before the issuance. If this number equals or exceeds the Shareholder Approval Threshold, shareholder approval would be required. However, shares listed on LTSE Listings (or that are of the same class of securities that are listed on LTSE Listings) may accrue voting power over time. As a result, even if the voting power of newly issued shares of an LTSE Listings Issuer is less than the Shareholder Approval Threshold at the time of the issuance, it may potentially be greater than the Shareholder Approval Threshold after a certain period of time, depending on how many of the new shares are registered in record name and accrue additional voting power over time, relative to the number of existing shareholders that do so.
IEX Rule 14.412 requires that a company listed on the Exchange receive shareholder approval in advance of the “potential issuance of common stock” where the “common stock has or will have upon issuance voting power” that would exceed the Shareholder Approval Threshold. The Exchange notes that, by its terms, IEX Rule 14.412 therefore could be read to look only to the voting power of the shares upon issuance, rather than the potential voting power of those shares after some period of time.
The Exchange notes, however, that because shareholders that obtain shares in a transaction may or may not elect to hold their shares in record ownership, and may hold them in such manner for varying lengths of time, it is not possible to determine with precision how many shares issued in any transaction would accumulate additional voting power or the extent of voting power those shares will eventually attain. One potential approach would be to assume that all of the new shares in a proposed issuance will be registered in record name and held in that form for ten years, thereby accruing the maximum additional voting power (
Proposed Rule 14A.412 would take what the Exchange believes to be a more reasonable and balanced approach that is aligned with the purpose of this requirement, while still taking into account the potential increased future voting power of new shares to be issued.
The Long-Term Voting Factor would be calculated by dividing, as of the Shareholder Approval Calculation Date (defined below), the voting power outstanding attributable to the LTSE-Listings Issuer's shares listed on LTSE Listings by the combined Initial Voting Power of those shares. This number will be equal to one if none of the LTSE Listings Issuer's shareholders have accrued additional voting power and will increase beyond one at a rate proportional to the number of additional votes attributable to LTSE Listings' long-term voting mechanics. In other words, the Long-Term Voting Factor represents the effect of long-term voting on the LTSE Listings Issuer's outstanding voting power as of the Shareholder Approval Calculation Date. For example, if an LTSE Listings Issuer has 1,000,000 shares outstanding on the Shareholder Approval Calculation Date, each with an Initial Voting Power of one vote per share, and as a result of increases in voting power over time, those shares have a total of 3,000,000 votes, the Long-Term Voting Factor would be 3.0. The formula would then assume that new shares to be issued would similarly achieve three votes per share over some period of time in the future. Given that the Exchange is unable to predict how many shareholders will actually elect to hold their shares in record ownership and thereby accrue additional voting power, or how long such shareholders would hold their shares, the Exchange believes that it is reasonable to look to the LTSE Listings Issuer's prior experience and apply that same experience to the new shares to be issued.
For LTSE Listings Issuers that have been listed on LTSE Listings for fewer than five years, the numerator in the shareholder approval calculation would be the greater of (i) the number of shares to be issued multiplied by the product of the Initial Voting Power for such shares and the Long-Term Voting Factor or (ii) the number of shares to be issued multiplied by the Initial Voting Power of such shares further multiplied by two. This effectively applies a minimum Long-Term Voting Factor of two to LTSE Listings Issuers that have been listed on LTSE for fewer than five years, even where the LTSE Listings Issuer has an actual Long-Term Voting Factor of less than two. The Exchange believes that imposing this minimum multiple of two is appropriate because the actual Long-Term Voting Factor that these companies would have experienced during their short period of time of being public companies is likely to be lower than longer-listed issuers and may not be representative of the longer-term growth in voting power that the new shares may ultimately attain.
As stated above, it is difficult to predict with any level of certainty how many shareholders will register their shares in record name and accrue additional voting power; however, the Exchange believes that applying a minimum multiple of two for companies that have been listed on LTSE for less than five years is reasonable and conservatively estimates the relative potential voting power of the new shares to be issued. This belief is informed by the Exchange's understanding of current shareholder turnover data, such as that in 2015 (albeit for non-LTSE Listings Issuers), investors held a stock for an average of about eight months.
Proposed Rule 14A.412(b) would also clarify how to calculate the denominator in the shareholder approval calculation. IEX Rule 14.412(e)(2) currently provides that the denominator (voting power outstanding) refers to the “aggregate number of votes which may be cast by holders of those securities outstanding which entitle the holders thereof to vote generally on all matters submitted to the Company's security holders for a vote.” The calculation would be the same for LTSE Listings Issuers, except that proposed Rule 14A.412(b) would provide that this calculation must be made as of the Shareholder Approval Calculation Date, which would be the date on which an LTSE Listings Issuer enters into a binding agreement to conduct a transaction that may require shareholder approval under IEX Rule 14.412 (
The provisions described above are designed to clarify how the shareholder approval calculation under IEX Rule 14.412 would be conducted by an LTSE Listings Issuer. All other provisions of IEX Rule 14.412 would continue to apply, including, for example, the financial viability exception in IEX Rule 14.412(f).
Pursuant to IEX Rule 14.500(a), securities of an Exchange-listed company that do not meet the listing standards set forth in Chapters 14 and 16 of the Exchange's rulebook are subject to potential delisting from the Exchange. IEX Rule Series 14.500 sets forth procedures for the independent review, suspension and delisting of companies that fail to satisfy such standards. Proposed Rule 14A.500(a) would provide that a failure to meet the listing standards set forth in the LTSE Listings Rules would be treated as a failure to meet the listing standards set forth in Chapter 14 of the Exchange's rulebook for purposes of IEX Rule Series 14.500. As a result, the procedures set forth in the IEX Rule Series 14.500 would apply to any LTSE Listings Issuer that fails to comply with the listing standards in the LTSE Listings Rules, in addition to other applicable listing standards in the Exchange's rulebook.
IEX Rule 14.501(d) provides that if a company fails to satisfy the Exchange's listing standards, the type of deficiency at issue will determine whether the company will be immediately suspended or delisted, whether the company will have an opportunity to submit a plan to regain compliance or whether the company is entitled to an automatic cure or compliance period before a delisting determination is issued. Proposed Rule 14A.500(b) would provide that a failure to satisfy one or more of the LTSE Listings Rules will be treated as a deficiency for which a company may submit a plan to regain compliance in accordance with the Exchange's rules. Like all companies listed on the Exchange, LTSE Listings Issuers will be fully subject to IEX rules related to noncompliance and delisting, as set forth in Chapter 14 of the Exchange's rules.
Proposed Rule 14A.500(c) would provide that in the event that an LTSE Listings Issuer becomes subject to delisting from LTSE Listings for failure to satisfy one or more LTSE Listings Rules but is otherwise in compliance with all other applicable listing rules of the Exchange, the Exchange may permit such issuer to remain listed on the Exchange, provided that such issuer will cease to be listed on LTSE Listings and will cease to be an LTSE Listings Issuer.
Proposed Rule Series 14A.600 is currently marked “Reserved.” The Exchange intends to file a separate proposed rule change with the Commission under Section 19 of the Act that would addresses [sic] listing fees applicable to LTSE Listings Issuers.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act in general,
As discussed in detail in the Purpose section above, the Exchange believes that there is growing concern among market observers that pressures to meet short-term expectations have resulted in negative consequences for companies, investors and the economy as a whole. The Exchange believes that the LTSE Listings Rules would remove impediments to a free and open market and protect investors and the public interest by providing the marketplace with a differentiated listing venue choice that seeks to encourage greater focus by companies and investors on the long-term. Specifically, the LTSE Listings Rules are intended to better enable companies to focus on long-term value creation, potentially enhancing opportunities for capital formation, and are also intended to foster transparency and effective corporate governance, which would benefit all investors, particularly those with a long-term focus. In addition, because listing on LTSE Listings and becoming subject to the LTSE Listings Rules is a voluntary election, the LTSE Listings Rules are not designed to permit unfair discrimination among issuers.
The following subsections provide additional detail on how the LTSE Listings Rules are designed to further the objectives of Section 6(b) of the Act.
As described in the Purpose section under “Board of Directors and Committee Requirements,” the proposed LTSE Listings Rules would impose additional obligations on the boards of directors and board committees of LTSE Listings Issuers. For example, the LTSE Listings Rules would require each LTSE Listings Issuer to establish a board committee dedicated to overseeing the issuer's strategies for creating and sustaining long-term growth (
As described in the Purpose section under “Long-Term Strategy and Product Disclosures,” the proposed LTSE Listings Rules would require LTSE Listings Issuers to provide investors with LTSP Disclosures, which are supplemental disclosures regarding an LTSE Listings Issuer's long-term strategy and products. Specifically, the LTSP Disclosures would include disclosures relating to an LTSE Listings Issuer's Long-Term Growth Strategy, Buybacks, Human Capital Investment and research and development. These disclosures would be in addition to the disclosures required under the Act, the Commission's rules thereunder and the Exchange's other rules. The Exchange believes that the LTSP Disclosures would be consistent with the aims of the existing disclosure requirements of the Act—to ensure that investors receive full and accurate information so that they can make informed investment decisions—and are thereby consistent with the protection of investors and the public interest. Specifically, the Exchange believes that the LTSP Disclosure requirements would ensure that investors receive sufficient information to evaluate a company's progress toward meeting long-term goals. Although only LTSE Listings Issuers would be subject to these requirements, these requirements would not unfairly discriminate among issuers as only those companies electing to be subject to the LTSE Listings Rules would be subject to these requirements.
As described in the Purpose section under “Long-Term Alignment of Executive Compensation,” the LTSE Listings Rules would require that an LTSE Listings Issuer's compensation committee adopt a set of executive compensation guidelines applicable to Executive Officers that are designed to link executive compensation to the long-term value of the LTSE Listings Issuer. The Exchange believes that these requirements are consistent with the protection of investors and the public interest, consistent with Section 6(b)(5) of the Act, because they would help ensure that Executive Officers are incentivized to take actions that would enhance the long-term growth of an LTSE Listings Issuer, rather than short-term results. In addition, the Exchange believes that requiring a stronger link between a company's long-term performance and its executive compensation is designed to prevent fraudulent and manipulative acts and practices, by incentivizing executives to act in the long-term interest of LTSE Listings Issuers and limiting the extent to which executives could personally profit from efforts to effect short-term performance.
As described in the Purpose section under “Long-Term Shareholder Voting Structure,” the LTSE Listings Rules would require that LTSE Listings Issuers maintain voting rights provisions in their corporate organizational documents that provide shareholders with the ability, at the shareholders' option, to accrue additional voting power over time. The Exchange believes that these requirements are consistent with the protection of investors and the public interest because they would provide a mechanism by which long-term shareholders can have greater influence in corporate governance. The Exchange believes that long-term shareholders are more likely than short-term investors to exercise their governance rights in a manner that prioritizes long-term growth over short-term results, and thus it is in the public interest and furthers the protection of investors for longer-term investors to have a greater role in corporate governance. In this regard, the Commission has noted that, “when the interests of long-term investors and short-term traders conflict . . . its clear responsibility is to uphold the interests of long-term investors.”
As described in the Purpose section under “Other Long-Term Requirements,” the LTSE Listings Rules would include certain other rules designed to encourage LTSE Listings Issuers to focus on long-term value creation. For example, the LTSE Listings Rules would provide that LTSE Listings Issuers are generally prohibited from providing Earnings Guidance more frequently than annually. The Exchange believes that this requirement is consistent with the protection of investors and the public interest by enhancing the ability of companies to withstand short-term pressures and focus on long-term growth, and is designed to prevent fraudulent and manipulative acts and practices, such as the risk that a company could take actions to artificially meet prior Earnings Guidance.
The LTSE Listings Rules would also require that each LTSE Listings Issuer develop and publish a policy regarding an LTSE Listings Issuer's impact on the environment and community, and a policy explaining an LTSE Listings Issuer's approach to diversity. The Exchange believes that this requirement is consistent with the protection of investors and the public interest by ensuring that companies consider their impact on various stakeholders and the sustainability of their business.
The LTSE Listings Rules would require LTSE Listings Issuers to have and maintain a publicly accessible website. Documents required to be posted on this website under the LTSE Listings Rules would be required to be made available in a printable version in the English language. The Exchange believes that these requirements are consistent with the protection of investors and the public interest by ensuring that investors and the public have access to the disclosures and other documents required by the LTSE Listings Rules.
The LTSE Listings Rules would require LTSE Listings Issuers to make certain certifications to the Exchange. Specifically, LTSE Listings Issuers would be required to certify, at or before the time of listing, that all applicable listing criteria, including listing criteria under the LTSE Listings Rules, have been satisfied. In addition, the LTSE Listings Rules would require the CEO of each LTSE Listings Issuer to certify annually to the Exchange that the LTSE Listings Issuer is in compliance with proposed Rule Series 14A.400, which would contain the corporate governance
As described in the Purpose section under “Proposed Rules Clarifying Application of Existing Exchange Rules,” the LTSE Listings Rules would include a number of rules that would clarify the application of existing Exchange rules to LTSE Listings Issuers. In general, these rules would provide that LTSE Listings Issuers must comply with both the LTSE Listings Rules as well as all other applicable rules of the Exchange. However, these rules would also explain any deviations from this general principle. For example, although the Exchange maintains listing rules relevant for various types of securities, including American Depositary Receipts, preferred stock, rights and warrants, among others, the LTSE Listings Rules would clarify that only common equity securities would be eligible for listing on LTSE Listings. Similarly, although the Exchange maintains a number of exemptions from certain corporate governance requirements for certain types of issuers (
Another example of a proposed rule that would clarify the application of existing Exchange rules to LTSE Listings Issuers is proposed Rule 14A.412, which would clarify how an LTSE Listings Issuer would conduct the shareholder approval calculation in IEX Rule 14.412. The Exchange believes that this proposed Rule would further the objectives of Section 6(b)(5) of the Act because it would ensure that the long-term voting mechanics of the LTSE Listings Rules are taken into account when conducting this calculation. As discussed in the Purpose section, the Exchange believes that the proposed approach appropriately balances the reasonably likely potential dilution to existing shareholders without imposing a disparately burdensome shareholder approval requirement on LTSE Listings Issuers. The fact that shares may accrue voting power over time means that shares may be issued that have voting power that is less than the Shareholder Approval Threshold at the time of issuance, but potentially greater than the Shareholder Approval Threshold after a certain period of time. This would increase the dilution to the shareholders that held shares prior to that issuance. Although such existing shareholders would also have the ability to accrue additional voting power, to protect such shareholders and promote just and equitable principles of trade, proposed Rule 14A.412 would require LTSE Listings Issuers to take into account the likely voting power growth that the potential new shares would obtain over time (
For purposes of proposed Rule 14A.412, the assumed growth in voting power for the potential new shares is equal to the actual growth in voting power that the existing shares have obtained; however, shares of relatively new LTSE Listings Issuers may not have had time to accrue additional voting power. In other words, the Long-Term Voting Factor may be lower than what it would otherwise be for an LTSE-Listings Issuer that has been listed on LTSE Listings for a longer period of time. As a result, proposed Rule 14A.412 provides that LTSE Listings Issuers that have been listed for fewer than five years must assume a minimum Long-Term Voting Factor of two.
Proposed Rule 14A.500(c) would provide that in the event that an LTSE Listings Issuer becomes subject to delisting from LTSE Listings for failure to satisfy one or more LTSE Listings Rules but is otherwise in compliance with all other applicable listing rules of the Exchange, the Exchange may permit such issuer to remain listed on the Exchange, provided that such issuer will cease to be listed on LTSE Listings and will cease to be an LTSE Listings Issuer.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes that the proposed rule change will enhance competition between exchange listing markets in furtherance of Section 11A(a)(1)(C)(ii) of the Act
The Exchange also does not believe that the proposed rule change will result in any burden on intramarket competition since becoming subject to the supplemental standards in the LTSE Listings Rules is completely voluntary. Issuers can elect to list on the Exchange without listing on LTSE Listings, or can elect to become subject to the heightened standards of the LTSE Listings Rules. The Commission and Congress have in other contexts recognized that companies may elect to be subject to greater compliance obligations than strictly required, or elect not to rely on exemptions that may otherwise be available. For example, in adopting the Jumpstart Our Business Startups Act,
The Exchange also does not believe that the proposal will impose any burden on competition between LTSE Listings Issuers that is not necessary or appropriate in furtherance of the purposes of the Act because all companies electing to list on LTSE Listings will be subject to the same standards. Furthermore, where appropriate, the LTSE Listings Rules are designed to provide LTSE Listings Issuers with flexibility to implement the minimum standards contained in the LTSE Listings Rules in ways that are best suited for that issuer's business.
Finally, the Exchange does not believe that the transfer agent certification requirement under proposed Rule 14A.413(b)(5) will impose a burden on competition with respect to transfer agents. While not all transfer agents will be able to implement the required software or other systems or processes, any transfer agent can choose to invest the resources necessary to implement such software or other systems or processes. Moreover, as noted above, as a new listing venue, the Exchange expects to face intense competition from existing exchanges. Consequently, the degree to which a new listing category on the Exchange could impose any burden on competition among transfer agents is extremely limited, and the Exchange does not believe that such listing category would impose any burden on transfer agents that is not necessary or appropriate in furtherance of the purposes of the Act.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to adopt rules related to the inbound router for C2 Options.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange seeks: (1) To adopt Rule 3.18 to govern the Exchange's receipt of inbound options orders from the Exchange's affiliate broker-dealer, Cboe Trading, Inc. (“Cboe Trading”), on behalf of the Exchange's affiliate options exchanges, Cboe EDGX Exchange, Inc. (“EDGX Options”) and Cboe BZX Exchange, Inc. (“BZX Options) and (2) approval from the Securities and Exchange Commission (the “Commission”) pursuant to Rule 3.2(f) for affiliate Cboe Trading to become a Trading Permit Holder of the Exchange.
Proposed Rule 3.18 is based on EDGX Options Rule 2.12. Pursuant to proposed Rule 3.18, Cboe Trading's inbound routing services from EDGX Options and BZX Options to the Exchange would be subject to the following conditions and limitations: (1) The Exchange must enter into (a) a plan pursuant to Rule 17d-2 under the Exchange Act with a non-affiliated self-regulatory organization
The Exchange will comply with the above-listed conditions prior to offering inbound routing from Cboe Trading. In meeting the conditions, the Exchange will have mechanisms in place to protect the independence of the Exchange's regulatory responsibility with respect to Cboe Trading, as well as demonstrate that Cboe Trading cannot use any information that it may have because of its affiliation with the Exchange to its advantage.
Exchange Rule 3.2(f) provides that without prior Commission approval, no Trading Permit Holder may be or become affiliated with the Exchange. The Exchange seeks Commission approval for Exchange affiliate Cboe Trading to become a Trading Permit Holder of the Exchange pursuant to Rule 3.2(f).
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that the rule change promotes the maintenance of a fair and orderly
C2 does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe the proposed rule change will impose any burden on intramarket or intermarket competition that is not necessary or appropriate in furtherance of Act as the proposed rule is based on EDGX Options Rule 2.12 and BZX Options Rule 2.12 [sic], which allow [sic] EDGX Options and BZX Options to receive orders from affiliate Cboe Trading on behalf of affiliate exchanges. Moreover, the requirements of Rule 3.18 (
The Exchange neither solicited nor received comments on the proposed rule change.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
Recognizing that the Commission has previously expressed concern regarding the potential for conflicts of interest in instances where a member firm is affiliated with an exchange to which it is routing orders, the Exchange has proposed limitations and conditions to Cboe Trading's affiliation with the Exchange to permit the Exchange to accept routed orders that Cboe Trading would route in its capacity as a facility of C2.
Specifically, as detailed above, the Exchange committed to the following limitations and conditions:
• The Exchange shall enter into a plan pursuant to Rule 17d-2 under the Act with a non-affiliated self-regulatory organization (“SRO”) and ensure that such plan is operative before offering routing services through Cboe Trading. The 17d-2 plan will relieve the Exchange of regulatory responsibilities with respect to Cboe Trading for rules that are common rules between the Exchange and the non-affiliated SRO. In addition, the Exchange shall enter into a regulatory services agreement (“RSA”) with a non-affiliated SRO to perform regulatory responsibilities for Cboe Trading for unique Exchange rules that are not common rules under the 17d-2 plan.
• The RSA shall require the Exchange to provide the non-affiliated SRO with information, in an easily accessible manner, regarding all exception reports, alerts, complaints, trading errors, cancellations, investigations, and enforcement matters (collectively
• The Exchange, on behalf of Cboe Trading, shall establish and maintain procedures and internal controls reasonably designed to ensure that Cboe Trading does not develop or implement changes to its system on the basis of non-public information regarding planned changes to Exchange systems, obtained as a result of its affiliation with the Exchange, until such information is available generally to similarly situated members of the Exchange in connection with the provision of order routing to or from the Exchange.
As the Exchange represents above, the Exchange believes that the above conditions will protect the independence of the Exchange's regulatory responsibility with respect to Cboe Trading and ensure that Cboe Trading cannot use any information that it may have because of its affiliation with the Exchange to its advantage.
In the past, the Commission has expressed concern that the affiliation of an exchange with one of its members raises potential conflicts of interest, and the potential for unfair competitive advantage.
Finally, Exchange Rule 3.2(f) provides that, without prior Commission approval, no Trading Permit Holder may be or become affiliated with the Exchange. The Exchange now seeks Commission approval for its affiliate, Cboe Trading, to become a Trading Permit Holder of the Exchange pursuant to Rule 3.2(f) so that its affiliate may provide routing services as a facility of the Exchange. Although the Commission continues to be concerned about potential unfair competition and conflicts of interest between an exchange's self-regulatory obligations and its commercial interest when the exchange is affiliated with one of its members, for the reasons discussed above, the Commission believes that it is consistent with the Act to permit Cboe Trading to become affiliated with the Exchange, in the capacity of a facility of C2, for the purposes of providing routing services for the Exchange subject to the conditions described above.
The Exchange has requested that the Commission find good cause for approving the proposed rule change prior to the 30th day after publication of the notice thereof in the
The Commission notes that Cboe Trading, formerly known as Bats Trading, Inc.,
The Commission believes that good cause exists for accelerated approval of the proposed rule change because it raises no novel issues, as the Exchange is adopting the same conditions and limitations that EDGX Options and BZX Options have adopted for Cboe Trading.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
60-Day notice and request for comments.
The Small Business Administration (SBA) intends to request approval, from the Office of Management and Budget (OMB) for the collection of information described below. The Paperwork Reduction Act (PRA) requires federal agencies to publish a notice in the
Submit comments on or before June 1, 2018.
Send all comments to Adrienne Grierson, Deputy Director, Office of Credit Risk Management, Small Business Administration, 409 3rd Street, 8th Floor, Washington, DC 20416.
Adrienne Grierson, Deputy Director, Office of Credit Risk Management,
This information collection is reported to SBA's Office Credit Risk Management (OCRM) by SBA's 7(A) Lenders, Certified Development Companies, Microloan Lenders, and Non-Lending Technical Assistance Providers. OCRM uses the information reported to facilitate its oversight and monitoring of these groups, including their overall performance on SBA loans and their compliance with the applicable program requirements.
SBA is requesting comments on (a) Whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
Small Business Administration.
30-Day Notice.
The Small Business Administration (SBA) is publishing this notice to comply with requirements of the Paperwork Reduction Act (PRA), which requires agencies to submit proposed reporting and recordkeeping requirements to OMB for review and approval, and to publish a notice in the
Submit comments on or before May 2, 2018.
Comments should refer to the information collection by name and/or OMB Control Number and should be sent to:
Curtis Rich, Agency Clearance Officer, (202) 205-7030
This information collection is provided by SBA lenders and borrowers to provide basic loan information and certifications regarding the disbursement of loan proceeds. SBA relies on this information during the guaranty purchase review process as a component in determining whether to honor a loan guaranty.
Comments may be submitted on (a) whether the collection of information is necessary for the agency to properly perform its functions; (b) whether the burden estimates are accurate; (c) whether there are ways to minimize the burden, including through the use of automated techniques or other forms of information technology; and (d) whether there are ways to enhance the quality, utility, and clarity of the information.
The Charter of the Department of State's Cultural Property Advisory Committee has been renewed for an additional two years.
The Charter of the Cultural Property Advisory Committee has been renewed for a two-year period. The Committee was established by the Convention on Cultural Property Implementation Act of 1983. The Committee reviews requests from other States Parties to the 1970 UNESCO
Cultural Heritage Center, U.S. Department of State, Bureau of Educational and Cultural Affairs, 2200 C Street NW, Washington, DC 20522.
Department of State.
Notice of meeting.
The Department of State (Department) will hold a town hall meeting in Spokane, Washington, to discuss the modernization of the Columbia River Treaty (CRT) regime.
The meeting will be held on April 25, 2018, from 5:00 p.m. to approximately 7:00 p.m., Pacific Time.
The meeting will be held in the Isabella Room of the Historic Davenport Hotel, 10 South Post Street, Spokane, Washington 99201.
Susan May,
This Town Hall will initiate the Department's public engagement on the modernization of the CRT regime. The meeting is open to the public, up to the capacity of the room. Requests for reasonable accommodation should be made to the email listed above, on or before April 18, 2018. The Department will consider requests made after that date, but might not be able to accommodate them. Information regarding the proposed agenda, and other information about the meeting, can be found at on
The Surface Transportation Board has received a request from the Southern California Association of Governments (WB18-11—3/27/18) for permission to use data from the Board's 2016 Masked Carload Waybill Sample. A copy of this request may be obtained from the Office of Economics.
The waybill sample contains confidential railroad and shipper data; therefore, if any parties object to these requests, they should file their objections with the Director of the Board's Office of Economics within 14 calendar days of the date of this notice. The rules for release of waybill data are codified at 49 CFR 1244.9.
Federal Aviation Administration (FAA), U.S. Department of Transportation (DOT).
Fourteenth RTCA SC-230 Airborne Weather Detection Systems Plenary.
The FAA is issuing this notice to advise the public of a meeting of Fourteenth RTCA SC-230 Airborne Weather Detection Systems Plenary.
The meeting will be held May 02-03, 2018 9:00 a.m.-5:00 p.m.
The meeting will be held at: RTCA Headquarters, 1150 18th Street NW, Suite 910, Washington, DC 20036.
Karan Hofmann at
Pursuant to section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92-463, 5 U.S.C., App.), notice is hereby given for a meeting of the Fourteenth RTCA SC-230 Airborne Weather Detection Systems Plenary. The agenda will include the following:
Attendance is open to the interested public but limited to space availability. With the approval of the chairman, members of the public may present oral statements at the meeting. Persons wishing to present statements or obtain information should contact the person listed in the
Federal Aviation Administration (FAA), DOT.
Notice of meeting.
The FAA is issuing this notice to advise the public of the Research, Engineering & Development Advisory Committee meeting.
The meeting will be held on April 11, 2018—9:30 a.m. to 4:30 p.m.
The meeting will be held at the Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591.
Chinita A. Roundtree-Coleman at (609) 485-7149 or website at
Pursuant to section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92-463, 5 U.S.C. App. 2), notice is hereby
Federal Highway Administration (FHWA), DOT.
Notice of Limitation on Claims for Judicial Review of Actions by the California Department of Transportation (Caltrans), pursuant to 23 U.S.C. 327.
The FHWA, on behalf of Caltrans, is issuing this notice to announce actions taken by Caltrans. The actions relate to a proposed highway project, State Route 132 West Freeway/Expressway Project from post miles 11.0 to 15.0 and 15.7 to 17.5 in the County of Stanislaus in the City of Modesto, State of California. Those actions grant licenses, permits, and approvals for the project.
By this notice, the FHWA, on behalf of Caltrans, is advising the public of final agency actions. A claim seeking judicial review of the Federal agency actions on the highway project will be barred unless the claim is filed on or before August 30, 2018. If the Federal law that authorizes judicial review of a claim provides a time period of less than 150 days for filing such claim, then that shorter time period still applies.
For Caltrans: Haesun Lim, Acting Branch Chief, Central Sierra Environmental Analysis Branch, 855 M Street, Suite Significant Impact (FONSI) for the project, approved on March 9, 2018, and in other documents in the FHWA project records. The EA, FONSI, and other project records are available by contacting Caltrans at the addresses provided above. The Caltrans EA and FONSI can be viewed and downloaded from the project website at
This notice applies to all Federal agency decisions as of the issuance date of this notice and all laws under which such actions were taken, including but not limited to:
23 U.S.C. 139(
Under part 211 of Title 49 Code of Federal Regulations (CFR), this document provides the public notice that on March 23, 2018, the Memphis Area Transit Authority (MATA) petitioned the Federal Railroad Administration (FRA) for a waiver of compliance from certain provisions of the Federal railroad safety regulations contained at Title 49 CFR. FRA assigned the petition Docket Number FRA-2008-0063.
In its petition, MATA seeks to extend the terms and conditions of its Shared Use waiver, originally granted by FRA's Railroad Safety Board (Board) on October 31, 2008, and extended in 2013. MATA seeks a permanent waiver of compliance from some sections of Title 49 of the CFR for operation of its vintage Riverfront Streetcar line, which features “limited connections” to the general railroad system, including a 1.5-mile shared corridor with the Canadian National Railway (CN) and Amtrak. This shared corridor includes a diamond at-grade rail crossing of the CN/Amtrak track by the Streetcar and 11 shared highway-rail grade crossings. All shared highway-rail at-grade crossings have signalized crossing protection. Also, the diamond at-grade rail crossing is fully interlocked and signaled. All maintenance of the right-of-way is performed by CN forces. MATA ceased operation of its streetcars in 2014 after two fires onboard its rolling stock. MATA hopes to reopen the Riverfront Streetcar line in summer 2018 with overhauled/rebuilt streetcars.
MATA again seeks partial relief from 49 CFR part 225,
A copy of the petition, as well as any written communications concerning the petition, is available for review online at
Interested parties are invited to participate in these proceedings by submitting written views, data, or comments. FRA does not anticipate scheduling a public hearing in connection with these proceedings since the facts do not appear to warrant a hearing. If any interested parties desire an opportunity for oral comment and a public hearing, they should notify FRA, in writing, before the end of the comment period and specify the basis for their request.
All communications concerning these proceedings should identify the appropriate docket number and may be submitted by any of the following methods:
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Communications received by May 17, 2018 will be considered by FRA before final action is taken. Comments received after that date will be considered if practicable.
Anyone can search the electronic form of any written communications and comments received into any of our dockets by the name of the individual submitting the comment (or signing the document, if submitted on behalf of an association, business, labor union, etc.). Under 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its processes. DOT posts these comments, without edit, including any personal information the commenter provides, to
Office of the Assistant Secretary for Research and Technology (OST-R), Bureau of Transportation Statistics (BTS), DOT.
Notice.
In compliance with the Paperwork Reduction Act of 1995, this notice announces that the Information Collection Request (ICR) abstracted below is being forwarded to the Office of Management and Budget (OMB) for extension of currently approved collection. The ICR describes the nature of the information collection and its expected burden. The
No comments were received.
Written comments should be submitted by May 2, 2018.
Marianne Seguin, Office of Airline Information, RTS-42, Room E32-105, OST-R, BTS, 1200 New Jersey Avenue SE, Washington, DC 20590-0001, Telephone Number (202) 366-1547, Fax Number (202) 366-3383 or EMAIL
The Department of Transportation sets and updates the Intra-Alaska Bush mail rates based on carrier aircraft operating expense, traffic, and operational data. Form 298-C cost data, especially fuel costs, terminal expenses, and line haul expenses are used in arriving at rate levels. DOT revises the established rates based on the percentage of unit cost changes in the carriers' operations. These updating procedures have resulted in the carriers receiving rates of compensation that more closely parallel their costs of providing mail service and contribute to the carriers' economic well-being.
DOT often has to select a carrier to provide a community's essential air service. The selection criteria include historic presence in the community, reliability of service, financial stability and cost structure of the air carrier.
Fitness determinations are made for both new entrants and established U.S. domestic carriers proposing a substantial change in operations. A portion of these applications consists of an operating plan for the first year (14 CFR part 204) and an associated projection of revenues and expenses. The carrier's operating costs, included in these projections, are compared against the cost data in Form 298-C for a carrier or carriers with the same aircraft type and similar operating characteristics. Such a review validates the reasonableness of the carrier's operating plan.
The quarterly financial submissions by commuter and small certificated air carriers are used in determining each carrier's continuing fitness to operate. Section 41738 of Title 49 of the United States Code requires DOT to find all commuter and small certificated air carriers fit, willing, and able to conduct passenger service as a prerequisite to providing such service to an eligible essential air service point. In making a
Senior DOT officials must be kept fully informed and advised of all current and developing economic issues affecting the airline industry. In preparing financial condition reports or status reports on a particular airline, financial and traffic data are analyzed. Briefing papers prepared for senior DOT officials may use the same information.
The Confidential Information Protection and Statistical Efficiency Act of 2002 (44 U.S.C. 3501 note), requires a statistical agency to clearly identify information it collects for non-statistical purposes. BTS hereby notifies the respondents and the public that BTS uses the information it collects under this OMB approval for non-statistical purposes including, but not limited to, publication of both Respondent's identity and its data, submission of the information to agencies outside BTS for review, analysis and possible use in regulatory and other administrative matters.
Office of the Comptroller of the Currency, Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on a continuing information collection as required by the Paperwork Reduction Act of 1995 (PRA).
In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.
The OCC is soliciting comment concerning renewal of its information collection titled, “Guidance on Stress Testing for Banking Organizations with more than $10 Billion in Total Consolidated Assets.”
Comments must be submitted on or before June 1, 2018.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. You may submit comments by any of the following methods:
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Instructions: You must include “OCC” as the agency name and “1557-0312” in your comment. In general, the OCC will publish them on
You may review comments and other related materials that pertain to this information collection beginning on the date of publication of the second notice for this collection
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Shaquita Merritt, (202) 649-5490 or, for persons who are deaf or hearing impaired, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW, Suite 3E-218, Washington, DC 20219.
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information that they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of title 44 requires federal agencies to provide a 60-day notice in the
The guidance provides an overview of how a banking organization should structure its stress testing activities to ensure those activities fit into the banking organization's overall risk management. The purpose of the guidance is to outline broad principles for a satisfactory stress testing framework and describe the manner in which stress testing should be used. While the guidance is not intended to provide detailed instructions for conducting stress testing for any particular risk or business area, it does describe several types of stress testing activities and how they may be most appropriately used by banking organizations. The guidance also does not explicitly address the stress testing requirements imposed upon certain companies by section 165(i) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Comments submitted in response to this notice will be summarized and included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on:
(a) Whether the collections of information are necessary for the proper performance of the OCC's functions, including whether the information has practical utility;
(b) The accuracy of the OCC'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.
Office of the Comptroller of the Currency, Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on a continuing information collection as required by the Paperwork Reduction Act of 1995.
An agency may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid OMB control number.
The OCC is soliciting comment concerning the renewal of its information collection titled, “Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies under Section 312 of the Fair and Accurate Credit Transactions Act.”
Comments must be received by June 1, 2018.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557-0238, 400 7th Street SW, Suite 3E-218, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465-4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Shaquita Merritt, OCC Clearance Officer, (202) 649-5490 or, for persons who are deaf or hearing impaired, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street, SW, Suite 3E-218, Washington, DC 20219.
Under the PRA (44 U.S.C. 3501-3520), Federal agencies must obtain approval from OMB for each collection of information that they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency requests and requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of part 44 requires federal agencies to provide a 60-day notice in the
Twelve CFR 1022.42(a) requires furnishers to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of consumer information that they provide to a consumer reporting agency (CRA).
Section 1022.43(a) requires a furnisher to conduct a reasonable investigation of a dispute initiated directly by a consumer in certain circumstances. Furnishers are required to have procedures to ensure that disputes received directly from consumers are handled in a substantially similar manner to those complaints received through CRAs.
Section 1022.43(f)(2) incorporates the statutory requirement that a furnisher must notify a consumer by mail or other means (if authorized by the consumer) not later than five business days after making a determination that a dispute is frivolous or irrelevant. Section 1022.43(f) incorporates the statute's content requirements for the notices.
Comments submitted in response to this notice will be summarized, included in the request for OMB approval, and become a matter of public record. Comments are invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection 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.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service (IRS), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Bad Debt Reserves of Banks.
Written comments should be received on or before June 1, 2018 to be assured of consideration.
Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the regulation should be directed to Martha R. Brinson, at (202) 317-5753, or at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning application for registration for certain excise tax activities.
Written comments should be received on or before June 1, 2018 to be assured of consideration.
Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6529, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the form should be directed to Kerry Dennis, at (202) 317-5751 or Internal Revenue Service, Room 6529, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet, at
The following paragraph applies to all of the collections of information covered by this notice.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Forms 12339, Internal Revenue Service Advisory Council Membership Application; 12339-B, Information Reporting Program Advisory Committee Membership Application, 12339-C, Advisory Committee on Tax Exempt and Government Entities—Membership Application, and Form 13775, Tax Check Waiver.
Written comments should be received on or before June 1, 2018 to be assured of consideration.
Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Sara Covington at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or at (202) 317-6038 or through the internet at
The following paragraph applies to all of the collections of information covered by this notice: An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service (IRS), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Branded Prescription Drug Fee.
Written comments should be received on or before June 1, 2018 to be assured of consideration.
Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of this regulation should be directed to Martha R. Brinson, at (202) 317-5753, or at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless the collection displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service (IRS), as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Guidance on Reporting Interest Paid to Nonresident Aliens.
Written comments should be received on or before June 1, 2018 to be assured of consideration.
Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of this regulation should be directed to Martha R. Brinson, at (202) 317-5753, or at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning Form 8892, Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation—Skipping Transfer Tax.
Written comments should be received on or before June 1, 2018 to be assured of consideration.
Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Sandra Lowery at Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or at (202) 317-5754 or through the internet, at
The following paragraph applies to all of the collections of information covered by this notice: An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Agricultural Marketing Service, USDA.
Proposed rule; order for referendum; notice of public meeting.
The Agricultural Marketing Service (AMS) proposes the issuance of a Federal Milk Marketing Order (FMMO) regulating the handling of milk in California. This proposed rule proposes adoption of a California FMMO incorporating the entire state of California and would adopt the same dairy product classification and pricing provisions used throughout the current FMMO system. The proposed California FMMO provides for the recognition of producer quota as administered by the California Department of Food and Agriculture. This proposed FMMO is subject to producer approval by referendum.
The Agricultural Marketing Service (AMS) will conduct a public meeting at 9:00 a.m. on April 10, 2018, to explain and answer questions relating to how the proposed California FMMO contained in this proposed rule, if adopted, would operate and review the producer referendum process that will be followed to obtain producer approval of the proposed rule.
The public meeting will be held at the Clovis Veterans Memorial District Building, 808 Fourth Street, Clovis, California 93612. Meeting information can be found at
Erin Taylor, Acting Director, Order Formulation and Enforcement Division, USDA/AMS/Dairy Program, STOP 0231, Room 2969-S, 1400 Independence Ave. SW, Washington, DC 20250-0231, (202) 720-7311, email address:
This proposed rule, in accordance to 7 CFR part 900.13a, is the Secretary's final decision in this proceeding and proposes the issuance of a marketing order as defined in 7 CFR part 900.2(j). AMS finds that a FMMO for California would provide more orderly marketing conditions in the marketing area, warranting promulgation of a California FMMO. The record is replete with discussion from most parties on whether disorderly marketing conditions exist, or are even needed, to warrant promulgation of a California FMMO. FMMOs are authorized by the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674 and 7253) (AMAA). The declared policy of the AMAA makes no mention of “disorder,” and AMS finds that disorderly marketing conditions are not a requirement for an order to be promulgated. The standard for FMMO promulgation is to “. . . establish and maintain such orderly marketing conditions . . . ,” (7 U.S.C. 602(4)) and AMS finds that the proposed California FMMO meets that standard.
AMS has considered all record evidence presented at the hearing. Pursuant to a February 14, 2018 Memorandum from Secretary of Agriculture Sonny Perdue, Judicial Officer William Jensen conducted an independent
A FMMO is a regulation issued by the Secretary of Agriculture that places certain requirements on the handling of milk in the area it covers. Each FMMO is established under the authority of the AMAA. A FMMO requires handlers of milk for a marketing area to pay minimum class prices according to how the milk is used. These prices are established under each FMMO after a public hearing where evidence is received on the supply and demand conditions for milk in the market. A FMMO requires that payments for milk be pooled and paid to individual farmers or cooperative associations of farmers on the basis of a uniform or average price. Thus, all eligible dairy farmers (producers) share in the marketwide use-values of milk by regulated handlers.
AMS proposes the establishment of a FMMO in 7 CFR part 1051 to regulate the handling of milk in California. Where appropriate, AMS proposes the adoption of uniform provisions found in 7 CFR part 1000 that are have been adopted into the 10 current FMMOS established in chapter X. These uniform provisions include, but are not limited to, product classification, end-product price formulas, Class I differential structure, and the producer-handler definition.
As in all current FMMOs, California handlers regulated by a California FMMO would be responsible for accurate reporting of all milk movements and uses, and would be required to make timely payments to producers. The California FMMO would be administered by the United States Department of Agriculture (USDA) through a Market Administrator, who would provide essential marketing services, such as laboratory testing, reporting verification, information collection and publication, and producer payment enforcement.
A unique feature of the proposed order is a provision for the recognition of the quota value specified in the California quota program currently administered by the California Department of Food and Agriculture (CDFA). AMS finds that the California quota program should remain a function of CDFA in whatever manner CDFA deems appropriate. Should CDFA continue to use producer monies to fund the quota program, AMS finds that the proper recognition of quota values within a California FMMO, as provided for in the Agriculture Act of 2014 (2014 Farm Bill) (Pub. L. 113-79, sec. 1410(d)), is to permit an authorized deduction from payment to producers, in an amount determined and announced by CDFA.
In conjunction with this proposed FMMO, AMS conducted a Regulatory Economic Impact Analysis to determine the potential impact of regulating California milk handlers under a FMMO on the milk supply, product demand and prices, milk allocation in California and throughout the United States, and impacts to consumers. As part of the
Prior documents in this proceeding:
This proposed rule is governed by the provisions of Sections 556 and 557 of Title 5 of the United States Code and is therefore excluded from the requirements of Executive Order 12866.
This proposed rule is not expected to be an Executive Order 13771 regulatory action because this proposed rule is not a significant regulatory action under Executive Order 12866.
The provisions of this proposed rule have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have a retroactive effect. If adopted, the proposed FMMO would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.
AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
The AMAA provides that administrative proceedings must be exhausted before parties may file suit in court. Under 7 U.S.C. 608c(15)(A) of the AMAA, any handler subject to an order may request modification or exemption from such order by filing with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with the law. A handler is afforded the opportunity for a hearing on the petition. After a hearing, USDA would rule on the petition. The AMAA provides that the district court of the United States in any district in which the handler is an inhabitant, or has its principal place of business, has jurisdiction in equity to review USDA's ruling on the petition, provided a bill in equity is filed not later than 20 days after the date of the entry of the ruling.
AMS has reviewed this proposed rule in accordance with Departmental Regulation 4300-4—Civil Rights Impact Analysis (CRIA), to identify and address potential impacts the proposal might have on any protected groups of people. After a careful review of the proposed rule's intent and provisions, AMS has determined that this proposed rule, if adopted, would not limit or reduce the ability of individuals in any protected classes to participate in the proposed FMMO, or to enjoy the anticipated benefits of the proposed program. Any impacts on dairy farmers and processors arising from implementation of this proposed rule are not expected to be disproportionate for members of any protected group on a prohibited basis.
An anonymous commenter took exception to AMS's determination with respect to civil rights impact of the proposed rule. The commenter took exception with AMS's conclusion that because the proposed California FMMO would provide for orderly marketing conditions, its implementation would not result in disparate impacts on protected classes, especially consumers. The civil rights analysis did not consider consumers because consumers are not a protected class. Other observations suggested by the commenter regarding consumerism and homelessness are outside the scope of the CRIA.
Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions so that small businesses will not be unduly or disproportionately burdened. Small dairy farm businesses have been defined by the Small Business Administration (SBA) (13 CFR 121.601) as those businesses having annual gross receipts of less than $750,000. SBA's definition of small agricultural service firms, which includes handlers that would be regulated under this proposed FMO, varies depending on the product manufactured. Small fluid milk and ice cream manufacturers are defined as having 1,000 or fewer employees. Small butter and dry or condensed dairy product manufacturers are defined as having 750 or fewer employees. Small cheese manufacturers are defined as having 1,250 or fewer employees.
For the purpose of determining which California dairy farms are “small businesses,” the $750,000 per year criterion was used to establish a production guideline that equates to approximately 315,000 pounds of milk per month. Although this guideline does not factor in additional monies that may be received by dairy farmers, it is a standard encompassing most small dairy farms. For the purpose of determining a handler's size, if the plant is part of a larger company operating multiple plants that collectively exceed the employee limit for that type of manufacturing, the plant is considered a large business even if the local plant has fewer than the defined number of employees.
Interested persons were invited to present evidence at the hearing on the probable regulatory and informational impact of the proposed California FMMO on small businesses. Specific evidence on the number of large and small dairy farms in California (above and below the threshold of $750,000 in annual sales) was not presented at the hearing. However, data compiled by CDFA
Record evidence indicates that implementing the proposed California FMMO would not impose a disproportionate burden on small businesses. Currently, the California dairy industry is regulated by a California State Order (CSO) that is administered and enforced by CDFA. While the CSO and FMMOs have differences that are discussed elsewhere
The record evidence indicates that while the program is likely to impose some costs on the regulated parties, those costs would be outweighed by the benefits expected to accrue to the California dairy industry. In conjunction with the publication of the recommended decision (82 FR 10634), AMS released a Regulatory Economic Impact Analysis (REIA) to study the possible impacts of the proposed California FMMO. AMS received five comments related to the REIA. The substance of those comments and AMS's response are provided in the documentation that accompanies an updated REIA, which was prepared to reflect the provisions proposed in this FMMO. The updated analysis may be viewed in conjunction with this proposed FMMO (Docket No. AMS-DA-14-0095) at
The record shows that the California dairy industry accounts for approximately 20 percent of the nation's milk supply. While its 39 million residents are concentrated in the state's coastal areas, the majority of California's dairy farms are located in the interior valleys, frequently at some distance from milk processing plants and consumer population centers.
CDFA has defined and established distinct regulations for Northern and Southern California dairy regions.
According to CDFA, there were 1,392 dairy farms in California in 2016. Of those, 1,297 were located in Northern California, and 95 were in Southern California. The statewide average number of cows per dairy was 1,249; in Northern California, the average herd size was 1,265 cows, and in Southern California, 1,026 cows. Average milk production for the state's 1.74 million cows was 23,265 pounds in 2016.
According to record evidence, 132 handlers reported milk receipts to CDFA for at least one month during 2015. A CDFA February 2015 list of California dairy product processing plants by type of product produced
CDFA reported
According to CDFA, total Class 1 sales in California were approximately 642 million gallons in 2016. Record evidence shows that annual California Class 1 sales outside the state averaged 22 million gallons for the five years preceding 2015.
The record shows that for the five-year period from 2010 through 2014, an average of 230 million pounds of California bulk milk products were transferred to out-of-state plants for processing each year. During the same period, an average of 633 million pounds of milk from outside the state was received and reported by California pool plants each year.
AMS proposes to establish a FMMO in California similar to the 10 existing FMMOs in the national system. The California dairy industry is currently regulated under the CSO, which is similar to the proposed FMMO in most respects. California handlers currently report milk receipts and utilization to CDFA, which calculates handler prices based on component values derived from finished product sales surveys. Likewise, FMMO handlers report milk receipts and utilization to the Market Administrators, who calculate handlers' pool obligations according to price formulas that incorporate component prices based on end product sales values. Under both programs, the value of handlers' milk is pooled, and pool revenues are shared by all the pooled producers. Thus, transitioning to the FMMO is expected to have only a minimal impact on the reporting and regulatory responsibilities for large or small handlers, who are already complying with similar CSO regulations.
Under the proposed California FMMO, uniform FMMO end-product price formulas would replace the CDFA price formulas currently used to calculate handler milk prices. FMMO end-product price formulas incorporate component prices derived from national end-product sales surveys conducted by AMS. Use of price formulas based on national product sales would permit California producers to receive prices for pooled milk reflective of the national market for commodity products for which their milk is utilized. Consistent with the current FMMOs, California FMMO Class I prices would be computed using the higher of the Class III or IV advance prices announced the previous month, and would be adjusted by the Class I differential for the county where the plant is located.
Regulated minimum prices, especially for milk used in cheese manufacturing, are likely to be higher than what handlers would pay under the CSO. However, pooling regulations under the proposed FMMO would allow handlers to elect not to pool milk used in manufacturing. This option would be available to both large and small manufacturing handlers.
Dairy farmers whose milk is pooled on the proposed California FMMO would receive a pro rata share of the pool revenues through the California FMMO uniform blend price. The California FMMO would not provide for the quota and non-quota milk pricing tiers found under the CSO. Under the proposed California FMMO, regulated handlers would be allowed to deduct monies, in an amount determined and announced by CDFA, from blend prices paid to California dairy farmers for
These changes are expected to affect producers and handlers of all sizes, but are not expected to be disproportionate for small entities.
The record shows that there are four producer-handlers
The evidentiary record shows that several smaller California producer-handlers, whose production volume exceeds the threshold to receive an exemption from the CSO's pricing and pooling regulations, would likely qualify as producer-handlers under the proposed California FMMO.
The evidentiary record indicates that milk in interstate commerce, which the CSO does not have authority to regulate, would be regulated under the proposed California FMMO. Currently, California handlers who purchase milk produced outside the state do not account to the CSO marketwide pool for that milk. Record evidence shows approximately 425 million pounds of milk from outside the state was processed into Class 1 products at California processing plants during 2014.
Under the proposed FMMO, all Class I milk processed and distributed in the marketing area would be subject to FMMO pricing and pooling regulations, regardless of its origin. Thus, revenues from Class 1 sales that are not currently regulated would accrue to the California FMMO pool and would be shared with all producers who are pooled on the California FMMO, including out-of-state producers. If California handlers elect to continue processing out-of-state milk into Class I products, under the provisions of the proposed California FMMO they would be required to pay the order's classified minimum price for that milk. Those additional revenues would be pooled and would benefit large and small producers who participate in the pool. Both large and small out-of-state producers who ship milk to pool plants in California would receive the California FMMO uniform blend price for their milk.
Dairy product classification under the CSO and the proposed FMMO is similar, but not identical. The table below compares CSO and FMMO product classes.
Under the proposed California FMMO, the classification of certain California products would change to align with standard FMMO classifications:
• Reassigning buttermilk from CSO Class 2 to FMMO Class I
• Reassigning half and half from CSO Class 1 to FMMO Class II
• Reassigning eggnog from CSO Class 2 to FMMO Class I
• There are numerous instances where the CSO classifies a product based on product type and where the product is sold.
Under the proposed FMMO, California handlers would no longer receive credits for fluid milk fortification. Instead, accounting for fortification would be uniform with other FMMOs, as the fluid milk equivalent of the milk solids used to fortify fluid milk products would be classified as Class IV, and the increased volume of Class I product due to fortification would be classified as Class I. The FMMO system accounts for fortification differently than does the CSO. The record does not indicate the net impact of this change. However, the impact is not expected to disproportionately affect small entities.
The proposed California FMMO does not contain a transportation credit program to encourage milk shipments to Class 1, 2, and 3 plants, as is currently provided for in the CSO. AMS proposes that producer payments be adjusted to reflect the applicable producer location adjustment for the handler location where the milk is received, thus providing the incentive to producers to supply Class I plants. Producers are responsible for finding a market for their milk and consequently bear the cost of transporting their milk to a plant. The record of this proceeding does not support reducing the producers' value of the marketwide pool by authorizing transportation credits to handlers. This change is not expected to disproportionately impact small business entities.
AMS continues to find that adoption of the proposed California FMMO would promote more orderly marketing of milk in interstate commerce. Classified milk prices under the order would reflect national prices for manufactured products and local prices for fluid milk products, fostering greater equality for California producers and handlers in the markets where they compete. Under the proposed FMMO, handlers would be assured a uniform cost for raw milk, and producers would receive uniform payments for raw milk, regardless of its use. Small dairy farmers and handlers are not expected to be disproportionately impacted by the transition from CSO to FMMO regulations.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the ballot materials that will be used in conducting the referendum have been submitted to and approved by OMB (0581-0300). The forms to be used to administer the proposed California FMMO have also been reviewed by OMB (0581-0032) and would be approved should the California FMMO producer referendum pass.
Any additional information collection and recordkeeping requirements that may be imposed under the proposed order would be submitted to OMB for public comment and approval.
Notice is hereby given of the filing with the Hearing Clerk of this final decision with respect to the proposed marketing agreement and order
This final decision is issued pursuant to the provisions of the AMAA and the applicable rules of practice and procedure governing the formulation of marketing agreements and orders (7 CFR part 900). The proposed marketing agreement and order are authorized under 7 U.S.C. 608c.
The proposed marketing agreement and order are based on the record of a public hearing held September 22 through November 18, 2015, in Clovis, California. The hearing was held to receive evidence on four proposals submitted by dairy farmers, handlers, and other interested parties. Notice of this hearing was published in the
Ninety-eight witnesses testified over the course of the 40-day hearing. Witnesses provided a broad overview of the history and complexity of the California dairy industry, and submitted 194 exhibits containing supporting data, analyses, and historical information.
Upon the basis of evidence introduced at the hearing and the record thereof, the Administrator of AMS on February 6, 2017, filed with the Hearing Clerk, USDA, a recommended decision and Opportunity to File Written Exceptions thereto by May 15, 2017. Twenty-nine comments or exceptions were filed. That document also announced AMS's intent to request approval of new information collection requirements to implement the program. Written comments on the proposed information collection requirements were due April 17, 2017. Two comments were filed. AMS issued a notice regarding Documents for Official Notice, inviting comments on whether the Department should take official notice of numerous listed documents submitted for consideration by proponents. The notice was issued on August 8, 2017, and published on August 14, 2017. Comments on the official notice request were due August 29, 2017. Three supportive comments were received and are discussed later in this decision. Lastly, AMS announced its intent to request approval of a new information collection for ballot material to be used in a producer referendum in a document issued on April 17, 2017, and published on April 21, 2017. Comments on the ballot material information collection were due June 20, 2017. One supportive comment was received. A Submission for OMB Review seeking OMB approval of the ballot material was issued on September 27, 2017, and published on October 2, 2017 (82 FR 45795).
The material issues presented on the record of hearing are as follows:
1. Whether the handling of milk in the proposed marketing area is in the current of interstate commerce, or directly burdens, obstructs, or affects interstate commerce in milk or its products;
2. Whether economic and marketing conditions in California show a need for a Federal marketing order that would tend to effectuate the declared policy of the Act;
3. If an order is issued, what its provisions should be with respect to:
a. Handlers to be regulated and milk to be priced and pooled under the order;
b. Classification of milk, and assignment of receipts to classes of utilization;
c. Pricing of milk;
d. Distribution of proceeds to producers; and
e. Administrative provisions.
The findings and conclusions on the material issues are based on the record of the hearing and the comments and exceptions filed with regard to the recommended decision. Discussions are organized by topic, recognizing inevitable overlap in some areas. Topics are addressed in the following order:
The purpose of the following section is to provide a general description and comparison of the major features of the California state dairy regulatory framework and the FMMO system as provided in the evidentiary record. A more detailed discussion of each issue is provided in the appropriate section of this decision.
California State Order:
Currently, milk marketing in California is regulated by the CDFA. The CSO is codified in the
The California quota program is a state-administered producer program that entitles the quota holder to $0.195 per pound of solids-not-fat above the CSO base and overbase price of milk.
The CSO provides for the pricing of five classified use values of milk. In general, Class 1 is milk used in fluid milk products; Class 2 is milk used in heavy cream, cottage cheese, yogurt, and sterilized products; Class 3 is milk used in ice cream and frozen products; Class 4a is milk used in butter and dry milk products, such as nonfat dry milk; and Class 4b is milk used in cheese—other than cottage cheese—and whey products.
The CSO utilizes an end-product pricing system to determine classified prices for raw milk produced and manufactured in the State of California. Class 1, 4a, and 4b prices are announced monthly. Class 2 and 3 prices are announced bi-monthly. Prices for all five milk classes are component-based. Three components of milk are used to determine prices: butterfat (fat); solids-not-fat (SNF), which includes protein and lactose; and a fluid carrier (used in only the Class 1 price).
The CSO determines milk component prices based on commodity market prices obtained from the Chicago Mercantile Exchange (CME), the AMS Dairy Market News Western Dry Whey—Mostly (WDW-Mostly) price series, and the announced nonfat dry milk (NFDM) California Weighted Average Price (CWAP), which is determined by CDFA through weekly surveys of California manufacturing plants.
The price for milk used in cheese manufacturing (CSO Class 4b) is a
The CSO pricing system has a number of features worth highlighting. First, under the CSO, handlers must pay at least minimum classified prices for all Grade A milk purchased from California dairy farmers, regardless of whether the milk is pooled on the CSO. Additionally, Class 1 processors may claim credits against their pool obligations to offset the cost of fortifying fluid milk to meet the State-mandated nonfat solids content standards.
The classified use values of all the milk pooled on the CSO are aggregated, and producers are paid on the fat and SNF component levels in their raw milk. Producers are paid on the basis of their allocated quota (if applicable), base, and overbase production for the month. While the CSO pricing formulas have changed over time, in their current form the base and overbase prices are the same. Generally, the quota price is the overbase price plus the $1.70 per cwt quota premium.
Almost all California-produced milk received by California pool plants is pooled on the CSO, with some exceptions. Grade B milk is neither pooled nor subject to minimum prices. Manufacturing plants that do not make any Class 1 or 2 products can opt out of the pool; however, they are still required to pay announced CSO classified minimum prices for Grade A milk received. The requirement that quota holders must deliver milk to a pool plant at least once every 60 days tends to limit the amount of Grade A milk not pooled on the CSO. The decision not to pool milk in California carries with it a stipulation that the plant may not repool for 12 months after opting not to pool, and after repooling, a plant cannot opt out of pooling for 12 months.
Entities recognized as producer-handlers under the CSO may be exempt from pooling some or all of their milk. Producer-handlers are dairy farmers who also process and distribute their dairy products. Fully exempt (“Option 66”) producer-handlers have minimal production volumes and are exempt from the pricing and pooling provisions of the CSO. Producer-handlers who own exempt quota (“Option 70”) do not account to the CSO marketwide pool for the volume of Class 1 milk covered by their exempt quota.
The State of California cannot regulate interstate commerce; therefore, milk from out-of-state producers cannot be regulated by the CSO. While the record reflects that California handlers typically pay for out-of-state milk at a price reflective of the receiving plant's utilization, those prices are not regulated or enforced by the CSO.
The CSO provides transportation credits to producers for farm-to-plant Class 1, 2, and 3 milk movements between designated supply zones and plants with more than 50 percent Class 1, 2, and/or 3 utilization in designated demand zones. The CSO also provides for transportation allowances to handlers for plant-to-plant milk movements.
A FMMO is a regulation issued by the Secretary of Agriculture (Secretary) that places certain requirements on the handling of milk in a defined geographic marketing area. FMMOs are authorized by the AMAA. The declared policy of the AMAA is to “. . . establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce . . .” (7 U.S.C. 602(1)). The principal means of meeting the objectives of the FMMO program are through the use of classified milk pricing and the marketwide pooling of returns.
Whereas the CSO designates five classes of milk utilization, FMMOs provide for four classes of milk utilization. FMMO Class I is milk used in fluid milk products. Class II is milk used to produce fluid cream products, soft “spoonable” products like cottage cheese, ice cream, sour cream, and yogurt, and other products such as kefir, baking mixes, infant formula and meal replacements, certain prepared foods, and ingredients in other prepared food products. Class III is milk used to produce spreadable cheeses like cream cheese, and hard cheeses, like Cheddar, that can be crumbled, grated, or shredded. Class IV is milk used to produce butter, evaporated, or sweetened condensed milk in consumer-style packages, and dry milk products.
Like the CSO, the FMMO program currently uses end-product price formulas based on the wholesale prices of finished products to determine the minimum classified prices handlers pay for raw milk in the four classes of utilization. However, the FMMO pricing system has some notable differences. While the CSO announces some classified prices on a bi-monthly basis, FMMOs announce prices for all four milk classes monthly. FMMOs use four components of milk to determine prices: Butterfat, protein, nonfat solids, and other solids.
Like the CSO, the FMMO determines component prices based on commodity prices. However, AMS administers the Dairy Product Mandatory Reporting Program (DPMRP) to survey weekly wholesale prices of four manufactured dairy products (cheese, butter, NFDM and dry whey), and releases weekly average survey prices in the National Dairy Product Sales Report (NDPSR).
As referenced previously, a central issue of this proceeding is the pricing of milk used for cheese manufacturing (FMMO Class III). The FMMO pricing system determines the Class III value from DPMRP surveyed butter, cheese, and dry whey prices. The FMMO does not utilize a sliding scale to determine the value of whey that contributes to the Class III price.
Unlike the CSO, FMMOs do not provide for a tiered system of producer payments. A uniform blend price is computed for each FMMO reflecting the use of all milk in each marketwide pool. A blend price is paid for all milk that is pooled on the FMMO, adjusted for location. In six of the FMMOs, producers are paid for the pounds of butterfat, pounds of protein, pounds of other solids, and cwt of milk pooled. The cwt price is known as the producer price differential (PPD) and reflects the
Inclusion in the FMMO marketwide pool carries with it an obligation to be available to serve the fluid market with necessary milk supplies throughout the year. In the FMMO system, participation in the pool is mandatory for distributing plants that process Grade A milk into Class I products sold in a FMMO marketing area. Handlers of manufacturing milk (Class II, III, or IV) have the option of pooling, and pool eligibility is based on performance standards specific to each FMMO.
FMMOs recognize the unique business structures of producer-handlers and exempt them from the pricing and pooling regulations of the orders based on size. Producer-handler exemptions under FMMOs are limited to those vertically-integrated entities that produce and distribute no more than three million pounds of packaged fluid milk products each month.
Unlike the CSO, FMMOs are authorized to regulate the interstate commerce connected with milk marketing. Thus, there is no differentiated regulatory treatment for milk produced outside of a FMMO marketing area boundary. All eligible milk is pooled and priced in the same manner, regardless of its source.
The Appalachian and Southeast FMMOs provide for transportation credits to offset a handler's cost of hauling supplemental milk to Class I markets. During deficit months, handlers can apply for transportation credits to offset the cost of supplemental milk deliveries from outside the marketing area to meet the Class I demand of FMMO handlers. The most significant difference from the CSO here is that the FMMO transportation credits described are not paid from the marketwide pool. Instead, they are paid from separate funds obtained through monthly assessments on handlers' Class I producer milk. The exception is the Upper Midwest FMMO, which provides transportation credits on plant-to-plant milk movements paid from the marketwide pool.
Four proposals were published in the Hearing Notice of this proceeding. Dairy Farmers of America, Inc., Land O'Lakes, Inc., and California Dairies, Inc. jointly submitted Proposal 1. Dairy Farmers of America, Inc. (DFA), is a national dairy-farmer owned cooperative with approximately 14,000 members and several processing facilities located throughout the United States, with products marketed both nationally and internationally. Within California, DFA represents 260 members and operates three processing facilities. Land O'Lakes (LOL) is a national farmer-owned cooperative with over 2,200 dairy-farmer members. LOL has processing facilities in the Upper Midwest, the eastern United States, and the State of California, with products marketed nationally and internationally. Within California, LOL represents 200 dairy-farmer members and operates three processing facilities. California Dairies, Inc. (CDI), is a California based dairy-farmer owned cooperative with 390 dairy-farmer members, six processing facilities in California, and national and international product sales. Combined, DFA, LOL, and CDI (Cooperatives) market approximately 75 percent of the milk produced in California.
Proposal 1 seeks to establish a California FMMO that incorporates the same dairy product classification and pricing provisions as those used throughout the FMMO system. Proposal 1 also includes unique pooling provisions, described as “inclusive” throughout the proceeding, that would pool the majority of the milk produced in California each month while also allowing for the pooling of milk produced outside of the marketing area if it meets specific pooling provisions. The proposal includes fortification and transportation credits similar to those currently provided by the CSO. Lastly, Proposal 1 provides for payment of the California quota program quota values from the marketwide pool before the FMMO blend price is computed each month.
Proposal 2 was submitted on behalf of the Dairy Institute of California (Institute). The Institute is a California trade association representing proprietary fluid milk processors, cheese manufacturers, and cultured and frozen dairy products manufacturers in 38 plants throughout California. Institute plants process 70 percent of the fluid milk products, 85 percent of the cultured and frozen dairy products, and 90 percent of the cheese manufactured in the state. The Institute's first position is that a California FMMO should not be promulgated. However, should USDA find justification for promulgation, the Institute supports Proposal 2. Proposal 2 incorporates the same dairy product classification provisions used throughout the FMMO system, as well as pooling provisions that are consistent with those found in other FMMOs. The Proposal 2 pooling provisions require the pooling of Class I milk, but the pooling of milk used in manufactured products is optional. Proposal 2 includes fortification and transportation credits similar to those currently provided by the CSO. It also includes an additional shrinkage allowance for extended shelf life (ESL) products above that provided in the FMMO system. Lastly, Proposal 2 recognizes quota value by allowing producers to opt out of the quota program, thus receiving a FMMO blend price reflective of the market's utilization. Under Proposal 2, producers who remain in the quota program would have their blend price monies transferred to CDFA and redistributed according to their quota and non-quota holdings.
Proposal 3 was submitted on behalf of the California Producer Handlers Association (CPHA). CPHA is an association of four producer-handlers: Foster Farms Dairy, Inc. (Foster); Hollandia Dairy, Inc.; Producers Dairy Foods, Inc. (Producers);and Rockview Dairies, Inc. (Rockview). CPHA members own their respective dairy farms and process that farm milk, as well as the milk of other dairy farms, for delivery to consumers. CPHA members own exempt quota, which entitles them to exemption from CSO pricing and pooling provisions for the volume of Class 1 milk covered by their exempt quota. Proposal 3 seeks recognition and continuation of CPHA members' exempt quota status under a California FMMO.
Proposal 4 was submitted on behalf of Ponderosa Dairy (Ponderosa). Ponderosa is a Nevada dairy farm that supplies raw milk to California fluid milk processing plants. Ponderosa contends that disorderly marketing conditions do not exist in California that would warrant promulgation of a FMMO. However, if USDA finds justification for a California FMMO, Proposal 4 seeks to allow California handlers to elect partially-regulated plant status with regard to milk they receive from out-of-state producers. Such allowance would enable handlers to not pool out-of-state milk, as long as they could demonstrate that they paid out-of-state producers an amount equal to or higher than the market blend price.
This section reviews and summarizes the testimony, hearing evidence, and comments and exceptions filed regarding the recommended decision addressing whether or not promulgation of a California FMMO is justified. After careful consideration and review, this final decision affirms the finding that
A Cooperative witness testified regarding current California marketing conditions and the need for establishing a California FMMO. According to the witness, California is the largest milk-producing state, producing more than 20 percent of the nation's milk. The witness stated that the pooled volume of a California FMMO would be the largest of all FMMOs, averaging slightly below 3.4 billion pounds per month; the Class I volume would represent the third largest, following the Northeast and Mideast FMMOs.
The Cooperative witness testified that the primary reason California farmers are seeking the establishment of a FMMO is to receive prices reflective of the national commodity values for all milk uses. The witness opined that orderly marketing is no longer attainable through the CSO because the prices California dairy farmers receive do not reflect the full value of their raw milk. The witness estimated that this pricing difference has reduced California dairy farm income by $1.5 billion since 2010. The witness maintained that Proposal 1 allows California dairy farms to receive an equitable price for their milk, while also tailoring FMMO provisions to the California dairy industry. The Cooperatives' post-hearing brief reflected this position.
The Cooperative witness testified that there are significant price differences, depending on whether a producer's milk is regulated by the CSO or a FMMO. To illustrate this difference, the witness compared California farm milk prices to those received by producers in the states that comprise the Upper Midwest and Pacific Northwest marketing areas.
The Cooperative witness emphasized that while both the CSO and the FMMOs use end-product pricing formulas to determine class prices, the two regulatory systems use different commodity series, effective dates, yield factors, and make allowances, which result in substantially different prices, as highlighted above. The witness explained that while the two regulatory systems have always had price differences, historically CSO and FMMO prices were relatively close. According to the witness, prices began to diverge significantly in 2007 when the CSO established a fixed whey factor in its formula for milk used to produce cheese. From that point forward, the witness said, price differences have become significant and have led to market disruptions both in the fluid and manufacturing markets.
The Cooperative witness summarized USDA's justification from the FMMO Order Reform decision for adopting a national Class I price surface that assigns a Class I differential for every county in the country, including counties in California. The witness said that the separate CSO Class 1 price surface undermines the integrity of the nationally coordinated Class I price surface and has become a source of disorder in California. To demonstrate the disorder, the witness compared FMMO Class I and CSO Class 1 prices for both in-state and out-of-state purchases. The witness said that because of the CSO and FMMO differences in both classified price formulas and Class I/1 price surfaces, the Class 1 price paid by California handlers is almost always lower than what it otherwise would be if FMMO Class I prices were applicable for those same purchases.
The Cooperative witness presented a similar comparison between CSO Class 1 prices and Class I prices in FMMO areas that were likely competitors. The witness said that under FMMO regulations, the difference in Class I prices between two FMMO areas is attributed to the difference in the Class I differential at the two locations. For example, the witness explained, the Class I price difference between two plants, one located in a $2.10 zone and another in the $2.00 zone, would be $0.10 per cwt. However, when the witness compared Class 1 prices in California and a competing FMMO area, the price difference was always greater than the difference in differentials. For example, the FMMO differential in the Los Angeles/San Diego market is $2.10, while the differential in neighboring Phoenix is $2.35, a difference of $0.25. However, said the witness, when comparing the actual CSO Class 1 price in Los Angeles/San Diego with the FMMO Class I price in Phoenix from August 2012 to July 2015, the difference averaged $0.62. The witness concluded that these observed price differences undermine a nationally-coordinated pricing structure and contribute to disorderly marketing, where fluid milk handlers pay different minimum prices depending on where they are regulated.
The Cooperative witness also provided testimony on the CSO and FMMO price disparities for manufacturing milk. The witness testified that FMMO Class II, III, and IV prices reflect national prices for products manufactured in these classes. If Proposal 1 is adopted, the witness said, California handlers would pay the same uniform prices as their FMMO competitors in the national marketplace. The witness noted past FMMO decisions that discussed the national supply and demand for manufactured dairy products and the need for national uniform manufacturing prices. The witness stressed that California producers should also receive these national prices like their FMMO counterparts.
The Cooperative witness elaborated on the differences between CSO and FMMO manufacturing class prices. When comparing FMMO Class II to CSO Class 2 and Class 3 prices, the witness cited differences in the commodity series used as price references, the time periods of data used, and the length of time prices are applicable to explain the sometimes large differences in prices under the two regulatory systems. As a result, the witness said, Class 2 products are sometimes sold on a spot basis to exploit short-term price differences.
The Cooperative witness presented a comparison of CSO Class 4a and FMMO Class IV prices from January 2000 to July 2015, revealing that over the entire time period the Class 4a price averaged $0.29 per cwt less than the Class IV price. The witness added that over this 15-year period, the CSO Class 4a price on an annual average basis was never above the FMMO Class IV price.
The Cooperative witness also provided testimony on the price disparity between CSO Class 4b and FMMO Class III price formulas. Data from January 2000 to July 2015 revealed
The Cooperative witness reiterated the consequences of having two different regulatory pricing schemes which has led to severe differences between the regulated markets. The witness opined that the regulatory differences allow California handlers who purchase raw milk and manufacture products for sale in the national marketplace to pay substantially different regulated minimum prices than handlers regulated by the FMMO system. The witness estimated that because of the regulatory price differences, from August 2012 to July 2015, California farms received, on average, $1.89 per cwt less than similarly-situated FMMO farms. The witness concluded that this results in California farms being in a worse competitive position than similarly situated FMMO farms. The witness labeled this as disorderly and said that this condition should be remedied through the adoption of Proposal 1.
The Cooperative witness also entered data estimating the value of regulating interstate commerce through the establishment of a California FMMO. The witness cited January 2009 through July 2015 CDFA data that indicated a monthly average of 54.5 million pounds of milk originating outside the state was processed by California processing plants, and another monthly average 36 million pounds of milk was produced inside California and sold to plants located outside of the state. The witness explained that this milk is able to evade CSO minimum-price regulations because of the state's inability to regulate interstate commerce. Consequently, the witness said, out-of-state farms delivering milk to California plants can receive plant blend prices, which can be higher than the market's overbase price received by in-state producers delivering to the same plant. The witness elaborated that the problem is compounded because processors receiving these unregulated supplies are not required to pay minimum classified prices and can instead pay a lower price than their competitors pay for regulated milk. By regulating these interstate transactions through the establishment of a California FMMO, the witness stressed, the California market would be more orderly.
The Cooperatives' post-hearing brief also highlighted the CSO's inability to regulate out-of-area milk as a market dysfunction. The Cooperatives wrote that out-of-area sales financially harm California dairy farms because the Class 1 revenues from those sales do not contribute to the CSO marketwide pool that is shared with all the farms in the market.
A consultant witness, appearing on behalf of the Cooperatives, testified in support of Proposal 1. The witness was of the opinion that the primary purpose of FMMOs is to enhance producer prices, which is provided in the AMAA through its flexibility to regulate milk and/or milk products, not just fluid milk. As evidence of this flexibility, the witness discussed the Evaporated Milk Marketing Agreement, in existence until 1947, under which manufacturing milk was regulated. The witness said it was reasonable to conclude from this example that the regulation of all California plants that purchase milk from California farms, as contained in Proposal 1, would fall within the scope of the AMAA.
The consultant witness elaborated that extending minimum price regulation to all classes of milk in California is necessary to avoid the market-disrupting practice of handlers opting to not pool eligible milk because of price, often referred to as depooling. The witness said that many FMMOs have adopted provisions to reduce instances of depooling. Currently under the CSO, the witness said, while plants can choose to not participate in the marketwide pool, they gain no price advantage because they are still required to pay minimum classified prices. The witness was of the opinion that the impact of depooling would be greater in a California FMMO because of how California quota premiums are paid. The witness testified that uniform prices calculated after deducting quota premiums would be less than they otherwise would be if large volumes of milk were not pooled. Additionally, the witness addressed the requirement of uniform producer payments. The witness was of the opinion that under Proposal 1, once quota premiums were paid, as required by California law, remaining pool revenues would be distributed uniformly to producers for non-quota milk, as required by the AMAA.
The consultant witness addressed the issue of whether Proposal 1 would implement classified prices that were too high. The witness opined that the classified price formulas contained in Proposal 1 would not establish manufacturing milk prices that are too high because FMMO regulated handlers in other areas are already paying those prices. The witness entered data showing that cheese production has increased in the western states (not including California and Idaho) by 92 percent from 2000 to 2014, while California cheese production has increased only 64 percent. The witness concluded that minimum FMMO prices have not been detrimental to FMMO-regulated plants, and offered the fact that over-order premiums are currently paid to FMMO producers to support that claim. The witness stated that regulations providing for orderly marketing conditions should also provide stability (regulations should not alter market transactions) and efficiency (regulations should stimulate a competitive economic environment), and concluded that both are embodied in Proposal 1.
Twenty-seven California dairy farmers testified in support of Proposal 1. Sixteen belong to one of the three proponent Cooperatives: Nine LOL members, three DFA members, and four CDI members. An additional 11 dairy farmers not associated with the Cooperatives provided testimony supporting the adoption of Proposal 1.
Although each dairy farmer provided unique testimony, several difficulties challenging the California dairy industry were addressed repeatedly. Producer testimony described financial hardships due to the CSO producer prices they receive consistently being below the amount needed to cover the cost of production. One farmer witness cited CDFA cost of production data from the first quarter of 2015 for the North
A number of producers testified that historically they had many competitive advantages (low cost of land, grain, hay and water) enabling them to produce milk at a significantly lower cost than farms located in the rest of the county. All of the witnesses testified that the hardships of high land, feed, and/or water costs, as compared to those in other dairy states, have eroded their competitive advantage. Citing no competitive advantage, coupled with the difference between the FMMO and CSO pricing formulas, dairy farmers testified they are receiving a lower mailbox price than their FMMO counterparts. Testimony stressed that these realities are forcing many California dairy farms out of business.
Many producers expressed that their inability to cover the cost of production is tied to how whey is valued in the CSO Class 4b formula. Thirteen of the 27 producers testified regarding the impact of the whey valuation on mailbox prices. The witnesses stressed that the CSO historically responded to producers' needs by encouraging manufacturing plant investment that would provide an outlet for milk to be processed at a regulated price considered fair. According to the witnesses, this regulatory balance shifted in 2007 because of a CDFA rulemaking that adopted a sliding scale capping the value of the dry whey factor in the Class 4b formula. Witnesses stated that the 2007 hearing marked the start of the widening discrepancy between mailbox prices for California dairy farmers and those received by other dairy farmers across the nation. Witnesses also said that the reduced mailbox prices continue to undervalue milk throughout the State. The producers were of the opinion that a California FMMO would bring California's valuation of dry whey in line with the rest of the country. With comparable whey values, producers testified their mailbox price would become more representative of the true market value of their milk.
Three testifying producers owned farms in both California and in FMMO regulated areas. These producers testified to the difference in production costs and mailbox prices received by their farms over the last decade or more. Their testimonies specifically highlighted the industry differences between California and Wisconsin. The producers said the production advantages California dairy farmers once enjoyed (inexpensive land, feed, and a different regulatory environment) no longer exist, and as a result, California dairy farms are closing or moving out of state at an increasing rate.
Seven producers testified that the use of futures contracting and hedging as risk management tools are hindered by the differences in the CSO and FMMO price formulas. They explained that current risk management tools are based on FMMO prices, and the fact that CSO prices are different make those tools less effective for California producers.
Eight producers provided evidence about reductions in the California dairy industry since 2007. According to the witnesses, many farms have elected to reduce their herd size or cease dairy farming. A witness provided September 2014 to September 2015 data showing that the Cooperatives have experienced a 6.6 percent reduction in milk production volume. The witness stated that the reduction seen by the Cooperatives is supported by CDFA data showing a 3.5 percent reduction in California milk production. The witness noted that while milk production in California is decreasing, it is increasing in the rest of the country. The witnesses believed the discrepancy between California and national milk production trends is due to the inability of California farms to compete on a level playing field with farms in the FMMO system. Many also expressed concern with the impact on related businesses due to the closing of many California dairy farms.
According to six producer witnesses, many farms have opted to weather the milk price volatility by diversifying their operations and investing in tree-crop production. Several witnesses testified that lenders encourage tree-crop production over dairy farming, due to the reduction of risk and the large margins attainable in tree-crop farming. Producers expressed a belief that the adoption of a California FMMO would lead to a more stable dairy industry supported by lenders.
Overall, California producer witnesses stated they are currently subject to a regulatory system that does not provide producer milk prices representative of the full value of their raw milk in the market. The producers believe adoption of a California FMMO represents an opportunity to remedy this regulatory disadvantage and to compete on a level playing field with the rest of the country.
A Western United Dairymen (WUD) representative testified in support of Proposal 1. WUD is a trade organization representing approximately 50 percent of California dairy farmers, whose farm sizes range from 17 to 10,000 cows. According to the WUD witness, the difference between CSO Class 4b and FMMO Class III prices demonstrates that the CSO is not providing California dairy farms with a milk price reflective of the national marketplace for manufactured dairy products. The witness attributed the pricing differences to how dry whey is accounted for in the two price formulas. The witness said the value difference has become increasingly larger since the CSO adopted a fixed whey factor in 2007, and then subsequently replaced it with a sliding scale whey factor in 2011. The witness said that from August 2014 to July 2015 the CSO Class 4b whey value averaged $1.50 per cwt less than the FMMO Class III whey value. As a result, the witness said, there are different regulated minimum milk prices for the milk products that compete in a national market. This regulated milk price difference, the witness stressed, results in market decisions based on government regulations instead of market fundamentals. Furthermore, the witness said, the resulting lower CSO class prices put California dairy farmers at a competitive disadvantage compared to their FMMO counterparts. The witness concluded that this situation is disorderly and reiterated WUD's support for Proposal 1 as a more appropriate method to determine the value of whey.
A witness representing the California Dairy Campaign (CDC) testified in support of Proposal 1. CDC is a dairy producer organization with members located throughout California. The CDC witness said that over the last 10 years, more than 600 California dairy farms have permanently closed or moved to other states. The witness attributed this to milk prices that have been consistently lower than the cost of producing milk in California, and noted that water and feed availability due to the ongoing drought is the primary reason for increased production costs. The witness highlighted the consolidation and concentration of the California dairy manufacturing sector that causes dairy producers to be price takers in the market, thus making equitable regulated minimum prices vital to the long-term viability of California dairy farms.
The CDC witness testified that the failure of the CSO to align with FMMO prices, particularly between CSO Class 4b and FMMO Class III, has resulted in a more than $1.5 billion loss to
The witness highlighted CDC's support of specific provisions contained in Proposal 1, including the adoption of FMMO end-product pricing formulas, unique pooling provisions that address the needs of the California market, regulation of out-of-state milk, uniform producer-handler provisions, fluid milk fortification allowances, and the continuation of the California quota program. The witness opined that Proposal 1 addresses California's unique market conditions and is the only path to restoring California producer price equity and the health of the California dairy industry.
CDC's post-hearing brief stated that CDC has supported adoption of a California FMMO for over 20 years. The brief highlighted 2015 CDFA data showing California cost of production at $19.30 per cwt, while the average farm income was $15.94 per cwt. The brief stated the belief that minimum prices are put in place to ensure dairy farmers are able to share in some minimal level of profitability. CDC estimated that in 2015, a 1,000-cow California dairy farm was paid approximately $1.4 million less than equal-sized farms whose milk was pooled on a FMMO. A witness representing Milk Producers Council (MPC) testified in support of Proposal 1. MPC is a nonprofit trade association with 120 California dairy-farmer members, accounting for approximately 10 percent of the California milking herd. The witness agreed with testimony given by the Cooperatives outlining California's disorderly marketing conditions. The witness said that California dairy farmers have repeatedly, though unsuccessfully, sought relief through CDFA to bring CSO classified prices more in line with FMMO classified prices. This is why California dairy farmers are now seeking to join the FMMO system, the witness added.
The MPC witness testified that Proposal 1 would establish orderly marketing conditions in California, resulting in a level playing field for producers and processors. The witness stressed that not only would Proposal 1 provide price alignment between California and FMMOs, but a California FMMO would regulate interstate commerce—something the CSO cannot do. Proposal 1 would also maintain the current California quota program, a vital financial tool for many California dairy farmers, the witness stated. The witness said that while the quota program has no impact on the minimum prices handlers pay, it does aid in providing a local milk supply for some plants that would otherwise have to source milk from farther distances. The witness explained that in some instances, quota is an investment farms located in higher cost areas of the state make to remain financially viable and be able to provide a local milk supply to plants that would otherwise have to seek a supply from farther distances.
A witness representing the National Farmers Union (NFU) testified in support of Proposal 1. NFU is a national grassroots farmer organization with over 200,000 members across the nation, including dairy farmers located in California. The witness testified that NFU supports the inclusion of California in the FMMO system so California dairy farms can receive prices similar to those received by dairy farms located throughout the country. The witness testified that California's low-milk prices and high-feed costs have resulted in strained margins and ultimately the closure of over 400 dairy farms in the last five years.
The NFU witness testified that the pay price differences between dairy farms whose milk is pooled under the CSO and FMMOs are primarily due to the difference in the Class 4b and Class III prices and have resulted in disorderly marketing conditions and a revenue loss to California dairy farms of more than $1.5 billion since 2010. The witness added that pay-price differences have reduced the ability of California dairy farms to utilize risk management tools, and put them at a disadvantage when competing for resources such as feed, land, cattle and labor.
A witness appearing on behalf of the Institute testified that while the Institute offered Proposal 2 as an alternative to the Cooperatives' proposal, their first position is that disorderly marketing conditions do not exist in California to warrant the promulgation of a FMMO. The witness stated that the California dairy industry is currently regulated by the CSO, whose purpose, much like a FMMO, is to provide for orderly marketing conditions. The witness emphasized their opinion that orderly marketing conditions are currently achieved through CSO classified pricing and marketwide pooling.
The Institute witness reviewed CSO history and regulatory evolution, and highlighted regulatory changes demonstrating how the CSO has consistently adapted to changing market conditions. Some, but not all, of these regulatory changes are highlighted below.
The Institute witness explained that California sought state solutions to disorderly marketing conditions through the Young Act of 1935. When FMMOs were authorized in 1937, California opted to remain under the purview of the CSO.
The Institute witness explained that the CSO adopted marketwide pooling through the Gonsalves Milk Pooling Act. Before that time, handlers operated individual handler pools, giving Class 1 handlers strong bargaining power as producers sought Class 1 contracts.
According to the witness, this led to handler practices that eroded producer revenues. The witness testified that the California quota program, also authorized by the Gonsalves Milk Pooling Act, was a way for Southern California dairy farmers, who at the time had a higher percentage of Class 1 contracts, to preserve some of the Class 1 earnings they would otherwise be required to share with all producers through marketwide pooling. At the time, the witness said, producers were assigned a production base, and producer quota was allocated based on historical Class 1 sales. Milk marketed in excess of a producer's base and quota allocations was termed overbase milk. The witness explained that during this time the state's population was growing, and quota was deemed necessary to ensure the market's Class 1 needs would always be met.
The Institute witness said that when the quota program was established, there was a growing number of dairy farmers who also owned fluid milk bottling operations. They typically processed all the milk they produced, and were referred to as producer-handlers. These operations feared that the income benefits they gained from processing their own milk would disappear with the establishment of mandatory pooling. To relieve this concern, the witness said smaller producer-handlers were exempted from pooling in return for not receiving a quota allocation. The witness explained larger producer-handlers had the option of not receiving a quota premium, and deducting those quota pounds from their Class 1 obligations to the pool, an amount referred to as exempt quota.
The Institute witness testified that the CSO was modified numerous times in the late 1970's and early 1980's to ensure that Class 1 needs of the market would always be met. First, call provisions were established requiring manufacturing plants participating in
In the early 1990's, CDFA amended how the quota premium was derived. At the time, quota funds were derived from Class 1, 2, and 3 prices, while overbase prices were derived from Class 4a and 4b prices. Consequently, the witness noted, the difference between quota and overbase prices varied greatly by month. The witness said the historic value of quota, in comparison to the overbase value, was evaluated to derive a fixed quota price of $0.195 per pound of quota solids nonfat.
The Institute witness also reviewed several instances since 2000 where CSO provisions were amended to reflect changing market conditions and changing FMMO regulations. These instances included adopting the “higher of” concept for pricing Class 1 milk, incorporating a dry whey factor in the price formulas, and changing the make allowances contained in the product price formulas—all changes the witness said were necessary to maintain orderly marketing conditions in California.
The Institute witness maintained that current California marketing conditions are orderly, and therefore the establishment of a FMMO is not justified. The witness stated the CSO program focuses on orderly marketing conditions to ensure Class 1 needs are met, while providing reasonable returns to those dairy farms who supply the Class 1 market. The witness stressed the regulated price differences between CSO Class 4a/4b prices and FMMO Class III/IV prices do not amount to disorder, and in fact, those differences are needed to maintain orderly marketing in the state.
The Institute witness testified that in the CSO-regulated environment, where all milk is subject to minimum price regulation, it is important that manufacturing prices are not set above market-clearing levels. The witness elaborated that the largest market, and therefore the highest value, for finished dairy products is in the eastern United States where most of the population resides. Therefore, the witness said, in order for California dairy products to be transported and compete in the eastern markets, they must have a lower value in the West. The witness was of the opinion that FMMO Class III and Class IV prices are not appropriate local, market-clearing prices for California.
The Institute witness also opined that current differences between CSO Class 2 and 3 prices and FMMO Class II prices are not disorderly. The witness explained that Class 2 and 3 prices are set relative to the Class 4a price, and it is important that these prices are not set so high as to encourage dairy ingredient substitution with Class 4a products. The witness argued the Cooperatives provided no evidence that the class price differences between the CSO and FMMO systems are disorderly.
The Institute witness also testified regarding the difference between CSO Class 1 and FMMO Class I prices. While CSO Class 1 prices are somewhat lower than those in neighboring FMMO areas, the witness said, they are not causing disorderly marketing conditions. The witness explained that if lower priced California milk is sold into FMMO areas, there are provisions for FMMO partial regulation to ensure the California Class 1 plants do not have a regulatory price advantage over the FMMO plants.
The Institute witness testified that recent declines in California milk production and increases in dairy farm consolidation are not evidence of disorderly marketing conditions. The witness elaborated that dairy-farm consolidation is a natural market evolution resulting from differences in producers' cost structure, risk tolerance, and access to capital. This is no different than consolidation trends seen in other regions of the country, added the witness. The witness also testified that, while dairy farmer margins have been volatile in recent years, California milk production costs have remained below the United States average. According to USDA Economic Research Service data, the witness said 2010-2014 California milk production costs were well below the national average, by a yearly average of $4.19 per cwt. Regardless of milk production and consolidation trends, the witness stated that California has adequate milk supplies to meet fluid demand, and milk movements to meet processing and manufacturing demands are largely efficient.
The Institute witness explained that its members represent approximately 65 percent of the fluid milk processing in California, and none have expressed difficulty obtaining milk supplies or any type of disorderly marketing condition. The witness expressed concern that any changes in the regulatory environment would likely increase the cost of fluid milk. This cost would be passed onto consumers, thereby creating a barrier for fluid milk sales, said the witness.
The Institute witness opined the CSO has an effective pricing and pooling system that has evolved over time to address changing market conditions, and disorderly marketing conditions do not exist to warrant a California FMMO. However, should the Department recommend a California FMMO, the witness said the provisions outlined in Proposal 2 should be adopted.
The post-hearing brief submitted on behalf of the Institute reiterated its opinion that the Department must find disorderly marketing conditions to justify intervention. Disorderly marketing conditions under the AMAA, the Institute wrote, refers to the fluid milk supply and not the market for manufactured milk. The brief stated that California has, on average, an 11 to 12 percent Class 1 utilization and more than enough reserve milk to meet fluid demand.
The Institute's brief outlined a six-point test that it argued needs to be met in order to justify a California FMMO. The Institute stated the current CSO already meets all six of the requirements and thus Federal intervention is not justified.
The Institute's brief also addressed the 1996 and 2014 Farm Bills as they pertain to the consideration of a California FMMO. The Institute stressed that in neither case did Congress amend the AMAA, and therefore the Department is authorized, but not required, to incorporate the California quota program. According to the Institute, whatever decision the Department makes, it must uphold the AMAA's uniform payments and trade barrier provisions. The Institute stated that Proposal 1's incorporation of the California quota program does not uphold either of these provisions.
The Institute's post-hearing brief argued that the differences in Class III and Class 4b prices, highlighted by the Cooperatives, do not provide justification for a California FMMO. According to the brief, the AMAA requires marketing orders to have regional application that recognizes differences in production and market conditions.
A witness appearing on behalf of Hilmar Cheese Company (Hilmar) testified that the Department has consistently found that evidence of disorderly marketing conditions must exist in order to justify Federal intervention through the promulgation or amendment of a FMMO. Hilmar is a dairy manufacturer with facilities in California and Texas selling dairy products both domestically and internationally. According to the witness, Hilmar's California cheese and
The Hilmar witness cited previous Department decisions, including the 1981 Southwestern Idaho/Eastern Oregon and the 1990 Carolina promulgations, as examples of what market conditions should be present in order for the Department to act. The witness was of the opinion that the Cooperatives did not provide evidence of actual disorderly marketing conditions in California warranting Federal intervention.
In its post-hearing brief, Hilmar stated that FMMOs are designed to be a marketing tool to address problems associated with the inherent instability in milk marketing. Hilmar reiterated its opposition to a California FMMO, stating that the Department has consistently denied proposals seeking price enhancement, as they believe is the case in this proceeding. Hilmar stated that the record does not support the notion that there is an inadequate supply of milk for fluid use in California, and therefore a California FMMO is not justified.
A witness appearing on behalf of HP Hood, LLC, a milk processor with facilities in California and other states, testified that disorderly marketing conditions are not present in California and therefore a FMMO is not warranted. The witness said the CSO is an efficient program that has been routinely updated to reflect changing market conditions. The witness stated that HP Hood has not had any difficulty securing an adequate supply of raw milk for its California processing plants, nor is HP Hood aware of instances where raw milk had to be transported long distances in order to meet California demand.
The HP Hood witness suggested the Department consider the potential adverse impacts of recommending a California FMMO on other FMMOs, as well as potential increases in milk costs to consumers that may stem from adoption of the higher uniform minimum milk prices included in Proposal 1. The witness specifically opposed the inclusive pooling portion of Proposal 1 and explained how the ability for milk handlers to pool or not pool is how orderly marketing has been maintained in the existing FMMOs. The witness urged the adoption of Proposal 2, should the Department find that a California FMMO is warranted.
A witness appeared on behalf of Saputo Cheese USA, Inc. (Saputo), a proprietary international dairy and grocery products manufacturer and marketer with seven dairy product-manufacturing facilities in California. Saputo opposes the promulgation of a California FMMO, but should the Department find a FMMO warranted, it supports adoption of Proposal 2. The witness testified that disorderly marketing conditions are not present in California to warrant FMMO promulgation. The witness explained how CDFA has been responsive to dairy industry concerns, has held many hearings in the past, and administers the CSO in a manner that facilitates orderly marketing as well as, or better than, the FMMO system.
The Saputo witness summarized many of the similarities and differences between the CSO and FMMO systems. The witness was of the opinion that the CSO mandatory pooling rules increased milk production to surplus levels and encouraged the construction of bulk, storable dairy product manufacturing facilities. In conjunction with these rules, the witness explained, CSO regulated minimum prices are set at levels that are not too high to encourage significant additional increases in supply.
The Saputo witness described the California cheese production landscape. The witness, relying on CDFA data, said that from January through March of 2015, 57 cheese plants processed 45 percent of California's milk. The witness noted that out of the 57 cheese plants, 3 of the plants processed more than 25 percent of the state's entire milk supply. The witness stated that if the increase in the hypothetical California FMMO Class III price included in the USDA Preliminary Economic Analysis of $1.84 per cwt occurred, under a system of mandatory pooling, the aforementioned 3 cheese plants would face combined increased annual raw milk costs of nearly $196.5 million. The witness testified that such raw milk cost increases would be disorderly and threaten the viability of California manufacturing facilities.
A witness appearing on behalf of Farmdale Creamery (Farmdale) testified in support of Proposal 2. Farmdale is a proprietary dairy processing company located in San Bernardino, CA, that manufactures cheese, sour cream, dried whey protein concentrate, and buttermilk. The witness was of the opinion that disorderly marketing conditions are not present in California, since there is no shortage of milk to meet fluid milk needs. The Farmdale witness opined that the CSO maintains an orderly market by responding to changing market conditions when warranted.
Should the Department find a California FMMO justified, the witness supported adoption of Proposal 2 and opposed the mandatory pooling provisions contained in Proposal 1.
The witness also testified about financial losses incurred by Farmdale since 2005, when the CSO whey value was sometimes higher than what they could obtain from the market. The witness added that their on-again, off-again financial losses demonstrate the inability of current regulatory pricing systems to track and value the whey markets.
A witness appeared on behalf of Pacific Gold Creamery (Pacific Gold) in opposition to the adoption of a California FMMO, although the witness supported the provisions contained in Proposal 2 should a FMMO be recommended. Pacific Gold operates a dairy farmer-owned specialty cheese plant in California. The witness testified that across existing FMMOs and unregulated areas, dairy product manufacturers regularly pay below FMMO minimum prices. The witness presented and explained USDA-prepared FMMO data regarding volumes of milk pooled and not pooled across existing FMMOs.
The Pacific Gold witness explained how their business produces ricotta from the whey stream of their cheese manufacturing, and how ricotta sales supplement the income of the cheese operation. The witness was of the opinion that the FMMO Class III price, and the accompanying higher whey value contained in Proposal 1, would be devastating to small and mid-size facilities. The witness also testified how an increase in California minimum-regulated prices would jeopardize exports, saying that U.S. domestic cheese prices are already relatively higher than global prices.
A post-hearing brief was submitted on behalf of Trihope Dairy Farms (Trihope). Trihope is a dairy farm located in, and pooled on, the Southeast FMMO. Trihope stated that disorderly marketing conditions do not exist in California to warrant promulgation of a FMMO. Trihope was of the opinion that California dairy farmers are seeking higher prices through a new regulatory body, which is not a justification for USDA to proceed. According to Trihope, the AMAA was designed to solve marketing problems in unregulated areas, not to address price disparities between Federal and State regulation.
Trihope expressed concern about the potential impact a California FMMO would have on the entire system. Trihope specifically noted the impacts to the southeastern marketing areas contained in the USDA Preliminary Economic Impact Analysis. According to their brief, Trihope estimates losses from 2017 to 2024 of approximately $313,091. Trihope wrote that California's marketing issues of high California milk production and limited plant capacity would not be solved by a FMMO.
A post-hearing brief submitted by Select Milk Producers, Inc. (Select) expressed support for the adoption of a California FMMO. Select is a national dairy-farmer cooperative that markets over 6.5 billion pounds of milk annually, and whose members' milk is regularly pooled on the Appalachian, Mideast, Southeast and Southwest FMMOs. Select also supplies plants located in many other FMMOs, but it does not supply any California plants. Select opined that having California's milk supply priced similarly to the rest of the FMMOs would remedy the competitive disadvantages faced by companies competing in the national marketplace, and would allow for more efficient milk movements. Select expressed support for maintaining a uniform national pricing system and opposed the Institute's alternative whey-pricing proposal. Select expressed support for the Cooperatives' inclusive pooling provisions on the basis that the provisions would apply only to California, due to its unique marketing conditions. Select stated the California quota program should be addressed outside of this rulemaking proceeding. Select was of the opinion that adoption of a California FMMO would lead to more orderly milk marketing throughout the entire FMMO system, and thus uphold the intent of the AMAA.
A post-hearing brief submitted on behalf of the Northwest Dairy Association (NDA) expressed support for Proposal 1. NDA is a dairy farmer-owned cooperative that markets the milk of its 460 members and operates numerous fluid milk and manufacturing plants located in Washington, Oregon, Idaho, and Montana. NDA was of the opinion that adoption of Proposal 1 would create more orderly marketing conditions and strengthen the entire FMMO system. As California represents the largest milk supply in the United States, NDA wrote, it is important for the integrity of the FMMO program to include the additional 20 percent of United States milk represented by California. NDA stated that California producers should not be disadvantaged with lower Class III and IV prices than what their western FMMO producer counterparts receive.
The record contains a voluminous amount of testimony, evidence, and opinions as to whether or not a California FMMO is justified. The Cooperatives and their supporters argue that a California FMMO was authorized by Congress in the 2014 Farm Bill. They contend that this proceeding is not about whether or not a FMMO should be established, but rather to determine what the California FMMO provisions should be. The Cooperatives are of the opinion that the existence of disorderly marketing conditions is not required by the AMAA to justify order promulgation. They stressed in their post-hearing briefs that a FMMO needs to establish and maintain orderly marketing conditions, and that would be accomplished through the adoption of their proposal. However, should the Department find that disorderly marketing conditions must be present, the Cooperatives provided evidence of what they believe are ongoing disorderly marketing conditions in California.
In general, the record reflects that the California producer community supports joining the FMMO system. Producers are of the opinion that the prices they currently receive under the CSO do not reflect the appropriate value for their milk and its components. Particularly, producers believe that the price they receive for milk used for cheese manufacturing does not value the dry whey component at a level commensurate with what manufacturers receive for whey in the marketplace.
In contrast, the Institute and its members consistently argued throughout the hearing, in their post-hearing briefs, and in comments to the recommended decision that the existence of disorderly marketing conditions is required by the AMAA, and that such conditions do not exist in California. They provided testimony explaining how the CSO is a flexible system that is routinely evaluated through the CDFA hearing process and changes are made as market conditions warrant. The Institute and its members were united in the opinion that the Cooperatives are solely seeking to receive higher prices for their milk, and that such higher prices are not justified for California.
As discussed earlier, the declared policy of the AMAA is to “. . . establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce . . .” FMMOs accomplish this through the classified pricing of milk products and marketwide pooling of those classified use values. Through these mechanisms, orderly marketing conditions are provided so that handlers are assured uniform minimum raw milk costs and producers receive minimum uniform payments for their raw milk, regardless of its use.
While in recent history FMMOs have been consolidated, amended and expanded, it has been decades since a new order has been promulgated. The records of those promulgation proceedings include descriptions of the market conditions at the time, and how a FMMO would provide order in the market. However, those decisions did not, nor does this final decision find, that disorderly marketing conditions must exist or are a condition of order promulgation. Order promulgation and amendatory proceedings have reiterated that a FMMO must adhere to the declared policy of the AMAA, where there is no express or implicit declaration of a requirement for a finding of disorderly marketing conditions.
This final decision continues to find, based on the evidentiary record, a FMMO for California would provide more orderly marketing conditions in the marketing area, and therefore promulgation of a California FMMO is warranted. The record is replete with discussion from most parties on whether disorderly marketing conditions exist, or are even needed, to warrant promulgation of a California FMMO. The declared policy of the AMAA makes no mention of “disorder,” and this final decision continues to find that disorderly marketing conditions are not a requirement for an order to be promulgated. The standard for FMMO promulgation is to “. . . establish and maintain such orderly marketing conditions . . . ,” and this decision continues to find that the proposed California FMMO meets that standard by providing uniform minimum raw milk costs to handlers and minimum uniform payments to producers for their raw milk, regardless of its use.
Comments filed on behalf of the Cooperatives supported the Department's finding that a California FMMO would effectuate the declared policy of the AMAA and was therefore warranted. The Cooperatives supported the determination that disorderly market conditions were not a requirement for FMMO promulgation. Furthermore, the Cooperatives wrote, the recommended decision properly found that the intent of the AMAA was not to preclude a group of state-
Comments filed on behalf of Select supported the finding that disorderly marketing conditions are not a requirement for order promulgation and that a California FMMO would provide more orderly marketing conditions.
Additionally WUD, CDC, MPC, and National All-Jersey (NAJ), whose comments focused primarily on the specific provisions recommended, offered general support for establishing a California FMMO.
The Institute took exception to the Department's finding that disorderly marketing conditions are not a requirement for order promulgation. They argued that a FMMO can only be promulgated if the regulations “establish” order, and they contend that the Department's finding that an order can be established if it creates “more” order unjustly broadens the authority of the AMAA. The Institute wrote that to establish orderly marketing conditions, market disorder must first exist. Therefore, because the Department did not find disorder in the California marketplace, the promulgation of a California FMMO is not justified.
The Institute further argued that the California FMMO promulgation standard articulated in the recommended decision was in contrast to prior agency decisions that cited disorder as a reason for promulgation or amendment. Lastly, the Institute argued that FMMO Supplemental Rules of Practice refer to disorder as a condition for submitting an amendatory proposal, so such standard should not be ignored in the California FMMO proceeding. The Institute concluded that the Department does not have the legal authority to change its interpretation of the declared policy of the AMAA, and therefore California lacks the market disorder needed to justify promulgation of a FMMO.
Separate comments filed by Leprino Foods (Leprino) and Dean Foods supported the arguments by the Institute regarding order promulgation.
Comments filed by the International Dairy Foods Association (IDFA) did not offer an opinion on whether a California FMMO should be promulgated, but did take exception with the Department's finding that disorderly marketing is not a requirement for FMMO promulgation. IDFA opined that if orderly marketing conditions already exist, the Department has no basis to promulgate an order. Like the Institute, IDFA argued that there should be no differentiation in the threshold for Federal government intervention between amendatory and promulgation proceedings. IDFA contended that the FMMO Supplemental Rules of Practice were adopted through notice and comment rulemaking by which the Department adopted the disorderly marketing conditions requirement, and the different threshold for promulgation described in the recommended decision is not appropriate. Additionally, IDFA reviewed multiple amendatory FMMO decisions that cited disorderly marketing conditions as a justification for regulatory change. IDFA concluded that imposing Federal regulations in a market that exhibits no signs of market disorder carries the risk of disrupting the currently existing orderly marketing conditions. Comments filed by Hilmar also took exception with the Department's finding that disorderly marketing conditions are not a requirement for FMMO promulgation. Hilmar wrote that the objective of the AMAA is to establish and maintain orderly marketing conditions and that the Department ignored past FMMO proceedings that cited disorderly marketing conditions as a justification for regulatory change. Hilmar contended that the Department did not explain why the California FMMO proceeding was held to a different standard.
Another commenter also argued that disorderly marketing conditions should be a requirement for FMMO promulgation. The commenter elaborated that in order for a FMMO to align with the public interest, the public should have access to milk at a reasonable cost, and further study is needed to determine the impact to all stakeholders. The commenter wrote that it was not in the public interest to establish a FMMO in a market where disorderly market conditions have not been found.
Additional opposition to the Department's finding that disorderly marketing conditions are not a requirement for FMMO promulgation was also expressed in comments filed by Pacific Gold and HP Hood.
Comments filed by CPHA were specific to exempt quota; however CPHA stressed that it would be unable to offer support or opposition to a California FMMO until CDFA has released its plan for operating the California quota program.
The Department recognizes that many commenters took exception to the finding that disorderly marketing is not a requirement for FMMO promulgation. Similar to arguments made at the hearing and in post-hearing briefs, the commenters provided numerous rulemaking examples where market disorder was found. However, none demonstrated that market disorder was a requirement for FMMO promulgation. This final decision continues to find that the declared policy of the AMAA to “establish and maintain orderly marketing conditions” does not require market disorder to be the justification for promulgation of an order.
Numerous commenters noted that the Supplemental Rules of Practice in 7 CFR 900.20-900.33 stipulate that petitioners provide examples of market disorder to justify requesting an amendatory proceeding. Commenters took exception to the fact that the Department was not now requiring evidence of market disorder to justify this promulgation proceeding. The 2008 Farm Bill required the Department to establish these Supplemental Rules specifically to address only amendatory proceedings. The rules outline submission requirements for FMMO amendatory proposals and specify timeframes the Department must adhere to during the amendatory rulemaking process. Congress could have extended the reach of the Supplemental Rules to include both amendatory and promulgation FMMO proceedings, but did not.
The record indicates that there are both handler and producer price differences between the CSO and the FMMO systems. The record contains data regarding the difference in classified use values paid by handlers regulated by the CSO and FMMOs. As will be discussed later, this decision proposes the adoption of the classified price formulas that currently exist in the FMMO system. A California FMMO, under the provisions contained in this final decision, would ensure that the prices handlers pay to purchase pooled California milk would be similar to prices paid for milk pooled on other FMMOs. As commodity dairy products compete in the national market, current FMMOs uniformly price the raw milk used in those products. This pricing system ensures that competing handlers have uniform minimum raw milk costs, and consequently none has a regulatory price advantage. The record demonstrates that California
This final decision continues to find that the classified prices proposed for a California FMMO will provide producers with a minimum producer blend price more reflective of the national market for manufactured products and the utilization of the local California market. Taken together, handler and producer prices reflective of the national market in which manufactured dairy products are sold will ensure orderly marketing conditions in California.
While the current CSO provides classified pricing and marketwide pooling similar to a FMMO, the hearing record reflects that California dairy producers have been unsuccessful in obtaining a minimum regulated price they believe is reflective of the full value of their raw milk. Some parties argued on the record, and in their comments on the recommended decision, that because the CSO already provides for classified pricing and marketwide pooling, disorderly marketing conditions do not exist in California, and therefore there is no justification for promulgating a California FMMO. As discussed earlier, disorderly marketing conditions are not a precedent or requirement for order promulgation. Furthermore, this final decision continues to find that it is not the intent of the AMAA to preclude a group of producers from petitioning for a FMMO simply because they are otherwise regulated by a state order that provides for classified pricing and marketwide pooling. Such a restriction would place an undue barrier on those producers as they would not have the opportunity to petition for FMMO regulation simply because they are currently regulated by a state.
Additionally, unlike the CSO, a California FMMO would have the authority to regulate interstate commerce. The record reveals that there is milk, both raw and packaged, being sold into and out of California over which the CSO has no regulatory jurisdiction. The revenues from those unregulated Class I sales are not shared with all the producers supplying the California market. A FMMO would ensure that those classified use values would be shared with all producers who supply the California market. The ability of a California FMMO to capture interstate sales, through either full or partial regulation, would protect the integrity of the entire regulatory framework. Furthermore, out-of-state producers supplying that milk would be paid the order's blend price, which is reflective of the market's total classified use value.
In their post-hearing brief, the Institute made reference to a “six-point test” that must be met in order for a FMMO to be promulgated. While the Institute correctly lists various factors that have been used in some order promulgations, the articulated AMAA standard that must be met for order promulgation is that the order will “. . . establish and maintain such orderly marketing conditions. . . .”
Other parties in post-hearing briefs contended that the 2014 Farm Bill mandated that a California FMMO be promulgated. The Farm Bill merely authorized a California FMMO that recognizes quota value as determined appropriate through a rulemaking proceeding. It is important to note that California producers could have petitioned for a FMMO at any time. However, Congress did not provide for the recognition of quota before the 1996 Farm Bill, and later, the 2014 Farm Bill. This decision finds that a California FMMO is justified, as it would meet the objective of the AMAA to “. . . maintain such orderly marketing conditions. . . .” The provisions proposed herein are tailored to the California market, adhere to the uniform handler and producer pricing provisions of the AMAA, and recognize quota as authorized by the 2014 Farm Bill and as deemed appropriate by an objective analysis of this hearing record.
Some hearing participants indicated that a goal of FMMOs, and therefore of a California FMMO, is to enhance producer prices. Other participants from outside of California, in testimony and post-hearing briefs, expressed the opinion that a California FMMO could not be promulgated if it would have adverse impacts on other FMMOs, and that the Department must act to mitigate those adverse impacts before such promulgation.
FMMOs are a marketing tool that, among other things, establish a marketing framework and enforce market-based minimum prices to handlers and uniform payments to producers reflective of all classified use values in the market. The record reflects that at the time of the hearing, California represented over 20 percent of the United States milk supply. If a California FMMO is established, over 80 percent of the United States milk supply would fall under the same regulatory framework. This decision finds that a California FMMO would provide more orderly marketing conditions in California. Through inclusion of California in the FMMO regulatory framework, the prices received by all producers participating in the FMMO system would be more reflective of the national marketplace for dairy products. This would send uniform market signals to producers that would allow them to make their individual business decisions.
Comments filed by the Maine Dairy Industry Association (MDIA) supported the establishment of the proposed California FMMO, but reiterated their opinion that the Department must mitigate potential adverse producer impacts in other FMMOs. Specifically, MDIA commented that the Department should address four specific adverse impacts: Impact on producer welfare and orderly marketing; impact on Class I utilization; impact from projected regional changes in milk production; and impact from projected depooling in various FMMOs.
It is to be expected that incorporating an additional 20 percent of the U.S. milk supply into a FMMO—milk that is currently state regulated—would have an impact in other regions of the country. The REIA released in conjunction with this final decision estimates the potential impact of regulating California milk handlers under a FMMO and its results show impacts in all regions throughout the United States. This final decision continues to find that promulgation of a California FMMO would enable 80 percent of the United States milk supply to fall under the same regulatory framework. Consolidation under this Federal milk marketing framework would ensure that prices received by all producers participating in the FMMO system would be more reflective of the national marketplace for dairy products. This final decision finds that changes to other FMMOs to counter projected impacts are not warranted and would only serve to send incorrect market signals to those producers who need to make individual business decisions based on accurate information.
This section reviews and highlights the hearing evidence, post hearing briefs, and comments or exceptions submitted in response to the recommended decision regarding the appropriate recognition of the California quota program, including exempt quota, in a California FMMO. The California quota program is a state-administered program that entitles the quota holder to an additional $0.195 per pound of SNF over the CSO overbase price. Currently, the money to pay the quota premium is deducted from the CSO marketwide pool before the CSO overbase price is calculated. This decision continues to find that the quota program should remain entirely within the jurisdiction of CDFA, and that its proper recognition under the proposed California FMMO would be through an authorized deduction from payments due to producers.
A Cooperative witness testified regarding the development of the California quota program and its continued significance to California dairy farmers. The witness explained the California quota system is a tiered pricing system, developed in the late 1960s, that pays producers on three price calculations referred to as quota, base, and overbase. In its current form, ownership of quota entitles producer-owners to a higher price for milk covered by quota, and a lower base/overbase price on their nonquota milk production. Approximately 58 percent of all California farmers own quota at varying levels, which in aggregate represents approximately 2.2 million pounds of SNF on a daily basis. The witness testified that, currently, quota premium payments are approximately $12.5 to $13 million per month, and this money is taken out of the CSO marketwide pool before the base/overbase price is calculated. The witness stressed that the quota program is an important revenue source for California dairy farms and that the value of quota should not be diminished with the adoption of a California FMMO.
The Cooperative witness reviewed the authorization of the California milk pooling and quota programs by the 1967 Gonsalves Milk Pooling Act (Gonsalves Act). Originally, the witness explained, producers were assigned quota holdings as they related to the producers' historical milk production and individual deliveries to the Class 1 market. The witness said that in the beginning, quota premiums were not a set value, but instead were determined by allocating quota holdings to the highest value milk (Class 1). Then base and overbase production were allocated to the remaining classes in descending order of classified value. In essence, the witness explained, quota holders were paid the Class 1 price for their quota holdings, and then a separate lower value for their non-quota holdings. According to the witness, when CDFA sought to enhance producer prices, additional revenue was typically assigned to Class 1 and subsequently quota holders, and overbase prices were not impacted. The witness said that as milk production grew without corresponding increases in quota holdings, producers were faced with lower milk prices on their non-quota production. Therefore, the Gonsalves Act was amended, effective January 1, 1994, setting the quota premium at $0.195 per pound of SNF (equivalent to $1.70 per cwt). The result, said the witness, was that overbase production did not subsidize quota milk, and quota holders could receive a reasonable return on their quota holdings.
The witness also discussed adjustments made to the total CSO marketwide pool value in conjunction with the quota program. According to the witness, when pooling was originally established, the provisions contained producer location differentials designed to encourage quota milk to be delivered to Class 1 plants. However, as overbase milk production began to grow, location differentials applicable only to quota milk did not ensure that the market's Class 1 needs would always be met, the witness stated. Consequently, in 1983 transportation allowances (on milk movements from ranches to plants) were established in lieu of location differentials. At the same time, the witness said, regional quota adjusters (RQAs), while providing no direct incentive to move Class 1 milk, were established to address producer equity issues that arose with the elimination of location differentials. The witness described RQAs as reductions (ranging from $0.00 to $0.27 per cwt) to the producer's quota premium, depending on their farm location and plant of receipt. In essence, the witness said, quota premiums have a location value: The further the dairy farm is located from the receiving plant, the lower the quota premium.
The Cooperative witness stated that quota can only be held on Grade A milk produced in California, and a quota holder must deliver milk to a pool handler at least every 60 days. The witness also noted the fact that quota is bought and sold on a monthly basis, which underscores its continued importance to California dairy farms. The witness estimated that at a price of $525 per pound of SNF, the California quota program has a value of $1.2 billion to California dairy farms.
The witness was of the opinion, which was reiterated in the Cooperatives' post-hearing briefs, that under current California and Federal statutory authorities, a California FMMO can be established and the California quota program maintained. The witness said that the main objective of Proposal 1 is to preserve the quota program to the maximum extent possible, and that proponents believe this is consistent with the Congressional intent of the Agricultural Act of 2014 (2014 Farm Bill), which authorized a California FMMO that recognizes the quota program.
The witness concluded by outlining what the proponents believe is the necessary framework of a proposed working relationship between CDFA and the Department, and said that the provisions contained in Proposal 1 are needed to effectively maintain the quota program. The witness explained that Proposal 1 allows the quota premium to be removed from the marketwide pool before a FMMO blend price is computed. Producers would then receive the blend price for their nonquota holdings and the FMMO blend price plus the quota premium (adjusted for RQAs) for their quota holdings. According to the witness, USDA would enforce all producer payments, including quota payments, and jurisdiction over quota administration, calculations, record keeping, and regulatory changes would remain with CDFA.
In their post-hearing brief, the Cooperatives asserted that their proposal is the only one that properly recognizes the quota program as intended by Congress. The Cooperatives rebutted the Institute's claim that adoption of Proposal 1 would create a trade barrier to milk produced outside the state because that milk would be ineligible for the quota program. The Cooperatives offered a modification that would create an out-of-state adjustor to ensure out-of-state producers do not receive a lower price than their in-state counterparts who can earn California quota premium payments.
The Cooperatives further argued that Proposal 1 upholds the AMAA's uniform pricing provisions, as all quota milk would be paid uniformly, all non-quota milk would be paid uniformly, and all milk located outside of the proposed marketing area would be
A consultant witness, appearing on behalf of the proponents of Proposal 1, testified regarding the economic importance of the California quota program, and provided a brief history of its evolution. At current market prices, the witness estimated the value of the California quota program at $1.164 billion—a significant economic asset for dairy farms and the communities they support, especially in counties where a high percentage of milk production is covered by quota. The witness noted that not only is quota a solid financial investment for dairy farms, but it is a tangible asset used by dairy farms to obtain additional financing from banks and lenders.
The witness utilized an economic impact analysis model to estimate the total economic impact of the California quota program. The witness estimated that total annual economic value of quota is associated with a $27.9 million increase in California GDP, creation of 1,269 jobs, an $11 million increase in local tax revenue, and a $16.7 million increase in Federal tax revenue. The witness clarified that the analysis did not consider the economic impact of the quota program on non-quota holders, but stressed that any change to the quota program would create regulatory uncertainty and diminish the economic value of quota. The witness opined that Proposal 2 does not recognize the economic value of quota and would result in the devaluation of the asset, which would financially harm California quota holders. The witness concluded that Proposal 1 was the only proposal that would preserve and maintain the California quota program.
Twelve dairy farmers testified that a California FMMO must provide for the continuation of the California quota program. The farmers stressed the importance of the program as an asset for dairy farms throughout the state. The witnesses explained that farms utilize quota not only for the monthly quota premium they receive, but also as an asset on farm balance sheets for lending purposes. The witnesses expressed concern that any devaluation of their quota asset would be financially harmful to their businesses. Of the 27 dairy farmers who testified, eight said they owned quota, and both quota and non-quota holders expressed support for the quota program.
A witness testifying on behalf of WUD also elaborated on the importance of maintaining the quota program and the need for strict pooling provisions to ensure the quota premium could continue to be paid. The witness said quota is considered an asset and if its value is diminished, it could create cash flow and lending difficulties for dairy farms. The witness was of the opinion that if a California order was adopted with pooling provisions similar to those found in other FMMOs, the quota value would likely be diminished, which would violate the California statute. A witness appearing on behalf of the Institute testified regarding Proposal 2's recognition of the California quota program. Like the Cooperative witness, the Institute witness provided a historical overview of the quota program's authorization and evolution. The witness stated that the quota program served as a way to compensate producers who shipped most of their milk to Class 1 plants through the contract system in place prior to marketwide pooling. At the time, the witness said, the industry believed prices to producers would become more uniform and quota allocation would be equalized among producers as Class 1 utilization grew.
The Institute witness outlined the problems the Institute believes arise from Proposal 1's method for quota recognition. The witness was of the opinion, which also was stressed in the Institute's post-hearing brief, that the Cooperatives have rendered an overly broad interpretation of the 2014 Farm Bill, and in doing so, proposed provisions that violate the AMAA. The witness said that before quota can be recognized, a California FMMO must first determine and pay a traditional FMMO blend price to out-of-state dairy farms who cannot own quota. The witness said that subtracting the quota value from the marketwide pool first, before computing a non-quota blend price, as suggested in Proposal 1, would result in non-uniform payments to producers and violate the AMAA.
The Institute witness explained the mechanics of quota recognition in Proposal 2, which were modeled after the former Oregon-Washington FMMO. The witness said that out-of-state producers would receive a traditional FMMO blend price for their milk pooled on the California FMMO. In-state producers would have the option to receive the CDFA calculated quota and non-quota prices, or they could irrevocably opt out of the quota program and receive the traditional FMMO blend price. The witness explained that producers opting to be paid on a quota/non quota basis would have their aggregate FMMO blend price monies transferred to CDFA for reblending and distribution to that producer subset. The witness opined that by giving in-state producers the payment choice, the uniform payment provision of the AMAA would be satisfied. The Institute witness said that Proposal 2 sought to recognize quota value as authorized by the 2014 Farm Bill while simultaneously upholding the purpose and provisions of the AMAA. These opinions were reiterated in the Institute's post-hearing brief.
The Institute witness highlighted California producer support for the quota program, and was of the opinion that USDA's Preliminary Economic Impact Analysis prediction that the program would quickly erode under Proposal 2 was overstated.
Proposal 3, submitted by the CPHA, seeks to have exempt quota—as part of the California quota program—be recognized and preserved, should a California FMMO be recommended. CPHA also proposed that the terms of consanguinity, as currently applied to producer-handlers under CDFA regulations, be removed to allow indefinite perpetuation of exempt quota. CPHA withdrew the second part of their proposal at the hearing.
A consultant witness for CPHA provided testimony regarding the history of the Gonsalves Act and detailed how exempt quota was included as part of the State's milk marketing program from its inception. According to the witness, the CSO marketwide pooling system and quota program were developed as an alternative to a FMMO. The witness said the quota program was originally designed so that farmers who historically served fluid milk processors would continue to receive a higher price for the portion of their milk that had previously been under Class 1 contract; under the CSO marketwide pooling system, all of the Class 1 revenue would be shared with the market's producers. Over time, the witness said, it was thought that quota holdings would be equalized among dairy farmers. Those who had not previously held contracts with fluid milk processors were expected to be assigned rights to new quota created as the fluid milk market expanded.
The consultant witness explained that dairy farmers who processed their own milk into fluid milk products were issued exempt quota, rather than regular quota, under the new CSO system. The exempt quota was allotted to these vertically integrated entities, known as producer-handlers, in recognition of how their milk was marketed. The witness said that there were originally
The consultant witness clarified that exempt quota was issued as certificates of ownership to the producer entity. The witness explained that the handler side of the business is still required to report all of its milk receipts to the CSO, and in turn, the handler entity receives a credit against its financial obligation to the pool for the volume of exempt quota owned by the producer entity. The handler entity then accounts to the CSO marketwide pool for Class 1 sales in excess of the exempt quota volume, said the witness. The producer entity side receives the Class 1 price from the handler side for the exempt quota volume of milk they produce, and then they receive a combination of the quota and overbase prices from the marketwide pool, depending on their regular quota holdings.
A witness from Producers, testifying on behalf of CPHA, said that all four members of CPHA own exempt quota, are referred to as “Option 70” producer-handlers, are fully regulated, and report to the CSO marketwide pool for all their Class 1 sales. The witness contrasted this to “Option 66” producer-handlers, who are fully exempt from the CSO and do not participate in the quota program. Of the original 49 “Option 70” producer-handlers, the witness said only the four CPHA members remain, and all have maintained essentially the same business structures since the quota program was established.
According to the Producers witness, CPHA members hold both exempt quota and regular quota, but most of the milk produced by CPHA members is accounted for as overbase production. Using 2015 CDFA data, the Producers witness calculated that “Option 70” producer-handler milk represents approximately 0.6 percent of all California production. The witness estimated that exempt quota represents 17.4 percent of “Option 70” producer-handler production and 4.6 percent of all California Class 1 sales. The witness said that all of the milk produced and sold by CPHA members, including volumes covered by exempt quota, is reported to the CSO marketwide pool.
The Producers witness said that the Gonsalves Act primarily addressed industry problems that did not impact producer-handlers because all the milk from their dairy operations flowed to their own Class 1 plants and the markets they had developed. The witness was of the opinion that the exempt quota feature was included as part of the quota program to recognize the vertically integrated producer-handler's unique business structure.
Additional CPHA witnesses representing Foster and Rockview joined the Producers witness in describing their acquisition and maintenance of exempt quota over the years. Each mentioned they had to make strategic business decisions or sacrifices in order to preserve their exempt quota status.
The CPHA witnesses attempted to quantify the value of exempt quota, explaining that exempt quota is carried as an asset on their farms' books and can be sold as or converted to regular quota. The CPHA witnesses measured the value of exempt quota as the difference between the CSO Class 1 and the quota prices. Using historical CDFA data, the Producers and Rockview witnesses calculated the average exempt quota value over the previous 20 years to be approximately $1.14 and $1.20 per cwt, respectively.
Using CDFA data for the preceding five years, a second Foster witness calculated the value of exempt quota in terms of regular quota for both northern and southern California. The witness estimated that every pound of exempt quota in northern California and southern California is worth 1.96 pounds and 2.12 pounds of regular quota, respectively. Valuing regular quota at $525 per pound of SNF, but not adjusting for RQAs, the witness estimated the value of exempt quota as $1,029 per pound of SNF in northern California, and $1,113 per pound of SNF in southern California. Citing CDFA production data, the witness calculated the value of the collective 40,244.51 pounds of SNF exempt quota in northern California as $41,411,600 and the 17,669.59 pounds of SNF exempt quota in southern California as $19,666,253.
The Rockview witness added that converting exempt quota to regular quota would make those volumes eligible for CSO transportation credits that are not currently available for exempt quota milk.
A Cooperative witness also testified with regard to the evolution of exempt quota for “Option 70” producer-handlers. The witness estimated that the four CPHA members market approximately five percent of all California Class 1 sales. The witness explained that exempt quota entitles the producer-handler to waive any pool obligation on those holdings. The witness described the value of exempt quota as the difference between the Class 1 and quota prices. The witness estimated that from 1970 through 2014, the additional value of exempt quota was approximately $0.58 per cwt in southern California. The witness estimated the monthly impact to the marketwide pool of recognizing exempt quota in this manner at less than one-half of one cent per cwt. The witness testified that the Cooperatives did not oppose adoption of Proposal 3.
A witness representing the Institute was of the opinion that exempt quota was offered to large producer-handlers for political expediency. According to the witness, as the Gonsalves Act and the particulars of marketwide pooling were being developed in the 1960s, larger producer-handlers worried they would lose advantages enjoyed under the then-prevailing system. The witness explained that to head off producer-handler opposition to marketwide pooling, concessions were made to smaller producer-handlers who were exempted entirely from pooling and received no quota allocation. Larger entities were given the option to forgo the quota premium and instead exempt those pounds from their Class 1 pool obligations.
The Institute witness testified that exempt quota holds no real market value, as it cannot be bought and sold. The witness acknowledged that determining an equivalency between exempt quota and regular quota might be one method to assign a value to exempt quota. The Institute witness opined that exempt quota holders have already recovered the cost of their exempt quota, which they were last able to purchase 20 years previous.
A witness from Dean Foods testified that the competitive advantage producer-handlers gain from their exempt quota can be spread out over their total volume of Class 1 sales. Dean Foods is a national fluid milk manufacturer that operates three Class I plants and one Class II plant in California. The witness argued that CPHA witnesses diluted the impact of exempt quota on Class 1 sales by comparing exempt quota volumes to total California milk production. The witness contended that it was more accurate to compare total “Option 70” producer-handler Class 1 production to total California Class 1 sales. The witness calculated that the total volume of the four producer-handlers, including their exempt quota volumes, accounted for 24 percent of total California Class 1 volume, including milk from out of state. The witness testified that 31 handlers process the other 76 percent of California Class 1 milk.
Additional fluid milk processor witnesses representing Clover Stornetta Farms and Farmdale Creamery, along with another Dean Foods witness, all
The Producers witness countered opposition testimony that exempt quota provides a competitive advantage enabling producer-handlers to bid customers away from fully-regulated handlers. The witness said that Producers pays the Class 1 price to the farm side of the business for the exempt quota milk they use, and pays the quota or overbase price for the rest of the farm's milk it processes.
In its post-hearing brief, the Institute argued against recognition of exempt quota under a California FMMO. According to the Institute's brief, the recognition of exempt quota in a California FMMO would violate the AMAA's uniform pricing provisions. The Institute explained that by recognizing exempt quota, exempt-quota-holding producer entities would not share the value of all their Class 1 sales with their fellow dairy farmers, and handler entities would not be required to pay uniform minimum prices for their raw milk supplies.
The Institute brief further argued that the 2014 Farm Bill language authorizing a California FMMO that recognizes quota value does not mean California's entire quota system should be preserved and maintained, nor that certain Class 1 handlers should be permitted to have a regulatory competitive advantage over other Class 1 handlers. The Institute brief also argued that permitting a differentiated status for only those few entities who currently own exempt quota would be inequitable to new market entrants.
In response, CPHA's reply brief asserted that CPHA handler entities currently pay Class 1 prices for all their raw milk, exempt quota provides no financial advantage over other fully-regulated handlers, and there are no market disruptions attributable to exempt quota. The reply brief stressed that CPHA producer entities, not their handler counterparts, hold exempt quota. The reply brief also asserted that the record contains no evidence that exempt quota holders enjoy raw milk price advantages. CPHA contended that all handlers pay the same classified price for raw milk in California, despite misperceptions to the contrary. CPHA pointed out that competitors have won and lost accounts for milk sales for a variety of reasons not necessarily attributed to exempt quota ownership.
According to CPHA's reply brief, Congress's use of the term “quota system,” and its omission of specific reference to exempt quota in the 2014 Farm Bill language, is consistent with its directive that the Secretary should hold a hearing to consider, and is authorized to recognize, all aspects of California's quota program under a California FMMO.
CPHA's reply brief clarified the intent of Proposal 3 to allow for the preservation of exempt quota status for those few producer-handlers who own it. CPHA argued its members are not seeking exemption from all pricing and pooling obligations under a California FMMO, but merely recognition of their ownership of exempt quota and the related volumes of production it represents.
A post hearing brief submitted by Trihope expressed concerns regarding the recognition of the California quota program within the FMMO framework. Trihope was of the opinion that any recognition of quota would violate the AMAA's uniform payments provision. Trihope also wrote that authorizing quota payments would give a revenue advantage to California dairy farms and create a trade barrier for out-of-state farms seeking to be pooled on the California FMMO.
The record contains detailed information about the establishment and evolution of the quota program administered by the State of California. The record reflects that the Gonsalves Act legislatively authorized both the California quota program and marketwide pooling within the structure of the CSO. Until that point, dairy farms were paid through individual handler pools that reflected a plant's use values for their milk—there was no marketwide pooling function that allowed all producers to share in the benefits from Class 1 sales and the burden of balancing the market to ensure an adequate supply of milk to meet Class 1 demand. Many witnesses alluded to the political compromise reached to compensate dairy farmers who held Class 1 supply contracts from the financial loss they would incur by pooling and sharing their Class 1 revenue with all dairy farmers in California. While the original quota allotment was based on existing Class 1 contracts, it was thought at the time that quota would equalize among producers as Class 1 utilization increased and future quota allotments were issued; however, this did not occur.
Many witnesses spoke of the importance they believe the California quota program has for the state's dairy industry. Producers spoke of the investments they made in purchasing quota allotments, and of the continued financial benefit quota provides through the monthly quota premium they receive. Even producers who own little or no quota spoke of the importance of continuing the program for their fellow dairy farmers.
The 2014 Farm Bill authorized the promulgation of a California FMMO, and specified that the order “shall have the right to reblend and distribute order receipts to recognize quota value.” The hearing record is replete with testimony on the proper interpretation of those final three words, “recognize quota value.” The Cooperatives conveyed, and stressed in their post-hearing brief submissions, that the 2014 Farm Bill mandates the quota program must be recognized, and only the method of recognition is to be decided through this rulemaking proceeding. The Cooperatives were of the opinion that the proper recognition of quota value is through the deduction of quota monies from the marketwide pool before a California blend price is calculated, as is current practice for the CSO.
Institute witnesses and post-hearing briefs stressed that quota recognition must be harmonized with the AMAA, in particular its uniform payments and trade-barrier provisions. Should any conflict arise, the Institute contends that because the Farm Bill did not amend the AMAA, the AMAA as the authorizing legislation should take precedent. The Institute's approach to recognizing quota value is to first allow producers the one-time decision to opt out of the quota program. Those producers who opt out of the quota program would be paid a FMMO blend price calculated without a deduction for quota. Those producers who remain in the quota program would have their FMMO blend price monies sent, in aggregate, to CDFA for reblending and redistribution according to their quota and nonquota milk marketings. The Institute is of the opinion that because dairy producers opting out of the quota program would not have their payments affected by
As discussed earlier, when promulgating or amending any FMMO, the Department must always evaluate whether the proposed action is authorized by the AMAA. The AMAA not only clearly defines its policy goal, which this decision has already discussed, but it also defines specific provisions that must be contained in the FMMO framework. The two most relevant to the discussion on quota recognition are the provision for uniform payments handlers make to producers, and the provision to prevent trade barriers. The uniform payment provisions require all handlers regulated by a FMMO to pay the same classified use value for their raw milk, and all producers whose milk is pooled on a FMMO to receive the same price for their milk regardless of how it is utilized. In this respect, similarly situated handlers are assured that they are paying the same raw milk costs as their competitors, and producers are indifferent as to where or how their milk is utilized, as they receive the same price regardless.
The trade barrier provision specifies that no FMMO may in any manner limit the marketing of milk or milk products within the marketing area. In this regard, FMMOs cannot adopt provisions that would create any economic barrier limiting the marketing of milk within marketing area boundaries.
To determine how to properly recognize quota value, Congress provided additional guidance to the 2014 Farm Bill language through the 2014 Conference Report.
The California quota program, like the CSO, is administered by CDFA. The record reflects that 58 percent of California dairy farmers own quota. In its current form, the quota program entitles a quota holder to an additional $0.195 per pound SNF (equivalent to $1.70 per cwt) over the market's overbase price on the quota milk they market each month. Similar to their FMMO counterparts, California handlers pay classified use values for their milk, and those values make up the CSO marketwide pool. Each month, CDFA deducts quota monies from the CSO marketwide pool before a marketwide blend price, otherwise known as the overbase price, is calculated. CDFA then announces the quota and overbase prices
The record reflects that the California quota program is funded by California producers. All handlers regulated through the CSO pay minimum classified use values, and it is only once those values have been pooled that the quota value is deducted from the pool. Data on the record indicates that all California dairy farmers, including quota holders, receive $0.37 per cwt less, on average, for all of their milk marketings in order to fund the $0.195 per pound of quota SNF payment to quota holders.
This decision continues to find the California quota program could be maintained, administered, and enforced by CDFA and that a California FMMO should operate as a stand-alone program. As is currently done in all FMMOs, handlers would pay classified use values into the pool, and all producers, both in-state and out-of-state, would receive a FMMO blend price reflective of the market's use values. It is through this structure that a California FMMO could ensure the uniform payment and trade barrier provisions of the AMAA are upheld.
Should CDFA determine it can continue to operate the California quota program through the use of producer monies, as is the current practice, the proposed California FMMO could recognize quota values through an authorized deduction by handlers from the payments due to producers for those dairy farmers determined by CDFA to be participants in the state-administered California quota program. The amount of the deduction would be determined and announced by CDFA.
Currently, FMMOs allow for authorized deductions, such as the Dairy Promotion and Research Program assessment, from a producer's milk check. The proposed California FMMO would similarly authorize a deduction for the state-administered California quota program. The California FMMO would allow regulated handlers to deduct monies, in an amount determined and announced by CDFA, from blend prices paid to California dairy farmers for pooled milk, and send those monies to CDFA to administer the quota program. CDFA would in turn enforce quota payments to quota holders.
In essence, this decision proposes that the California quota program could continue to operate in essentially the same manner as it currently does. The record reflects that the California quota program already assesses California producers to pay quota values to quota holders. While producers may not see this as an itemized deduction on their milk checks, their overbase price is lower than it otherwise would be if there was no quota program. This is a result of deducting the quota value from the pool prior to calculating the overbase price.
The California FMMO would authorize deductions from those California producers whose milk is pooled on the order. As this decision will later explain, the proposed California FMMO would have performance-based pooling standards that allow for manufacturing milk to not be pooled. CDFA would be responsible for the collection of California producer monies for milk not pooled because a California FMMO would only apply to producer milk as defined by the order. USDA and CDFA could cooperate by sharing data through a memorandum of understanding to facilitate CDFA administration of the quota program.
The Department received 13 comments supporting the recommendation to continue the California quota program under the authority and direction of CDFA, with FMMO cooperation for relevant information sharing. Comments expressing support for the proposed recognition of California quota program in the recommended California FMMO were received from the Cooperatives, the Institute, CPHA, HP Hood, Select, Producers, WUD, MPC, Pacific Gold,
Comments filed on behalf of the Institute stated that the Department's solution acknowledges the “recognize quota” language of the 2014 Farm Bill without violating the AMAA's requirements for uniform pricing. The Institute was also of the opinion that permitting CDFA to operate a standalone quota program through authorized deductions from producer payments allows the Department to avoid any potential interstate commerce issues relating to quota.
Comments filed on behalf of the Cooperatives also supported the Department's proposed recognition of the California quota program, as well as CDFA's continued administration of quota as a standalone program. The Cooperatives stated that the Department's decision properly recognized quota values and protected the financial investment of the California quota holders. The Cooperatives stated their support is contingent upon CDFA continuing the quota program as proposed by the Department, and added that if CDFA were unable or unwilling to maintain the program without diminishing quota value, the Cooperatives would withdraw their support of the Department's decision. The Cooperatives proposed that specific references to the applicable California statute and regulations that pertain to the California quota program be added to the proposed California FMMO.
Comments submitted on behalf of WUD supported the Department's treatment of the quota program, but requested that the producer referendum be postponed until CDFA determines how it will operate the program.
CDFA submitted a comment confirming its ability to establish a standalone, producer-funded quota program as proposed by the Department, and stated its aim to reach a conclusion prior to a California FMMO producer referendum. In its filed comments, CDFA indicated that it would work toward a solution with the intent of concluding its process before a California FMMO producer referendum was held so California producers would have the pertinent information needed to make an informed decision.
The Department continues to find the proper recognition of quota under the proposed California FMMO is to allow for authorized deductions from producer payments in accordance with the California quota program, as determined and administered by CDFA. As the Department finds this rulemaking proceeding is separate from CDFA's handling of the quota program, language referencing the CDFA regulations for administering quota is not included in the proposed California FMMO. Standalone language in the proposed California FMMO references the California quota program.
Regarding the treatment of exempt quota as addressed in Proposal 3, this decision continues to find that exempt quota is part of the California quota program and therefore its proper recognition should be determined by CDFA. The record demonstrates that exempt quota was initially granted when the California quota program was established, and like regular quota, the provisions have been adjusted numerous times through both California legislative and rulemaking actions. This decision continues to find the continuation of exempt quota, in whatever manner appropriate, should be determined by CDFA.
The record reflects that under the proposed FMMO, the four California producer-handlers who own exempt quota would likely become fully-regulated handlers because their sales exceed three million pounds per month. These fully-regulated handlers would be required to account to the marketwide pool for all of their Class I utilization and pay uniform FMMO minimum classified prices for all milk they pool. The CPHA witnesses testified that exempt quota is held on the producer side of their businesses. CDFA could best determine how those producers holding exempt quota should be compensated for their exempt quota holdings. Such compensation cannot be made by reducing the minimum Class I obligation of FMMO fully-regulated handlers without undermining the uniform handler payment provision of the AMAA.
Comments submitted on behalf of the CPHA expressed provisional support for the proposed treatment of quota, assuming all aspects of the current program, including exempt quota, would be maintained by CDFA. CPHA asked the Department to reopen the comment period pertaining to the quota program until CDFA releases a final statement detailing their plan to administer the quota program in its entirety. CPHA stated that until such time their comments on the recommended decision would be incomplete.
This decision does not find justification for reopening the public comment period. CDFA has publically outlined the steps it intends to take to preserve, plan for, and operate the California quota program. CDFA has publically stated it intends to complete a producer referendum and release the results before a FMMO producer referendum is held. California producers will be able to consider that information when voting on the proposed California FMMO.
Throughout the hearing, and in post-hearing briefs and comments filed in response to the recommended decision, dairy farmers and their Cooperative representatives stressed that while a California FMMO would provide them a more equitable price for their milk, entry into the FMMO system must not diminish or disturb, in any form, California quota values. This final decision continues to find that the package of FMMO provisions in this decision would create more orderly marketing of milk in California, adhere to all the provisions of the AMAA, and allow the California quota program to operate independently of the FMMO. In doing so, the California quota program will not be diminished or disturbed in any form by California's entry into the FMMO system.
This section outlines definitions and provisions of a California FMMO that describe the persons and dairy plants affected by the FMMO and specify the regulation of those entities.
The Cooperatives and the Institute both proposed regulatory language for an entire FMMO, including definitions and regulations specific to a California FMMO, as well as adoption of several of the uniform provisions common to other FMMOs. In many cases, hearing witnesses simply provided the list of uniform provisions for which they supported adoption, and in most cases, proponents for Proposals 1 and 2 agreed on the inclusion of these provisions.
The FMMO system currently provides for uniform definitions and provisions, which are found in Part 1000 under the General Provisions of Federal Milk Marketing Orders. Where applicable, those provisions are incorporated by reference into each FMMO. The uniform provisions were developed as part of FMMO Order Reform to prescribe certain provisions that needed to be contained in each FMMO to describe and define those entities affected by FMMO regulatory plans.
As outlined in the Order Reform Proposed Rule
This final decision continues to find that a set of uniform provisions should continue to be maintained throughout the FMMO system to ensure consistency between the uses of terms. Therefore, this final decision finds that a California FMMO should contain provisions consistent with those in the 10 current FMMOs.
Marketing conditions in each regulated marketing area do not lend themselves to completely identical provisions. Consequently, some provisions are tailored to the marketing conditions of the individual order, and provisions for a California FMMO in this final decision are similarly tailored to the California market where appropriate. This section provides a brief description of the uniform definitions and provisions for a California FMMO. Where a definition or provision does not lend itself to uniform application, it is discussed in greater detail here or in other sections of this document.
Two commenters expressed support for adopting the uniform provisions as proposed in the recommended decision to ensure consistency between uses of terms and application of principles and practices in FMMO areas.
Comments filed by the Cooperatives supported adoption of all but four of the recommended uniform provisions, for which they offered modifications: Pool plant, exempt plant, producer, and producer milk. Their specific exceptions are discussed later in this decision. The Cooperatives' comments also confirmed their support for adoption of the “miscellaneous and administrative” provisions generally used throughout the FMMO system, which specify the reporting, accounting, and payment procedures under the orders.
This decision continues to propose a set of uniform definitions consistent with the ten current FMMOs. The definitions for a California FMMO are explained below:
Comments filed by the Cooperatives took exception to the Department's recommended definition of
The exempt plant definition was standardized as part of Order Reform to provide a uniform definition of distributing plants that, because of their size, did not significantly impact competitive relationships among handlers in the market. The 150,000 pound limit on route disposition and sales of packaged fluid milk products was deemed appropriate because at the time it was the maximum amount of fluid milk products allowed by an exempt plant in any FMMO. Therefore, the uniform provisions ensured that exempt plants remained exempt from pricing and pooling provisions as part of Order Reform. This decision continues to find that to provide for regulatory consistency, the exempt plant definition in a California FMMO should be uniform with the 10 current FMMOs. This provision would allow for smaller California distributing plants that do not significantly impact the competitive relationship among handlers to be exempt from the pricing and pooling provisions of a California FMMO.
Both the Cooperatives and the Institute proposed adoption of the standard FMMO definition of exempt plants, and hearing witnesses were supportive of the proposals. However, in their post-hearing brief, the Cooperatives proposed two additional exempt plant categories to provide regulatory relief to small handlers under Proposal 1. The two additional exempt plant categories proposed include: (1) Plants that process 300,000 pounds or less of milk during the month into Class II, III, and IV products, and have no Class I production or distribution; and (2) plants that process, in total, 300,000 pounds or less of milk during the month, from which no more than 150,000 pounds is disposed of as route disposition or sales of packaged fluid milk products to other plants. Proposal 1, as originally drafted, would have fully regulated all handlers that received California milk, except for plants with 150,000 pounds or less of route disposition. Through the proposed modification, the Cooperatives sought to extend exempt plant status to smaller plants regardless of their use of milk. In essence, it would allow smaller plants with primarily manufacturing uses to be exempt from the pricing and pooling provisions.
The recommended decision found that the performance-based pooling provisions would make such additional exemptions unnecessary, as plants with manufacturing uses would have the option to elect not to pool their milk supply. In their filed comments, the Cooperatives took exception to the recommended definition of exempt plant as it did not contain the necessary language for inclusive pooling. This final decision continues to find the recommended exempt plant definition appropriate, as this decision does not propose adopting inclusive pooling for a California FMMO, negating the need for language tailored to inclusive pooling provisions. Specific details regarding pooling standards for a California FMMO are discussed in the Pooling section of this final decision.
The handler definition for a California FMMO should include the operator of a pool plant, a cooperative association that diverts milk to nonpool plants or delivers milk to pool plants for its account, and the operator of a nonpool plant.
The handler definition should also include intermediaries, such as brokers and wholesalers, who provide a service to the dairy industry, but are not required by the FMMO to make minimum payments to producers.
The Cooperatives proposed adoption of the uniform FMMO handler definition for a California FMMO. The Institute proposed adopting the uniform handler definition, modified to include proprietary bulk tank handlers (PBTH). A witness representing the Institute and Hilmar testified regarding the PBTH provision. The witness said a PBTH provision had been included in some former FMMOs to allow proprietary handlers to pool milk in a fashion similar to cooperative handlers, without needing to first deliver milk to a pool supply plant to meet the performance standards of the order. The witness explained that under Proposal 2, a PBTH would have to operate a plant—located in the marketing area—that does not process Class I milk and further, the PBTH would have to be recognized as the responsible handler for all milk pooled under that provision. The witness was of the opinion that the PBTH provision would promote efficient milk movements, reduce transportation costs, and eliminate unnecessary milk loading and unloading simply to meet the order's performance standards.
The witness said the flexibilities of a PBTH provision would offer operational efficiencies to Hilmar and allow them to meet criteria similar to the pool supply plant qualifications advanced in Proposal 2. The witness explained that Hilmar would be able to ship milk directly from a farm to a distributing plant, rather than shipping milk first to a pool supply plant and then on to a distributing plant.
In their post-hearing briefs, the Cooperatives opposed the PBTH provision, citing disorderly marketing conditions with its use in earlier marketing orders, and stating that the provision is unnecessary, prone to create disorder, and, as proposed, administratively unworkable. No comments were filed in regard to this provision as proposed in the recommended decision. The record supports adoption of the standard FMMO handler definition without the additional PBTH provision prescribed in Proposal 2. The Department has found in the past that PBTH provisions led to the pooling of milk that was not part of the legitimate reserve supply for distributing plants in the marketing area.
As a result of their exemption from the pricing and pooling provisions, producer-handlers, in their capacity as handlers, are not required to pay the minimum class prices established under the orders, nor are they, in their capacity as producers, granted minimum price protection for disposal of their surplus milk. Producer-handlers, in their capacity as handlers, are not obligated to equalize their use-value of milk through payment of the difference between their use-value of milk and the respective order's blend price into the producer-settlement fund.
Entities defined as FMMO producer-handlers must adhere to strict criteria that limit certain business practices, including the purchase of supplemental milk. Given these limitations, producer-handlers bear the full burden of balancing their milk production between fluid and other uses. Milk production in excess of their Class I route disposition does not enjoy minimum price protection under the orders and may be sold at whatever price is obtainable in the market.
Producer-handlers are required to submit reports and provide access to their books, records and any other documentation as deemed necessary by the Market Administrator to ensure compliance with the requirements for their regulatory status as producer-handlers. Therefore, producer-handlers are regulated under the orders, but are not “fully regulated” like other handlers who are subject to an order's pricing and pooling provisions.
Under the CSO, two categories of producer-handlers are recognized. “Option 66” producer-handlers may request exemption from the CSO's pooling regulations if both their farm production and their sales average less than 500 gallons of milk per day on an annual basis, and if they ship 95 percent of their production to retail or wholesale outlets. “Option 66” producer-handlers are fully exempt from the pool for their entire production and may not own quota or production base. The record reflects that there were two “Option 66” producer-handlers in California at the time of the hearing. No production data was submitted at the hearing to quantify the volume of “Option 66” producer-handler milk exempt from the CSO pool.
The CSO's second producer-handler category pertains to “Option 70” producer-handlers—large scale entities that own exempt quota, which exempts them from pooling a portion of their Class 1 milk. The exempt quota held by “Option 70” producer-handlers was discussed earlier in this decision.
Proposals 1 and 2 both include definitions and provisions for producer-handlers consistent with the 10 FMMOs that currently exempt persons who operate both dairy farms and distributing plants, and process and distribute no more than three million pounds of fluid milk per month. The producer-handler regulations under Proposal 2 more closely resemble those in the Pacific Northwest and Arizona FMMOs in that they contain additional specificity about producer-handler qualifications.
A Cooperative witness supported adoption of the standard FMMO producer-handler definition for a California FMMO as contained in Proposal 1. Under the standard definition, producer-handlers who sell or deliver up to three million pounds of Class I milk or packaged fluid milk products monthly would be exempt from the pricing and pooling provisions. The witness added that under Proposal 1, producer-handlers could own regular quota and qualify for transportation credits.
Two producer witnesses who also operate processing facilities in California described their individual experiences related to running small dairy farms and fluid milk processing operations. Both witnesses testified that they supported Proposal 1 because, among other things, they thought the proposed FMMO producer-handler definition could provide them exemptions from the pooling requirements for their Class I production and sales, something that they do not currently enjoy from the CSO.
A witness from Organic Pastures Dairy Company, LLC (Organic Pastures) testified on behalf of Organic Pastures and three other small San Joaquin Valley “producer-distributor” entities. According to the witness, these entities produce and bottle their own Class 1 milk, but do not qualify as “Option 66” producer-handlers, and must therefore account to the CSO pool. The witness explained that these businesses have taken risks to develop their own brands and customer bases, but struggle to survive financially. The witness said that Organic Pastures' monthly pool obligation for December 2014 was $50,000 for the milk they bottled and sold in California. The witness contended that because they produce, process, and distribute their own products, they should be exempt from regulation.
The entities represented by the witness supported a California FMMO because they believe they would meet the FMMO producer-handler definition and thus be exempt from the pricing and pooling provisions. The witness testified that the standard three-million pound limit would allow them to grow their businesses, but remain exempt from pricing and pooling provisions.
A witness from Dean Foods testified in support of the producer-handler provision contained in Proposal 2. The witness described similarities and differences between the producer-handler definitions in Proposals 1 and 2. The witness added that proponents of Proposal 2 recommended adoption of the additional ownership requirements, which mirror the standards in the Pacific Northwest and Arizona FMMOs. The witness explained that the additional requirements would ensure that larger-size operations typical of the western Federal orders that meet the producer-handler definition would not be able to undermine the intent of the provision.
The witness testified that Dean Foods fully supported the Institute's proposal to cap producer-handler exemptions at three million pounds of monthly Class I route disposition. The witness cited USDA decisions that found producer-handlers with greater than three million pounds of route disposition per month impacted the market, and thus their exemption from pricing and pooling provisions was disorderly.
Support for the producer-handler provisions contained in Proposal 2 was also expressed by two small California processors and by the Cooperatives in their post-hearing brief.
The FMMO system has historically exempted producer-handlers from the pricing and pooling provisions of FMMOs on the premise that the burden of disposal of their surplus milk was borne by them alone. Until 2005, there was no limit on the amount of Class I route disposition producer-handlers were allowed before they would be fully regulated. A Pacific Northwest and Arizona FMMO rulemaking established a three-million pound per month limit on Class I route disposition.
The recommended decision found the regulatory treatment of producer-handlers should continue to be uniform throughout the FMMO system. The monthly three million pound limit on Class I route disposition would ensure that California FMMO producer-handlers could not use their pricing and pooling exemption to undermine orderly marketing conditions.
The adoption of the standard FMMO producer-handler definition was supported by proponents of Proposals 1 and 2, as well as by entities that could meet the proposed producer-handler definition. The record does not contain data to indicate how many California entities would meet the proposed FMMO producer-handler definition, but it does indicate that only a small number would be impacted.
The additional qualification standards contained in the Pacific Northwest and Arizona FMMOs were explained in the Order Reform Proposed Rule.
The record reveals that herd sizes in California tend to be typical of the larger herd sizes found in the western FMMOs. According to CDFA data, in 2015 California's average herd size was 1,215. Therefore, the recommended decision found it appropriate that the producer-handler provision in a California FMMO should include the additional qualification standards similar to those in the nearby Pacific Northwest and Arizona FMMOs.
In their post-hearing brief, the Cooperatives proposed modifying Proposal 1 to broaden the producer-handler definition to include utilization other than Class I. The modification would allow producer-handlers with Class II, Class III, or Class IV manufacturing, in conjunction with their Class I processing, to be granted producer-handler status, as long as their total production remained under the three million pound processing limit. The Cooperatives contend this would provide regulatory relief to smaller producer-handlers, who would otherwise become regulated under the inclusive pooling provisions of Proposal 1. The recommended decision found that extending the producer-handler definition to include manufacturing uses would not be necessary because the recommended package of pooling provisions would allow for optional pooling of milk used in manufacturing.
Individual comments filed by HP Hood, Kroger, and the CDC expressed support for the producer-handler provision contained in the recommended decision. Commenters agreed that producer-handlers should be treated in California the same way they are treated in the rest of the FMMO system, and that allowing exemptions for production above 3 million pounds per month would create disorder. Comments filed by the Cooperatives also confirmed their support for the recommended producer-handler definition, which mirrors the definition used in the other western orders.
This final decision continues to find that the producer-handler definition, including additional language related to producer-handler qualification, as proposed in the recommended decision would be appropriate for a California FMMO. As well, the proposed California FMMO should contain the uniform FMMO producer-handler provision that limits monthly Class I route disposition to three million pounds. Because this final decision does not propose adoption of inclusive pooling, dairy product manufacturers of all sizes are allowed to opt out of the marketwide pool, making it unnecessary to provide additional allowances for small producer-handlers under the proposed California FMMO.
Comments filed by the Cooperatives recommended modifying language for the
Comments filed by the Cooperatives took exception to the definition of
Comments filed by the Cooperatives took exception to the definition of
Products such as whey, evaporated milk, sweetened condensed milk, yogurt beverages containing 20 or more percent yogurt by weight, kefir, and certain packaged infant formula and meal replacements, would not be considered fluid milk products for pricing purposes.
The AMAA authorizes FMMOs to regulate milk in interstate commerce, and its provisions require that milk be classified according to the form in which or purpose for which it is used. The classification of milk is uniform in all FMMOs to maintain orderly marketing conditions within and between FMMOs and to ensure that handlers competing in the national market for manufactured products have similar raw milk costs.
This decision continues to find that because California would be joining the FMMO system, it should contain the uniform classification provisions included in the 10 existing FMMOs. Adoption of standard FMMO product classification provisions in the proposed California FMMO is appropriate to maintain uniform pricing for similar products both within the California FMMO and throughout the FMMO system. This section provides a summary of the hearing evidence, post-hearing arguments, and comments or exceptions submitted regarding the proposed milk classification provisions under a California FMMO.
Proposals 1 and 2 both offer standard FMMO product classifications for their respective California FMMO provisions. Proposal 2 also provides an additional shrinkage allowance for ESL production at qualified ESL pool distributing plants.
A Cooperative witness testified regarding the proposed classification provisions contained in Proposal 1. The
A Cooperative witness contended that ESL products are value-added products and should not be granted additional shrinkage allowances under a California FMMO. The Cooperatives further argued that ESL shrinkage allowances should be evaluated at a national hearing because ESL products are manufactured in other FMMO marketing areas, in addition to California.
A consultant witness, appearing on behalf of the Institute, testified in support of the portion of Proposal 2 that establishes an additional shrinkage allowance for the manufacture of ESL and ultra-high temperature (UHT) milk products. The witness explained that the shrinkage allowance recognizes the inherent loss of milk from farm to plant and within the plant. The FMMO system currently allows for up to a 2 percent shrinkage allowance for pool distributing plants, depending on how the milk was received at the plant. The witness contended that the standard 2 percent allowance was developed before extensive use of ESL technology became common-place, and was based on typical shrinkage experienced in traditional high temperature, short time pasteurization (HTST) processing. The witness explained that under current FMMO classification provisions, a portion of the milk accounted for as shrinkage is classified at the lowest priced class for the month and shrinkage losses beyond 2 percent are considered excess shrinkage and classified as Class I.
The consultant witness testified that Proposal 2 provides a shrinkage allowance of an additional 3 percent on ESL production at plants qualified as ESL pool distributing plants. Under the proposed provisions, the plants eligible for the additional shrinkage allowance would be distributing plants located in the marketing area that process 15 percent of the respective plant's total receipts of fluid milk products physically received at the plant into ultra-pasteurized or aseptically-processed fluid milk products.
The intent of Proposal 2, explained the witness, is for an eligible plant to have a maximum shrinkage allowance of up to 5 percent on milk used in its ESL production, not on all milk used in the plant. Data from the witness' ESL processing clients, all located outside of California, showed their total product pound shrinkage averaged above 5 percent. The witness also estimated based on 2013 to 2014 USDA record data, that excess shrinkage in ESL and UHT plants throughout the country averaged 2.09 percent.
Another Institute consultant witness testified regarding a 19-plant shrinkage study of ESL plants; three of the plants in the study were located in California. The study showed a weighted average product pound shrinkage of 2.73 percent.
Two additional Institute consultant witnesses and a witness from HP Hood testified in support of the ESL shrinkage allowance provided in Proposal 2. The witnesses presented historical shrinkage data for ESL and UHT manufacturing facilities and offered extensive technical explanations for why shrinkage levels are higher in those systems than in HTST systems. The witnesses explained that shrinkage refers to milk lost in the manufacturing process due primarily to the fact that it sticks to the equipment pipes and is lost in the cleaning process. The witnesses stressed that ESL equipment has longer piping, and noted numerous operational differences which inherently lead to higher losses of milk when compared to HTST processing.
The HP Hood witness provided a similar explanation of ESL processing and why it lends itself to higher product losses. The witness said that even though fluid milk sales across the United States are declining, HP Hood ESL product sales have grown. The witness was of the opinion that because increases in ESL fluid milk sales benefit the entire dairy industry, dairy producers should share the burden of producing these products through greater shrinkage allowances, as reflected in the classification provisions provided in Proposal 2.
HP Hood, in its post-hearing brief, reiterated its position that the heavy investment in the development of ESL technology and market expansion for those products should be shared by dairy farmers. The Institute, in its post-hearing brief, concurred with HP Hood's points and argued the shrinkage allowances provided in Proposal 2 would assure ESL processors, like conventional fluid milk processors, would only be charged Class I prices for milk contained in fluid milk products and not for milk lost during processing. The Institute also stated that a promulgation proceeding for a new FMMO was an appropriate place to consider ESL shrinkage allowances.
The Cooperatives' reply brief reiterated that ESL products are value-added products and handlers already receive a premium in the market. Additionally, the Cooperatives claimed that the manufacturing costs cited by HP Hood in its brief were not significant enough to warrant the proposed change to the uniform classification rules.
As discussed previously in this decision, the primary objective of FMMOs is to establish and maintain orderly marketing conditions. FMMOs achieve this goal through the classified pricing and the marketwide pooling of the proceeds of milk associated with a marketing area. To that end, the AMAA specifies that a FMMO should classify milk “in accordance with the form in which or the purpose for which it is used.” The classification of milk ensures competing handlers have the same minimum regulated price for milk used in a particular product category. Thus, FMMOs have found it is reasonable and appropriate that milk used in identical or nearly identical products should be placed in the same class of use. This reduces the incidence of disorderly marketing that could arise from regulated price differences between competing handlers.
Currently, the provisions providing the classification of milk pooled on the existing FMMOs are identical.
Under the current FMMO uniform provisions, Class I consists of milk used to produce fluid milk products (whole milk, lowfat milk, skim milk, flavored milk such as chocolate milk). Class II milk includes milk used to make a variety of soft products, including cottage cheese, ice cream, yogurt and yogurt beverages, sour cream, baking mixes, puddings, meal replacements, and prepared foods. Class III includes milk used to make hard cheeses that may be sliced, grated, shredded, or crumbled, cream cheese, and other spreadable cheeses. Class IV milk includes milk used to produce butter, evaporated or condensed milk in
The record reflects that current product classification provisions under the CSO are comparable to those under FMMOs. While the CSO has five classes of milk (1, 2, 3, 4a and 4b), the record reflects that under the uniform FMMO classification provisions, products currently classified by the CSO as Class 2 and 3 would be classified by the California FMMO as Class II; CSO Class 4b products would be classified as California FMMO Class III; and CSO Class 4a products would be classified as California FMMO Class IV products.
Both the Cooperatives and the Institute support the product classification provisions already provided in the current FMMOs. Neither group was of the opinion that the proposed FMMO classification provisions would disadvantage any handler currently regulated by the CSO.
This decision continues to find that a California FMMO should contain, to the maximum extent possible, provisions that are uniform with the FMMO system California producers are seeking to enter. To that end, the proposed California FMMO should include the same classification provisions as currently provided in existing FMMOs to allow for consistency of regulation between FMMOs. Adoption of these provisions would ensure that milk pooled on the California FMMO is classified uniformly with the rest of the FMMO system, and consequently, competing handlers will incur the same regulated minimum prices.
Therefore, this decision continues to find that a California FMMO should provide the following product classifications used in existing FMMOs: Class I milk should be defined as milk used to produce fluid milk products; Class II milk should be defined as milk used to make a variety of soft products, including cream products, high-moisture cheeses like cottage cheese, ice cream, yogurt and yogurt beverages, sour cream, baking mixes, puddings, meal replacements, and prepared foods; Class III milk should be defined as milk used to make spreadable cheeses like cream cheese, and hard cheeses that may be sliced, grated, shredded, or crumbled; Class IV milk should be defined as milk used to make butter, evaporated or condensed milk in consumer-type packages, and dried milk products. Other uses for milk, including milk that is dumped, fed to animals, or accidentally lost or destroyed, should be assigned to the lowest-priced class for the month.
This decision also finds that the California FMMO should adopt the same provisions as the existing FMMOs regarding the classification of milk transfers and diversions, plant shrinkage and overages, and allocation of handler receipts to handler utilization.
A comment submitted on behalf of the Cooperatives expressed support for the Department's recommendations to adopt a uniform classification system under a California FMMO. They wrote that, with the exception of the issue regarding ESL shrinkage, which is discussed below, all major proponents at the hearing endorsed the Department's findings that uniform classification helps equalize competing handlers throughout the system.
The existing FMMOs also contain uniform provisions recognizing that some milk loss is inevitable in milk processing. This is referred to as shrinkage and is calculated as the difference between the plant's total receipts and total utilization. Pool handlers must account for all receipts and all utilization. Shrinkage provisions assign a value to milk losses at a plant. There is, however, a limit on the quantity of shrinkage that may be allocated to the lowest priced class. The limit depends on how the milk is received. For instance, shrinkage on milk physically received at the plant directly from producers based on farm weights and tests is limited to 2 percent, whereas, shrinkage on milk received directly from producers on a basis other than farm weights and tests is limited to 1.5 percent. Similar limits are placed on other types of bulk receipts. Quantities of milk in excess of the shrinkage limit are considered “excess shrinkage.” Excess shrinkage is assigned to the highest class of utilization at the plant to arrive at gross utilization, from which the allocation process begins.
The CSO provides a shrinkage allowance of up to 3 percent of the plant's total receipts, which is allocated on the basis of the plant's utilization. Similar to the FMMOs, excess shrinkage in the CSO is assigned as Class 1.
The recommended decision did not propose an additional shrinkage allowance for ESL products. Comments filed by HP Hood opposed the Department's recommendation, noting that ESL products have gained popularity while overall fluid milk consumption has declined, and processors should be compensated for the investments they have made to buoy the fluid milk sector.
Comments filed by the Cooperatives supported the Department's recommendation that no additional shrinkage allowance be provided for ESL production. The Cooperatives wrote that adopting a different shrinkage allowance for ESL products would deviate from national uniformity in the FMMO system.
This final decision does not find justification for an additional shrinkage allowance for ESL production at ESL pool distributing plants. While the record contains some ESL plant shrinkage data, data pertaining to ESL production at California plants is limited. The record does indicate that ESL production occurs throughout the country. This decision continues to find that amending provisions that are uniform throughout the FMMO system to allow an additional shrinkage allowance on ESL production should be evaluated on the basis of a separate national rulemaking proceeding.
The two main proposals in this proceeding offered end-product price formulas as the appropriate method for pricing producer milk pooled on a California FMMO, although the factors in the formulas differed. This section reviews arguments presented in testimony and post-hearing briefs regarding the appropriate method to value producer milk. This section further explains the finding that the recommended California FMMO include adoption of the same end-product price formulas used in the 10 existing FMMOs and addresses comments and exceptions received in response to the recommended decision.
A LOL witness, appearing on behalf of the Cooperatives, testified in support of the classified price provisions contained in Proposal 1. The witness testified that under Proposal 1, California would adopt the classified prices (including the commodity price series, product yields, and make allowances), the component prices, and the advanced pricing factors presently used in the FMMO system. The witness stated that 65 percent of the milk produced in the United States is currently priced under these common provisions, and the same should apply to the 20 percent of the national milk supply produced in California.
The witness provided testimony regarding the evolution of a national manufacturing price, starting with the Minnesota-Wisconsin price series in the 1960's, and ending with the national classified end-product price formulas adopted in 2000. The witness discussed the national pricing system that resulted
The witness also testified regarding the influence of California dairy manufacturing costs on the current FMMO make allowances. The witness noted that a USDA Rural Cooperative Business Service (RCBS) study, a Cornell University study of processing costs, and a CDFA cost-of-processing survey were relied upon by the Department to determine appropriate make allowance levels for cheese, butter, NFDM, and dry whey. In the witness's opinion, the inclusion of CDFA manufacturing cost data in the formulation of FMMO manufacturing allowances justifies the use of the same manufacturing allowances (butter: $0.1715 per pound; NFDM: $0.1678 per pound; cheese: $0.2003 per pound; and dry whey: $0.1991 per pound) in a California FMMO. The witness also reviewed the rulemaking history on the derivation of the product yields contained in the current FMMO price formulas, and was of the opinion that they are similar to product yields attainable by California manufacturing plants. The witness stated that the FMMO make allowances and product yields remained relevant, as they had been reaffirmed by the Department in a 2013 Final Rule.
The witness also testified regarding the FMMO national Class I price surface. The witness said that Order Reform resulted in the adoption of a national pricing surface, which assigned a value to milk for every county in the United States based on milk supply and demand at those locations. The witness was of the opinion that since California was factored into the Department's Order Reform analysis to derive the price surface, it would be appropriate for the price surface to be adopted in a California FMMO. The witness noted the price surface identifies five pricing zones covering California, ranging from $1.60 to $2.10 per cwt. The witness explained that in the FMMO system, the Class I differential is added to the higher of the Class III or Class IV price to determine the Class I price for a distributing plant at its location. The witness elaborated that since Class I processors compete with Class III and IV manufacturers for a milk supply, Class I prices are linked to manufacturing prices in the FMMO system, and this concept should likewise apply to a California FMMO.
The witness also explained how the base Class I differential, $1.60 per cwt, was derived during Order Reform. The witness said that the $1.60 base differential assumes a cost per cwt of $0.40 to maintain a Grade A facility, $0.60 for marketing, and $0.60 for securing a milk supply in competition with manufacturers. The witness noted these values were established in 2000, and although still relevant, the actual costs are higher in the current marketplace. The Cooperatives provided additional information in their post-hearing brief, contending that current costs support a base Class I differential of $2.40, a 50 percent increase over the base listed above.
The witness concluded by saying that California dairy farmers should receive prices reflecting the current national market and that are comparable to what producers receive from FMMO regulated plants in the rest of the country. This position was reiterated in the Cooperatives' post-hearing brief.
Another Cooperative witness provided testimony on the handler's value of milk and related provisions. The witness proposed that handlers regulated by a California FMMO pay classified prices based on the components in the raw milk they receive (otherwise known as “multiple component pricing”): butterfat, protein, and other solids. Under Proposal 1, the witness said, regulated handlers would pay for milk on the following components:
The Cooperative witness reiterated the Federal Order Reform recommended decision justification for implementing a national pricing structure and contended the same reasons apply to extending national pricing to a California FMMO. The witness added that while California handlers would be paying the same national prices for milk components, there would be no need to adjust price formulas for regional product yields because handlers only pay for the components they receive. The witness also explained that Proposal 1 did not prescribe location adjustments in the price formulas because California plants are included in the price surveys that determine the national commodity prices used in the FMMO formulas.
The Cooperative witness testified that Proposal 1 includes a fortification allowance on milk solids used to fortify Class I products to meet California's fluid milk standards, as is currently provided in the CSO. The witness noted that Proposal 1 does not propose a somatic cell adjustment or producer location differentials since both features are not currently contained in the CSO.
The Cooperative witness said Proposal 1 seeks to have producers paid on the basis of butterfat, protein and other solids, and does not include a producer price differential (PPD) adjustment per se. The witness said that the PPD is typically viewed as the benefit to FMMO producers for participating in the marketwide pool since the PPD reflects the additional revenue shared from the higher value class utilizations. Instead, the witness explained that under Proposal 1, the California FMMO would calculate a monthly PPD, but the PPD value would be paid to producers according to each component's annual contribution to the Class III price. For example, said the witness, if on an annual basis butterfat accounted for 32 percent of the total value of the Class III price, then 32 percent of the monthly PPD value would be paid out through an adjustment to the butterfat price. This same adjustment, the witness said, would apply to the producer protein and other solids prices. The witness explained that FMMO producers typically find the monthly PPD concept confusing and complicated, especially in months when it is a negative value. The witness said that California producers, who do not receive a PPD
The witness also clarified that the Cooperatives were amending the proposal regarding announcement of producer prices contained in Proposal 1 from “on or before the 11th” to “on or before the 14th” day after the end of the month.
Support for a national uniform pricing system was reiterated in the Cooperatives' post-hearing brief. The Cooperatives argued that the hearing record demonstrates California cheese competes in the national market. Having California milk priced uniformly in the FMMO system would not disadvantage California processors, reiterated the Cooperatives, but it would diminish the current pricing advantage they have under the CSO. The brief noted record evidence that many FMMO cheese processors paid higher than FMMO minimum prices for milk as proof that FMMO minimum prices are not too high.
The Cooperatives' brief also discussed California whey processing. The brief stated that 85.8 percent of cheese manufactured nationally is produced in plants that also process whey. In California, the Cooperatives wrote, the percentage is closer to 90 percent. Based on these comparable percentages, the Cooperatives stated whey pricing in California should be no different from the rest of the country.
The Cooperatives also stressed opposition to any adjustment to the price formulas to reflect a lower location value in California. The Cooperatives stated milk prices should not be California centric because manufactured products are sold nationally. If California classified prices were to be based solely on California product sales, the Cooperatives were of the opinion that California handlers would receive a raw milk cost advantage over other FMMO regulated handlers. The brief noted that the Cooperatives manufacture a majority of the butter and NFDM produced in California, and they did not believe the proposed California FMMO prices associated with those Class IV products would be too high. The Cooperatives stressed that any changes to the FMMO pricing system should be considered at a national hearing and not in this single-market proceeding.
An Institute witness testified regarding the pricing provisions included in Proposal 2. The witness explained that Class I products have the highest use value in order to encourage adequate milk production to meet Class I needs, and to attract milk to Class I rather than to manufacturing uses. As manufacturing class uses balance the supply and demand needs of the marketing area, the witness said it would be important that those classified use values not be set above market-clearing levels.
The Institute witness testified that historically, as milk began to travel greater distances for processing, FMMO pricing policy became more coordinated to promote orderly marketing conditions both within and between FMMOs. The witness said that the Minnesota-Wisconsin price series served as the basis for FMMO pricing because the area surveyed represented the largest reserve supply of milk in the country, and therefore generated an appropriate market-clearing price for manufacturing milk. The witness stated that California is now the region with the largest reserve supply and because California products must compete for sales in the east, the value of raw milk in California is lower than in eastern parts of the country. Therefore, emphasized the witness, minimum prices for a California FMMO should not be set above market-clearing levels in California. This position was reiterated in the Institute's post-hearing brief.
The Institute witness cautioned against setting minimum prices too high because it could lead to the inability of dairy farmers to find a willing buyer for their milk. Alternatively, the witness said, if minimum prices are set too low, dairy farmers could be compensated by the market through over-order premiums. The witness said Class III and IV prices for a California FMMO need to be reflective of commodity prices received by California plants, and reflective of current California manufacturing costs. The witness was of the opinion that the national values used in the current FMMO Class III and IV formulas are not appropriate for California.
The Institute witness explained their preference would be to use western commodity prices in the Class III and IV formulas. However, the witness said that, due to data confidentiality issues, the Department is unable to report these prices. As an alternative, the witness said, Proposal 2 contains default commodity values that would adjust the NDPSR prices based on the historical difference between the NDPSR prices and California or western based prices as reported by either CDFA or Dairy Market News. This western adjustment, the witness said, would result in commodity prices in the price formulas being more representative of the prices received by California handlers. The witness noted the only exception to how the adjustors are calculated is the default adjustor proposed for the Class III protein price. The Class III protein price adjustor utilized CME 40-pound block Cheddar cheese prices, because CDFA stopped reporting California 40-pound block Cheddar prices after August 2011.
The Institute witness also reviewed the manufacturing allowances contained in Proposal 2. Except for the dry whey manufacturing allowance, explained the witness, all are based on the most recent CDFA manufacturing cost survey for 2013.
The Institute witness testified that many California cheese plants manufacture products other than dry whey that often do not generate revenues to match the dry whey value in the regulated formulas. Other plants, according to the witness, do not have the capability to process the whey by-product from their cheese making operations. Therefore, the witness offered an alternative Class III other solids price formula that would be based on whey protein concentrate (WPC), and would cap the whey value to recognize that not all plants are able to capture value from their whey stream. The witness testified that a more appropriate reference commodity for whey products, one that would be more applicable to most California cheesemakers' operations, would be WPC. The witness explained that over the previous eight years, the production of dry whey declined 3.3 percent, while the production of various WPC and Whey Protein Isolate (WPI) products has seen increases ranging from 1.1 percent to 9.5 percent.
The Institute witness testified that cheese and whey markets are vastly different, and not all cheese plants find it profitable to invest in whey processing. According to the witness, when cheese plants do invest, it is usually in the limited processing of whey into concentrate solids for transportation savings. The witness said that only one plant in California
The Institute's post-hearing brief discussed several of the unique aspects of the California dairy industry. The brief stated that from 1995 to 2014, while the state's population grew 23 percent, California milk production increased 82 percent, which in turn fueled the expansion of cheese processing in the state. The brief stated that three processing facilities account for 25 percent of California's cheese manufacturing, and much of that production is marketed east of the Mississippi River. The brief cautioned that increasing minimum prices would create an economic trade barrier where California processors would no longer have the ability to compete in eastern markets due to higher minimum regulated prices.
The Institute's post-hearing brief also addressed the need for a national FMMO pricing hearing. The Institute reiterated hearing testimony that current pricing formulas are based on data from the 1990s, making the prices out of alignment with current market realities. The brief stated that pricing formulas need to be updated in order to be representative of current marketing conditions. The FMMO pricing system, the Institute stressed, needs all pricing formulas to be set at market clearing levels that enable over-order premiums to be paid when appropriate.
A witness appearing on behalf of Leprino Foods, a mozzarella cheese and whey products manufacturer based in Denver, Colorado, testified regarding the Class III price formula contained in Proposal 2. Leprino operates nine plants in the U.S., three of which are in California. Leprino is a member of the Institute and supports adoption of Proposal 2 if the Department recommends a California FMMO.
The Leprino witness stressed the importance of minimizing the impacts of minimum regulated pricing on the dairy marketplace. The witness testified that the United States dairy industry is increasingly integrated with global dairy markets since more than 15 percent of United States milk solids are exported, and that many manufacturers, including Leprino, have made significant investments in developing export markets to increase demand for United States dairy products. The witness said it is important that any future California FMMO facilitate rather than inhibit the dairy industry's ability to leverage this export opportunity.
The Leprino witness testified about the importance of setting minimum regulated milk prices at market clearing levels that would allow for reasonable returns achievable under good management practices by California manufacturers. The witness testified that 80 percent of California milk production is utilized in Class III and IV products, a large percentage of which are marketed outside of California. Therefore, the witness said, California FMMO minimum prices should reflect values of California-manufactured products, f.o.b. the manufacturing plant. The witness added that because price formulas could only be changed through a hearing process, it would be important to set the regulated price formulas at minimum levels that allow market forces to function outside of the regulated system. The witness said regulated prices that are too high would lead to over-production of milk and disorderly marketing conditions. This concept was reiterated in the post-hearing briefs submitted by the Institute and Leprino.
The Leprino witness summarized findings from the Order Reform Final Decision that explained how manufacturing plant operators who find make-allowances inadequate to cover their actual costs are free to not participate in the order. The witness noted this option would not be available under Proposal 1, which underscores the importance of setting appropriate market clearing prices.
The Leprino witness testified that a California FMMO would require a Class III formula that is set in relation to achievable returns in California using the most recent data. The witness explained Leprino's preference that the Department suspend the California FMMO proceeding to defer implementation until after a national hearing could be held to review and revise the existing Class III formula. The witness added that the Department should hold a national Class III and IV price formula hearing after this rulemaking to utilize more current data and account for the impacts of a California FMMO, if necessary.
The Leprino witness testified in support of establishing a DPMRP western price survey to determine minimum milk prices under a California FMMO. The witness explained how the Department might rely on surveyed commodity prices from other western states, if necessary, to overcome any data confidentiality issues. In its brief, Leprino encouraged the Department to establish a definition for the Western Area, and recommended it include California, Oregon and Washington. In addition to these three states, the witness said that other areas should be considered in order to eliminate confidentiality constraints. However, the witness said that in the event confidentiality concerns continue to arise, Proposal 2 contained alternative default equations.
The Leprino witness discussed the justification for pricing western produced products differently than those in the rest of the country. The witness stressed that the location value of California manufactured products is lower because of the additional transportation costs required to deliver products to the population centers in the east. This opinion was reiterated in Leprino's post-hearing brief. The witness noted that nearly half of Leprino's cheese production sold domestically is shipped to markets east of the Mississippi, and they incur transportation costs ranging from $0.10 to $0.15 per pound.
The Leprino witness was of the opinion that bulk Cheddar cheese remains the most appropriate product from which to derive the FMMO Class III price, but California Class III price formulas should rely on 40-pound block Cheddar prices because all California Cheddar production is in blocks. The adoption of 40-pound block Cheddar prices was reiterated in Leprino's post-hearing brief.
The witness testified in support of modifying the make allowances in Proposal 2 to incorporate a sales and administrative cost of $0.0015 per pound. Therefore, the new proposed make allowances per pound of product would be as follows: $0.2306 for cheese, $0.1739 for butter, $0.2310 for whey, and $0.2012 for NFDM.
The Leprino witness provided extensive testimony on the appropriate valuation of whey in FMMO Class III minimum pricing. The witness explained how the explicit whey factor had been a problem for cheesemakers and led the Institute to propose an alternative valuation. Proposal 2 would value the whey portion of the Class III price formula relative to its concentrated liquid whey value, which the witness said was the most generic whey product produced. The witness stated that the WPC-34 price index is the most common reference used for the sale of liquid whey by cheese plants selling concentrated whey in California. The witness added that the prices received for liquid whey are discounted to reflect additional processing required to produce a full-value whey product. Accordingly, said the witness, California FMMO minimum prices should rely on WPC-34 survey prices to approximate a whey value in the Class III price.
The Leprino witness testified in opposition to the Class III and IV formulas contained in Proposal 1. The formulas, the witness said, do not reflect California market conditions. The witness warned that higher regulated prices in California would lead to disorderly marketing conditions. In its post-hearing brief, Leprino stated the pricing formulas in Proposal 1 use old manufacturing cost data and the national weighted average prices for the four products exceeded the prices received in California. Leprino noted that there was no evidence provided by the Cooperatives related to the relevance of the Proposal 1 formulas to California.
A witness testifying on behalf of Hilmar spoke on how the current FMMO Class III and IV pricing formulas, if applied to a California FMMO incorporating inclusive pooling, would lead to disorderly marketing conditions. In its brief, Hilmar stated that disorderly marketing conditions would negate the competitive equilibrium present between eastern and western markets and lead to a trade barrier that would hinder the California dairy industry.
The witness testified that Hilmar had not experienced difficulties in sourcing raw milk supplies, and that there was currently no disorder in California to warrant promulgation of a California FMMO. The witness described several scenarios in the past where CSO whey pricing methodology over valued whey and led to disorderly marketing conditions for Hilmar, its independent producer suppliers, and other California dairy farmers, which CDFA was able to remedy through an adjustment to the whey factor.
The Hilmar witness testified that if milk used in California cheese production was subject to the whey factor used in the current FMMO Class III price, the whey product stream in California would be overvalued. Use of that whey factor, along with the inclusive pooling provisions in Proposal 1, would give rise to disorderly marketing conditions.
The Hilmar witness was of the opinion that 2015 California milk production decreased for reasons not relevant to the differences in CSO 4b versus FMMO Class III pricing. Instead, the witness said, production was influenced by low milk powder prices related to global oversupply of milk powder, as well as drought, environmental regulations, and competition for land from other crops.
The Hilmar witness testified that CSO milk prices are minimums, and cooperatives have the ability to negotiate for higher milk prices from their proprietary plant customers. The witness said that Hilmar paid premiums of approximately $120 million for milk above the CSO 4b price over the last several years. The witness explained that these premiums were paid for milk characteristics such as component content and other market-based factors. The witness added that when CSO 4b prices were temporarily increased through CDFA's adjustment to the sliding scale whey factor, the premiums Hilmar paid for milk decreased.
The Hilmar witness testified that the make-allowances in the FMMO Class III and IV formulas are outdated, and new manufacturing cost studies are necessary. The witness stated that Hilmar's manufacturing costs for cheese and milk powders are higher than those provided for in the FMMO Class III and IV formulas. The witness said that if a California FMMO was adopted with inclusive pooling, it would be impossible for Hilmar to clear the market, unlike in existing FMMOs where manufacturing milk is not required to be pooled.
The Hilmar witness explained that California FMMO minimum milk prices need to reflect local supply and demand conditions. The witness entered Hilmar data showing that prices received for the sale of Hilmar cheese averaged $0.04 per pound lower than the announced NDPSR weighted average cheese price from 2010 to 2013. This price difference, the witness explained, is a function of the additional transportation cost incurred by Hilmar to transport product to eastern markets. The witness made similar price comparisons for NFDM and butter.
The Hilmar witness stressed that if California FMMO prices are not reflective of the California market, the California dairy industry will be less competitive in the global marketplace. The witness noted that in 2014, Hilmar exported 10 percent of its cheese, 50 percent of its WPC, and 95 percent of its lactose; and it planned to export all of the skim milk powder to be produced at a manufacturing facility nearing completion in Turlock, California. Inclusive pooling and U.S.-centric milk pricing in California, said the witness, would lead to competitive disadvantages for California manufacturers in international and domestic markets.
The Hilmar witness testified that they produce several types of whey products, but not dry whey. The witness was of the opinion that dry whey is a poor indicator of the value of Hilmar's WPC products. The witness said the potential minimum regulated cost under inclusive pooling provisions in a California FMMO would make production of Hilmar's whey products unprofitable.
In the post-hearing brief submitted by Hilmar, concerns regarding an adequate return on investment were raised. Hilmar was of the opinion that Proposal 1 does not provide an adequate level of return on investment to allow for processors to remain viable. The brief stated that adoption of provisions allowing for handlers to opt not to pool manufacturing milk could alleviate those concerns.
In its post-hearing brief, Hilmar sought to counter the Cooperatives' claim that California manufacturers have a competitive advantage over their FMMO counterparts and thus should be able to pay FMMO minimum prices. Hilmar countered that California handlers have a long-term competitive disadvantage when compared to their FMMO counterparts because of the CSO's mandatory pricing and pooling provisions. Hilmar maintained that the value of milk in California is lower than in the eastern part of the country, and California FMMO price formulas should reflect this reality.
A witness testified in support of Proposal 2 on behalf of Marquez Brothers International (Marquez), a Hispanic cheese manufacturer located in Hanford, California. The witness explained how their company invested in a processing facility in 2004 to address challenges with whey disposal. The witness explained that of the total milk solids they receive, approximately 48 percent is used in cheese, and 52
The Marquez witness testified that out of 57 California cheese plants, 49 plants (19.1 percent of California cheese production) have limited or no ability to process whey. The witness testified that whey disposal had been a burden for their business in the past, costing $1.5 million per year with no revenue offset and no recognition in the CSO 4b price of whey disposal costs. The witness added that the same problems existed in the FMMO Class III formula price contained in Proposal 1. The witness testified that the reliance on dry whey to price the other solids component of the FMMO Class III price would be inappropriate since cheesemakers must pay producers for the value of whey that can be generated from their milk, regardless of whether that price is actually obtained from the market.
The Marquez witness testified that adoption of Proposal 1 would discourage investment in cheese processing technologies. The witness said that a system of inclusive pooling coupled with other increases in operating costs would lead to competitive difficulties for California cheese plants.
A witness appeared on behalf of BESTWHEY, LLC (BESTWHEY), in opposition to adoption of Proposal 1. BESTWHEY provides consulting services to cheese manufacturing facilities, with a focus on specialty cheeses and whey handling and disposal. According to the witness, Proposal 1 would restrict the growth of California's cheese industry and eliminate most of the small cheese businesses in the state, and Proposal 1's inclusive pricing and pooling would lead to an over-supply of California milk. The witness highlighted the limited number of California plants with whey processing capabilities. The witness supported adoption of Proposal 2 because, according to the witness, it would provide a more realistic value for whey in the other solids price calculation, based on the actual value of liquid whey sold by cheese plants.
A witness appeared on behalf of Klondike Cheese (Klondike), a Wisconsin-based cheese manufacturer. The witness said that Klondike cools its liquid whey by-product and sells it to a larger whey processing facility. The witness provided detailed descriptions of whey processing methodology and the associated costs. The witness testified that basing the other solids price on dry whey markets is inappropriate and does not accurately reflect the revenues from whey at their operation. The witness entered Klondike 2014 data showing an average loss on its whey production of $0.6516 per cwt of milk.
A witness testified on behalf of Decatur Dairy (Decatur), a cooperative-owned, Wisconsin-based cheese manufacturer, in regard to using dry whey as the basis for the other solids price. The witness provided detailed descriptions of whey processing methodology and the associated costs. The witness said that Decatur sells warm wet whey to a nearby plant for further processing. The witness said that dry whey prices contained in the FMMO product-price formulas did not reflect the revenue they receive from their liquid whey sales, and it is not feasible for them to invest in drying equipment. The witness entered Decatur data for 2012 to 2015 showing average annual losses on its whey production ranging from $0.0627 to $0.7114 per cwt of milk.
A consultant witness appeared on behalf Joseph Gallo Farms (Gallo Farms). The witness explained that Gallo Farms owns two dairy farms, as well as cheese and whey processing facilities in California, and supports adoption of Proposal 2. Gallo Farms processes WPC from their own cheese operation and from other cheese facilities.
The Gallo Farms witness testified that if they had been required to pay the FMMO Class III price for milk, they would not have been able to make updates or improvements to their facilities. The witness estimated their cheese costs would have increased by $0.2237 per pound if Proposal 1 had been in effect from January 2014 through September 2015. The witness was of the opinion that California dairy farmers should not compare the prices received in California to prices received in the Midwest or East Coast, where significant population centers are serviced. The witness characterized the California market as significantly different from eastern markets, as it includes not only the West Coast population centers, but also Mexico and other export markets. The witness was of the opinion that a California FMMO, as provided for in Proposal 1, could lead to the closure of small and medium sized manufacturing plants.
The Gallo Farms witness supported the portion of Proposal 2 that relies on WPC to determine the other solids price, as most whey pricing is related to the WPC market rather than dry whey. An Institute witness testified regarding Class I pricing. The witness was of the opinion that the policy of assigning Class I milk the highest classified value should be reevaluated, given current market realities. The witness said that Proposal 1 relied on the current Class I price surface and fluid milk pricing system incorporated in the existing FMMOs, while other potential fluid milk pricing options have not been thoroughly investigated. The witness argued that although the “higher of” pricing mechanisms dampens Class I sales and limits the ability of fluid milk processors to hedge their Class I milk volumes, the Institute still supported the Class I milk pricing mechanism advanced in Proposal 2.
The Institute witness also testified regarding a technical modification to Proposal 2 that would affect how handlers pay for the milk components used in Class I products and how handler credits for fortifying fluid milk products would be determined. The witness explained that milk standards set by the State of California require a higher nonfat solids content than the Food and Drug Administration standard used elsewhere in the country. California fluid milk processors fortify raw milk with either condensed or nonfat dry milk to meet these higher standards.
The Institute witness described the differences between CSO and FMMO accounting for fluid milk fortification. Under FMMOs, the witness said, handlers account to the pool at the Class IV price for the solids used to fortify milk, but then are charged the two-factor (butterfat and skim) Class I price for the volumetric increase in fluid milk realized through fortification. Under the CSO, handlers account to the pool using a three-factor (butterfat, nonfat solids, and fluid carrier) Class 1 price for all solids used in Class 1 products, but then receive a credit for the solids used to fortify milk to meet the state standards. The Institute witness was of the opinion that the CSO three-factor system, coupled with its fortification credits, is superior to the FMMO system because it encourages orderly milk movements by making fluid milk handlers indifferent to the solids content of milk they receive, and it ensures that Class 1 handlers do not have a regulated milk price advantage over one another. The witness explained that plants receiving milk with a higher solids content might pay a higher Class 1 price for the raw milk, but less for fortification, while plants receiving milk with a lower solids content might pay a lower Class 1 price for the milk, but more for fortification, making both plants competitive with each other. The
A witness appeared on behalf of Hilmar to outline the history of FMMO surplus milk pricing policies. The witness, referring to decisions from previous FMMO rulemakings and reports, stated that FMMO minimum pricing should be set at levels aligning with net revenues received by manufacturers in the local marketing area in order for milk to “clear” the market. Therefore, the witness concluded, the Department must examine the local California market situation when determining appropriate minimum prices in a California FMMO.
A Cooperative witness addressed the alternative Other Solids price formula that was offered by the Institute. The witness stressed that no verifiable price series for WPC-34 exists, nor did the Institute present any third-party WPC-34 manufacturing cost studies. The witness estimated that 86 percent of the Class 4b milk was processed at plants that had whey drying capabilities. In addition, the witness said that the Cooperatives' modified exempt plant provision would exempt as many as 25 of the 57 cheese plants from FMMO minimum price regulation.
The FMMO program currently uses product price formulas relying on the wholesale price of finished products to determine the minimum classified prices handlers pay for raw milk in the four classes of products. Class III and Class IV prices are announced on or before the 5th day of the month following the month to which they apply. The Class III and Class IV price formulas form the base from which Class I and Class II prices are determined. The Class I price is announced in advance of the applicable month. It is determined by adding a Class I differential assigned to the plant's location to the higher of an advanced Class III or Class IV price computed by using the most recent two weeks' DPMRP data released on or before the 23rd of the preceding month. The Class II skim milk price is announced at the same time as the Class I price, and is determined by adding $0.70 per cwt to the advanced Class IV skim milk price. The Class II butterfat price is announced at the end of the month, at the same time as the Class III and Class IV prices, by adding $0.007 per pound to the Class IV butterfat price.
AMS administers the DPMRP to survey weekly wholesale prices of four manufactured dairy products (cheese, butter, NFDM and dry whey), and releases weekly average survey prices in the NDPSR. The FMMO product price formulas use these surveyed products to determine the component values in raw milk. The pricing system determines butterfat prices for milk used in products in each of the four classes from surveyed butter prices; protein and other solids prices for milk used in Class III products from surveyed cheese and dry whey prices, respectively; and a nonfat solids price for milk used in Class II and Class IV products from surveyed NFDM product prices. The skim milk portion of the Class I price is the higher of either the protein and other solids prices of the advanced Class III skim milk price or the NFDM price of the advanced Class IV skim milk price.
The butterfat, protein, other solids, and nonfat solids prices are derived through the average monthly NDPSR survey price, minus a manufacturing (make) allowance, multiplied by a yield factor. The make allowance factor represents the cost manufacturers incur in making raw milk into one pound of product. The yield factor is an approximation of the product quantity that can be made from a hundredweight of milk received at the plant. The milk received at the plant is adjusted to reflect farm-to-plant shrinkage when using farm weights and tests. This end-product pricing system was implemented as a part of Order Reform on January 1, 2000,
The pricing methodology described above was proposed by the Cooperatives to apply in a California FMMO and is contained in Proposal 1. The Cooperatives maintain that the Department has for many years held that the market for manufactured dairy products is national in scope and that the price of milk used to manufacture those products should therefore be the same across the nation. Proponents of Proposal 1 explained that the commodity prices used in the formulas are based on a survey of prices for manufactured dairy products from plants across the country, including California. Proponents went on to point out that the surveyed manufacturing costs were from plants in California, as well as in other states. These surveyed costs have been used to determine FMMO make allowances in the product-price formulas since their inception.
The Cooperatives, through witness testimony and post-hearing briefs, stressed that prices used to determine California handlers' value of milk should be based on the same national average factors as those used in the FMMOs. The Cooperatives repeatedly stressed that manufactured products compete in a national market, and therefore California dairy farmers should receive a milk price reflective of those commodity values. The Cooperatives' primary justification for a California FMMO is that the CSO does not provide California dairy farmers a milk price reflective of these national values, and they are now seeking to be included in the FMMO system so California dairy farmers can receive prices similar to their counterparts in the rest of the country.
The Institute, through witness testimony and post-hearing briefs, argued that classified prices in a California FMMO must be reflective of the current market conditions in California. They were of the opinion that not only has data used in the formulas become outdated, but that the value of California milk is inherently lower because of California's geographic location in the West and the additional cost of transporting finished product to population centers in the East. The Institute argued that these conditions make it hard for its dairy manufacturing member companies to remain competitive in the market.
In Proposal 2, the Institute proposed several changes to the current FMMO pricing formulas that would be applicable in California. First, the Institute proposed a western states price series for each commodity surveyed by the DPMRP. If a western price could not be used because of data confidentiality issues, the Institute proposed that a fixed value for each commodity be subtracted from the current NDPSR prices to represent the lower value of products in the West. Second, the Institute suggested that a Western states manufacturing cost survey be conducted to determine relevant California make allowances for each commodity, and if this was not feasible, they proposed specific make allowance levels they asserted are representative of manufacturing costs in California. Third, they proposed the NDPSR Cheddar cheese price used in the FMMO protein price formula for California only consider 40-pound block prices. They proposed that 500-pound barrel Cheddar cheese prices should not
In the early 1960s, FMMOs used a Minnesota-Wisconsin (M-W) manufacturing grade milk price series to determine a price for milk used in manufactured products based on the supply and demand for Grade B milk. As Grade B milk production and the number of plants purchasing Grade B milk declined, FMMOs moved to a Basic Formula Price (BFP). The BFP price incorporated an updating formula with the base M-W price to account for the month-to-month changes in the prices paid for butter, NFDM, and cheese. The Order Reform decision recognized that Grade B milk would only continue to decline and that the FMMO system needed a more accurate method for determining the value of producer milk.
As outlined in the Order Reform Final Decision, the goals for replacing the BFP price were: (1) To meet the supply and demand criteria set forth in the AMAA; (2) not to deviate greatly from the general level of the current BFP; and (3) to demonstrate the ability to change in reaction to changes in supply and demand. The product-price and component formulas currently used in the FMMO system were found to be the appropriate market-oriented alternative to the BFP. Additionally, that final decision specifically addressed the national market for commodity dairy products:
“. . . the current BFP may have a greater tendency to reflect supply and demand conditions in Minnesota and Wisconsin rather than national supply/demand conditions. The formulas in this decision use national commodity price series, thereby reflecting the national supply and demand for dairy products and the national demand for milk.”
The Department subsequently reiterated the necessity for FMMO classified prices to reflect national markets in a later final decision on Class III and IV pricing when it specifically addressed public comments pertaining to the relationship between the CSO and FMMOs:
“Class III and Class IV dairy products compete in a national market. Because of this, Class III and Class IV milk prices established for all Federal milk marketing order areas are the same.”
The evidentiary record of this proceeding supports and validates the same conclusion that prices used in a California FMMO should reflect the national marketplace for cheese, butter, NFDM and dry whey. The record reflects that commodity products produced in California compete in the same national market as products produced throughout the country. Uniform FMMO price formulas ensure similarly situated handlers have equal minimum raw milk costs regardless of where the handler is regulated, and as California is seeking to join the FMMO system, it is appropriate that the milk pooled on the California FMMO be priced under the same uniform price provisions found in all current FMMOs. Additionally, the record evidence supports the finding that by pricing California milk under these uniform pricing provisions, prices received by farmers whose milk is pooled on the California FMMO would be more reflective of the national market for commodity products for which their milk is utilized. Therefore, adopting a western adjusted price series, a 40-pound only Cheddar cheese price, and California-specific make allowances is not appropriate.
FMMO price formulas already account for California market conditions; therefore, it is reasonable and appropriate to use these price formulas in a California FMMO. This decision finds that the national FMMO pricing policy continues to reflect the marketing conditions of the entire FMMO system and is appropriate for adoption in California.
FMMO product-price formulas generally consist of three factors: commodity price, manufacturing allowance, and yield factor. Product yields contained in the formulas reflect standard industry norms. Yield factors were last updated in 2013,
Commodity prices used in the FMMO formulas are announced by AMS in the NDPSR every month and reflect current commodity prices received for products over the previous four or five weeks. While surveyed plant names and locations are not released by USDA, several witnesses testified that California dairy product sales meeting the reporting specifications
As the record demonstrates, most of the manufacturing allowances already account for California manufacturing costs. In regard to the Institute's position that data used to determine make allowance levels is not current, this decision recognizes 2006 data was used to determine current make allowance levels. Since that time, the Department has not received a hearing request to amend the levels. It may be appropriate to amend these levels in the future, and the Department would evaluate any changes to those levels on
Institute witnesses stressed that California manufacturers would be competitively harmed should California FMMO minimum classified prices not reflect a solely western location value. This decision finds that California manufacturers would not face competitive harm with the adoption of the uniform FMMO prices. Western manufacturing handlers who purchase milk pooled on the Pacific Northwest and Arizona FMMOs already routinely pay these prices. The record reflects that the Institute's primary concern was the adoption of the current FMMO price formulas for California, coupled with the adoption of the inclusive pooling provisions contained in Proposal 1. The provisions recommended by this decision allow handlers to elect to not pool milk used in manufacturing as determined appropriate for their individual business operations. Further, the proposed California FMMO provisions would not prohibit handlers and producers from utilizing the Dairy Forward Pricing Program
At the hearing, the Institute proposed an alternative method for computing the whey value in the other solids formula. The Institute argued, in testimony and post-hearing brief, that dry whey is not an appropriate reference commodity for California because little dry whey is produced in the state. Instead, they testified that prices from the more commonly produced WPC-34 should be used. The Institute provided evidence regarding WPC-34 production in California. The record contains testimony explaining how WPC-34 and dry whey production practices and manufacturing costs differ.
This decision finds that the prices adopted in the California FMMO should be uniform with all current FMMOs and be reflective of the dry whey market. Therefore, it is not appropriate on the basis of this hearing record to adopt a change in other solids pricing for only one FMMO. While, the data and testimony presented by the Institute may warrant further consideration for that purpose, to consider such a change for only one FMMO is not appropriate. While an academic expert did provide testimony on the record about a WPC-34 manufacturing cost survey, results of the survey, which would be of interest if such a proposal was being evaluated, were not available.
Comments filed by the Cooperatives in response to the recommended decision supported the Class III and IV price formulas contained in the proposed California FMMO. Their comments reiterated that because manufactured dairy products, including those manufactured in California, compete in a national market, classified prices paid by all regulated handlers should reflect that national market through the uniform, national Class III and IV end-product price formulas.
Additional comments submitted by Select, CDC, and WUD supported adoption of the end-product price formulas contained in the recommended decision. These entities were of the opinion that through national uniform manufacturing prices, California producers would receive the same prices as producers in the rest of the country, and milk movements would be based on economic decisions, not government regulation.
Comments filed by the Institute, Hilmar and Leprino took exception to the classified prices contained in the proposed California FMMO. The Institute maintained that the Department did not properly analyze all record evidence nor indicate what record evidence was accepted and rejected when making its determination. The Institute specifically took exception to the factors contained in the Class III price formula, arguing that they did not take into account local marketing conditions that demonstrate higher manufacturing costs and lower Class III product values. The Institute was of the opinion that the Department provided no basis for why record evidence on whey data was not considered.
Hilmar argued that the Department relied on past decisions and outdated data to wrongly conclude that the proposed California FMMO should contain the same price formulas as the current 10 FMMOs. Hilmar objected to the recommended decision's finding that adoption of the proposed price formulas would not result in competitive harm. Hilmar provided extensive comments on the competitive harm, in the form of loss in manufacturing revenue, profits, or market share they assert would result if the proposed California FMMO is established.
Hilmar reiterated comments similar to the Institute's that the proposed price formulas are not justified because they do not take into account local marketing conditions. It contended that the proposed price formulas would require California manufacturers to pay more for milk than is needed to clear the market and make a profit. Hilmar argued that because the Department did not rule on each proposed finding of fact, interested parties do not know what data did or did not factor into the Department's recommendation.
Hilmar also took exception with the Department's finding that changes to the pricing formulas should be done on a national, not individual market level. Hilmar concluded that adoption of the proposed California FMMO as contained in the recommended decision would, at a minimum, put California manufacturers in a less competitive position than they are in now. It further objected to waiting for a future national hearing to address any changes to the national uniform end-product product formulas.
Leprino was of the opinion that the Department did not consider record evidence regarding local California marketing conditions that they assert should result in different product price formula factors. Leprino wrote the Department incorrectly found the national uniform minimum regulated price structure should remain throughout the FMMO system, including a proposed California FMMO. Leprino reiterated a California FMMO should have different price formulas that recognize the different manufacturing costs, commodity prices received, and whey products produced in California.
Leprino contended that incorporation of Western-based commodity prices and manufacturing allowances, as contained in Proposal 2, was the only method for accurately valuing manufactured dairy products produced in California. It also reiterated support for deriving the whey value in the Class III product price formula through liquid whey rather than dry whey values, the latter being more representative of California whey production.
Leprino noted that a national hearing should be held to address these factors throughout the FMMO system, and that promulgation of a California FMMO should be delayed until such hearing is held.
Comments filed by Cacique Cheese (Cacique), Farmdale Creamery, and Pacific Gold Creamery took exception to the proposed end-product price formulas as appropriate for the California market. Cacique argued that
As detailed above, the primary theme of exceptions filed regarding the recommend price formulas revolve around the assertion that the Department ignored record evidence demonstrating local market conditions warrant different price formulas for California. Commenters suggested that because a California FMMO is only now being proposed, the pricing formulas in a California FMMO must only reflect the local marketing conditions of California. Additional exceptions were raised that the Department did not rule on every proposed finding of fact and only took Official Notice of a selected number of documents that were requested by stakeholders in post-hearing and reply briefs.
The decision to recommend promulgating a California FMMO and its specific provisions was based on the entire hearing record. The record reveals that during Order Reform, end-product price formulas were found to be an appropriate methodology for reflecting the national market for manufactured products as well as the local marketing conditions for the consolidated orders. Because of California's prominence in the national marketplace, California local marketing conditions were considered and factored into the end-product price formulas when those formulas were established, even though California did not join the FMMO system at that time.
As proposed, California regulated handlers would pay FMMO minimum classified prices that already account for their local marketing conditions, rather than a different set of state-regulated prices. By incorporating manufacturing costs and commodity prices received throughout the country, FMMO minimum classified prices reflect national supply and demand conditions. California products, sold throughout the country, are an integral part of the national supply and demand conditions of manufactured products. Therefore, adoption of these national end-product price formulas, without change, into a California FMMO is appropriate as they will continue to include California local marketing conditions and meet the pricing requirement of the AMAA.
It should be noted that regulated handler minimum prices throughout the country are currently affected by California marketing conditions through California plants whose DPMRP prices are incorporated in the NDPSR, and through California manufacturing costs that were incorporated into the current FMMO manufacturing allowances. In a national uniform pricing system, it is appropriate for California plants that become regulated by a FMMO to pay minimum classified prices that likewise incorporate local marketing conditions in other parts of the country through the same factors.
This final decision continues to find that any change to the nationally coordinated pricing system should be considered through a national rulemaking. FMMOs hearings are requested by the industry. To delay implementation of a California FMMO for a national pricing hearing that may or may not be requested, as suggested by some commenters, is not appropriate.
Evidence was introduced in the record regarding specific California manufacturing costs, commodities produced, and prices received. However, the FMMO system has a nationally coordinated pricing system and any changes to that system must be evaluated together in a rulemaking where all industry stakeholders can participate and all factors can be considered. While changes to the nationally coordinated FMMO pricing system may or may not be found to provide for more orderly marketing conditions, the current pricing system already takes into account marketing conditions from throughout the country, including California, which are incorporated in the pricing system on a monthly basis.
Comments received took exception to the finding that adoption of the recommended price formulas would not cause competitive harm by citing examples of reduced revenue, profits, and market share. The REIA released in conjunction with this decision demonstrates there would be an impact in all sectors of the industry and throughout the country. This final decision continues to find the recommended end-product price formulas appropriate for California and clarifies that manufacturers would not face competitive harm in the form of different minimum regulated prices than their competitors located in the other FMMOs.
One comment received stated that because the CSO had already increased prices to offset higher milk production costs, adoption of a California FMMO with higher minimum prices is not warranted. Throughout this decision, it has been repeated that adoption of the recommended end-product price formulas is warranted because they more accurately reflect the national commodity markets where dairy products are sold. The recommended decision did not find, nor does this final decision find, that these price formulas should be adopted in order to offset higher milk production costs, except to the extent that the prices indirectly reflect higher production costs through the supply and demand conditions that generate the resulting commodity prices received.
Some commenters took exception to the fact that the Department did not rule on each offered finding of fact presented in post-hearing and reply briefs. The Department is required to discuss relevant issues and the evidence relied upon in making its findings. The recommended decision encompassed those issues, taking into account arguments made on all sides of the issues presented. Particularized rulings on every argument presented by interested parties are not required.
In its post-hearing brief, the Institute filed a Negative Inference Motion asserting that because the Cooperatives did not enter into the record of this proceeding a study they commissioned evaluating their proposed milk pricing provisions, the Department should conclude that the study results contradict the Cooperatives' justification for adopting the price formulas contained in Proposal 1 without a need to draw any inferences about documents not in the record.
It is left to the discretion of the trier of fact to determine whether or not a negative inference will be drawn from the failure to present any specific piece of evidence under one party's exclusive control. The Department finds that the recommended pricing provisions are properly based on testimony of those witnesses who appeared and the evidence that has been presented by all parties on the record.
The record reflects, and this decision continues to find, that milk pricing in
No comments or exceptions were received in regard to the Class II price as proposed in the recommended decision.
The Cooperatives have proposed that the California FMMO adopt the same Class I pricing structure: the higher of the advanced Class III or Class IV price plus a Class I differential based on the plant location. They argued that the Class I price surface was designed as a nationally coordinated structure and already includes differential levels for all California counties. According to the Cooperatives, any change to the Class I differential surface should be done through a national rulemaking hearing where all interested parties can participate.
The Institute argued, in testimony and post-hearing briefs, that the Class I differential surface adopted as part of Order Reform did not consider California in its inception, and is not appropriate for adoption here. The Institute did not offer an alternative.
This decision continues to find that the Class I price formula contained in Proposal 1, and as currently used in all current FMMOs, and proposed in the recommended decision, would be appropriate for the proposed California FMMO. This decision finds that prices for milk pooled on the California FMMO and used in Class I products should be location-specific, since Class I products generally compete on a more local market. Therefore, the Class I differential surface that applies in all current FMMOs continues to be recommended for the California FMMO. As such, Class I prices for milk pooled on the California FMMO would be determined by the higher of the advanced Class III or Class IV milk price announced on or before the 23rd day of the preceding month, adjusted by the Class I differential at a plant's location.
This decision continues to recommend for a California FMMO the same Class I differential surface used in the current FMMOs. Contrary to Institute testimony, this differential surface was determined through a United States Dairy Sector Simulator (USDSS) model that included California supply and demand factors. An academic expert testifying in this proceeding was one of the lead authors of the model and stated that California was included when the model was constructed. This price surface was designed to facilitate the movement of milk to Class I markets without causing disorderly marketing conditions within or across markets. Therefore, it is not appropriate on the basis of this hearing record to make a change to the nationally coordinated Class I price surface.
Prior to January 1, 2000, there were 31 FMMOs. As part of the 1996 Farm Bill, the Department was instructed by Congress to consolidate the existing orders into as few as 10, and no more than 14, FMMOs, reserving one place for California. Since California stakeholders did not express a desire to enter the FMMO system at that time, the Order Reform process only considered the FMMO marketing areas in existence at the time for consolidation. In the Order Reform Final Decision, the reference to “not including the State of California”
Comments filed by the Cooperatives supported the proposed Class I price surface and concurred that California market conditions were considered when the surface was first established. Their comments stressed that the nationally coordinated price surface accounted for California market conditions and is appropriate for adoption in the proposed California FMMO.
Exceptions filed by the Institute in response to the recommended decision continued to assert that California was not considered when the price surface was developed and the Department did not provide an evidentiary citation from which to conclude otherwise. The Order Reform Recommended Decision outlined the committee process undertaken by the Department to address specific issues during the Reform process. The decision explained that partnerships were established with two university consortia to provide expert analysis on issues relating to price structure. The decision referenced two published papers by researchers at Cornell University, “U.S. Dairy Sector Simulator: A Spatially Disaggregated Model of the U.S. Dairy Industry” (USDSS) and “An Economic and Mathematical Description of the U.S. Dairy Sector Simulator”.
The “U.S. Dairy Sector Simulator: A Spatially Disaggregated Model of the U.S. Dairy Industry” paper
The Institute argued in their exceptions the Department did not take into account changes in the dairy industry after Federal Order Reform which should lead to a finding that a different price surface for California is justified.
As reiterated in other parts of this decision, establishing a California FMMO is not done in isolation. California is seeking to enter a Federally regulated system with current policy predicated on a system of nationally coordinated regulated prices. This includes the current Class I price surface. The record of this proceeding demonstrates that California market conditions, which continue to be reflected in the price formulas, were considered when the end-product pricing and Class I price surface provisions were developed. This nationally coordinated system has been
The Institute explained these two features are currently provided for in the CSO and work together to financially assist Class 1 handlers in meeting the State-mandated higher nonfat solids content for Class 1 products. The Institute explained that handlers receiving high solids milk pay a higher Class 1 price, but use less solids to fortify Class 1 products, and thus incur less cost to meet the state's nonfat solids standards for fluid milk products. Conversely, handlers purchasing low solids content milk pay a lower Class 1 price, but then incur a higher cost to fortify their Class 1 products. The Cooperatives supported this concept in their post-hearing brief.
The record of this proceeding does not contain sufficient evidence to justify deviation from the uniform FMMO treatment of Class I pricing. Therefore, Class I milk pooled on the proposed California FMMO is proposed to be paid on a skim and butterfat basis. This uniform treatment would avoid disorderly marketing with adjacent or other Federal orders, as otherwise handlers could engage in inefficient milk movements solely for the purpose of seeking a Class I price advantage.
Comments and exceptions received in response to the recommended decision uniformly supported 3-factor Class I pricing.
The Institute, Dean, HP Hood, and Kroger requested that the Department reconsider this issue. The Institute was of the opinion that the State-mandated higher nonfat solids standard, a local marketing condition, should be recognized in the California FMMO through 3-factor Class I pricing and the fortification allowances outlined in Proposal 2.
Dean said the Department did not provide an adequate justification to reject 3-factor Class I pricing, which they contend would prevent disorderly marketing conditions and was supported by the Cooperatives in their reply-brief. Dean reiterated its hearing arguments that 3-factor Class I pricing is necessary to avoid unequal raw product costs for products requiring fortification to meet state-mandated standards and would remove incentives for processors to seek higher nonfat solids content producer milk. Dean contended that without 3-factor Class I pricing, fortification costs between handlers would vary such that handlers would face non-uniform raw milk costs for the same end product. Dean wrote that the Department erred when finding for uniform Class I pricing among all FMMOs instead of recognizing the local California marketing conditions that Dean contends require 3-factor Class I pricing.
Comments filed by the Cooperatives and CDC supported the reconsideration of 3-factor Class I pricing but did not support reconsideration of the fortification credits denied in the recommended decision.
This decision continues to find that additional fortification credits as contained in Proposal 2 are not justified. The record indicates the CSO fortification credit system was designed in response to California's legislatively mandated higher nonfat solids standard for Class 1 products. The record does not address how incorporation of the CSO fortification credit system would operate in the context of the existing FMMO fortification classification provisions without resulting in a double credit for fortification. Dean contends in their exceptions that the proposed fortification credits are for the handling of fortification ingredients, not a reduction in the cost of those ingredients and therefore would not be double counting.
The record indicates the current CSO fortification credit system accounts for the fortification ingredients as Class 1 and then provides the handler with a per pound fortification credit based on the amount of the nonfat solids in the fortifying ingredient used. This is different than how current FMMOs provide for fortification by allocating the fortifying ingredients to Class IV, and then classifying the incremental volume increase as Class I. If the fortification credits provided for in Proposal 2 were adopted, it would result in the handler not only receiving the lower Class IV allocation for its fortifying ingredients (as opposed to accounting for them as Class 1 as is currently done under the CSO), but they would then also receive a handling credit based on the amount of product used to fortify. This would result in the handler receiving two forms of credit for fortifying, as opposed to only one form of credit currently provided for in some way in both the FMMO and CSO.
Furthermore, the record of this proceeding does not provide a justification for why the fortification credit levels contained in Proposal 2 are appropriate. Those credit levels, of $0.1985 per pound of nonfat solids in nonfat dry milk and $0.0987 per pound of nonfat solids in condensed milk, were established by CSO. No evidence was presented at the hearing to justify how the credits for handling were determined and why they might still be set at appropriate levels.
In regard to 3-factor pricing, record evidence offered by proponents concentrated on the pricing impact for reduced fat and lowfat milk products that have to be fortified to meet minimum state requirements using theoretical component tests for milk supplies. While record evidence does examine how 3-factor pricing would equalize costs between reduced fat and lowfat products, the analysis is incomplete as it does not address the net effect of such pricing across all Class I products, including whole and nonfat milk. Considering that a typical fluid processor makes a full array of Class I products, the total impact must be considered, given that each product has its own associated costs per gallon and a fluid processor would not typically process one or two products. Lastly, theoretical component tests may provide an understanding of relationships in manufacturing costs of different products. However, in the absence of actual tests of Class I handler milk supplies and an analysis encompassing the net effect across all Class I products, record evidence is not sufficient to justify deviation from 2-factor pricing of Class I milk.
Currently, six of the 10 FMMOs utilize multiple component pricing to determine both the handler's and producer's value of milk. In those six orders, producers are paid for the pounds of butterfat, pounds of protein, pounds of other solids of milk pooled, as well as a per hundredweight (cwt) price known as the producer price differential (PPD). The PPD reflects the producer's pro rata share of the value of Class I, Class II, and Class IV use in the market relative to Class III use. The Class III butterfat, protein, and other solids prices are the same component prices charged to handlers based on the value of the use of milk in Class III. In four of these six FMMOs, there is an
Proposal 1 and Proposal 2 seek to pay producers on a multiple component basis for the milk they produce. As will be discussed below, the proposals differ on how they would apply a PPD to producer payments. Unlike Proposal 2, Proposal 1 does not specify a somatic cell adjustment to the producer's value of milk.
The record reflects that milk use in California is concentrated in manufactured dairy products. In 2015, California Class 1 utilization was 13 percent, Class 2 and Class 3 utilization combined was 8.6 percent, while 78.4 percent was used in Class 4a and Class 4b products (cheese, butter and dried milk powders). As California is clearly a manufacturing market, it is appropriate for producers to be paid for the components they produce that are valued by the manufacturers. Therefore, this final decision continues to recommend producer payments on a multiple component basis. Producers would be paid for the butterfat, protein, and other solids components in their producer milk and for the cwt of milk pooled.
This decision continues to propose that producers under the proposed California FMMO be paid a PPD calculated in the same manner as in six current FMMOs. The PPD represents to the producer the value from the Class I, Class II, and Class IV uses they are entitled to share for supplying the market and participating in the FMMO pool. In general, the PPD is computed by deducting the Class III component values from the total value of milk in the pool, and then dividing the result by the total pounds of producer milk in the pool. The PPD paid to producers participating in the California FMMO pool would be adjusted to reflect the applicable producer location adjustment for the handler location where their milk is received.
Therefore, under the proposed California FMMO, the minimum payment to producers would be determined by summing the result of: Multiplying the hundredweight of a producer's milk pooled by the PPD adjusted for handler location; multiplying the pounds of butterfat in the producer's milk by the butterfat price; multiplying the pounds of protein in a producer's milk by the protein price; and multiplying the pounds of other solids in a producer's milk by the other solids price.
Proponents of Proposal 1 proposed distributing the PPD value across the butterfat, protein and other solids components, based on the average value each component contributed to the Class III price during the previous year. The Cooperatives purported that the PPD is confusing to producers, particularly when it is negative, and spreading the value of the PPD across the components would be a simpler method of distribution.
The PPD is the difference between value associated with all the milk pooled during the month and the producers' value for the butterfat, protein, and other solids priced at the Class III component prices for the month. In general, if the marketwide utilization value of all milk in the pool, on a per cwt basis, is greater than the marketwide utilization value of the producer's components priced at Class III component values, dairy farmers receive a positive PPD.
A negative PPD occurs when the value of the priced producer components in the pool exceeds the total value generated by all classes of milk. This is possible since all producer components are priced at the Class III components values, but pooled milk is utilized in all four classes, each with its own separately derived value.
Specifically, negative PPDs can happen when large increases occur in NDPSR survey prices from one month to the next, resulting in the Class III price (announced at the close of the month) exceeding, or being in a close relationship to, the Class I price (announced in advance of the month). Negative PPDs can also occur in markets with a large Class IV use when the Class IV price is significantly lower than the Class III price. A negative PPD does not mean that there is less total revenue available to producers. It often means the Class III component values are high relative to Class I prices. Because component values are the biggest portion of a producer's total revenue, high component prices coupled with negative PPDs often result in higher
This final decision does not find justification for distributing the PPD through the component prices as offered in Proposal 1. Current FMMO producers receive and understand that the PPD represents the additional value from the higher classified markets that they are able to share because they participate in the FMMO. This includes months when the PPD is negative.
While the proponents claim a negative PPD is confusing, this decision continues to find that distributing the PPD through the component prices would distort market signals to producers. As in the current FMMOs, a negative PPD in the California FMMO would inform producers that component values are rising rapidly. Regulated FMMO prices should not block those market signals. Producers in other FMMOs have been able to adapt to a multiple component pricing system that incorporates an announced PPD. This decision finds that California producers can do the same.
Comments filed by the Cooperatives, the Institute and MPC in response to the recommended decision expressed support for the proposed producer milk pricing provisions. The Cooperatives noted in their comments they did not object to the PPD provisions as proposed in the recommended decision.
Comments filed by NAJ also expressed support for the producer payment provisions, and contended any changes to the producer price formulas should occur through a national hearing.
Four of the current FMMOs provide for a SCC adjustment on producer milk values. The CSO does not include any such adjustment. Proposal 1 did not include a provision for a SCC adjuster, and a Cooperative witness specifically testified against its inclusion. Proposal 2 included a SCC adjuster, but no Proposal 2 witnesses testified regarding this aspect of their proposal. This final decision does not recommend a SCC adjuster for the California FMMO, as the record does not contain evidence to support its inclusion.
This final decision proposes that handlers regulated by the California FMMO should be allowed to make various deductions from a producer's milk check, identical to what is allowed in the current FMMOs. These deductions include such things as hauling expenses and National Dairy Promotion Program charges, as well as other authorized deductions such as insurance payments, feed bills, equipment expenses, and other dairy-related expenses. Authorized deductions from the producer's check must be authorized in writing by the producer. For the California FMMO, authorized deductions would necessarily include any assessment identified by CDFA for the payment of California quota values. A quota assessment would be authorized upon announcement by CDFA; it would not have to be authorized in writing by the producer.
Some hearing witnesses suggested that changes to the FMMO pricing system need to be considered in a separate rulemaking proceeding before California producers vote on a FMMO. Similar arguments were presented in
This section addresses the pooling provisions of the proposed California FMMO. A summary of the proposals, hearing testimony, post-hearing briefs, and comments on and exceptions to the recommended decision related to pooling provisions is provided below. Additionally, the proposed treatment of out-of-state milk is addressed in this section, as one of the initial proposals submitted to AMS sought to allow handlers to elect partially regulated distributing plant status with respect to milk received from farmers located outside of the marketing area. The proposal would have continued the reported practice of handlers paying the plant blend price—instead of the market's blend price—for milk produced from outside of the state, since such interstate transactions cannot be regulated by the CSO. Essentially, the proposal addressed whether out-of-state milk should be incorporated into the proposed California FMMO marketwide pool. Therefore, the topic is addressed in this section.
This final decision recommends pooling provisions for a California FMMO conceptually similar to those in the 10 current FMMOs, but tailored for the California market. The recommended pooling provisions are performance-based and are designed to identify those producers who consistently supply the Class I market and therefore should share in the revenues from the market. There would be no regulatory difference in producer payments for milk based on the location of the dairy farm where it was produced.
A Cooperative witness testified regarding the pooling provisions contained in Proposal 1. The witness said the Proposal 1 pooling provisions are designed to address the wide disparity between current producer and handler prices in California and those under the FMMO system. The witness stated that in order to design adequate California pooling standards, the Cooperatives evaluated historical producer blend prices using both CSO classified prices and the proposed California FMMO classified prices, from January 2000 through July 2015. The witness estimated that producer blend prices would have averaged $14.65 per cwt using CSO classified prices and $15.22 per cwt using the proposed California FMMO classified prices, an average difference of $0.57 per cwt. The witness's analysis showed that in every month, the estimated CSO blend price was less than the FMMO blend price, and that when considering only the most recent data (January 2015 through July 2015), the average difference was $0.86 per cwt. The witness stressed that to bring California producer blend prices into closer alignment with FMMO producer blend prices, the pooling provisions of a California FMMO must require the pooling of all classified use values.
The witness was of the opinion that California's combination of low utilization in the higher valued classes (Class 1, 2, and 3) and a state-administered quota program requires strict pooling provisions to prevent handlers from electing not to pool a significant portion of California milk each month. The witness was of the opinion that when the California overbase price is below Class 4a or 4b prices, there is an incentive to not pool milk in those classes because the handler can avoid a payment into the marketwide pool. The witness stated that from January 2000 through July 2015, the California overbase price was below either the Class 4a or 4b price 91 percent of the time. Thus, in those months, if all milk had not been pooled, producers would have received different minimum prices: Those producers whose milk was pooled would have received the minimum FMMO blend price, while the producers whose milk was not pooled would have had the potential to receive a higher price because the handler could have avoided sharing the additional revenue with all the producers in the market through the marketwide pool. This concern regarding producer price disparity was reiterated in the Cooperatives' post-hearing brief.
The Cooperative witness added that even after adjusting producer blend prices to account for quota payments (−$0.37), transportation credits (−$0.09), and RQAs ($0.03), there would have been a financial incentive to not pool a significant portion of California milk in most months. Using the pricing provisions contained in Proposal 1, the witness estimated that from August 2012 through July 2015, handlers would have chosen not to pool Class III or Class IV milk 94 percent of the time. The consequence, the witness emphasized, would not only be unstable producer prices, but the inability of the FMMO to achieve uniform producer prices. The witness stressed that to accumulate the revenue needed to provide adequate, uniform producer blend prices and facilitate orderly marketing, all the milk delivered to California plants must be pooled. Provisions requiring all milk to be pooled cannot be found in any other current FMMO.
However, the witness explained that FMMO pooling provisions have always been tailored to the market, and the pooling provisions contained in Proposal 1 are no different. The Cooperatives' post-hearing brief stressed California's need to have tailored pooling provisions that are different from other FMMOs. The Cooperatives' brief reiterated that allowing for milk to not be pooled would inhibit a California producer's ability to receive the national FMMO prices they are seeking.
The Cooperative witness proceeded to describe the pooling provisions contained in Proposal 1. The witness explained that under Proposal 1, any California plant receiving milk from California farms would be qualified as a pool plant, and all California milk delivered to that plant would be qualified as producer milk. The witness said Proposal 1 also provides for plants located outside of the marketing area that demonstrate adequate service to the California Class I market to qualify as pool plants on the order. The witness highlighted an additional provision that would regulate all plants located in Churchill County, Nevada, and receiving milk from farms located in Churchill County or California. According to the witness, producers in the Churchill County milkshed have historically supplied milk to the California Class 1 market, and this provision would ensure they could remain affiliated. The witness proposed the partially regulated distributing plant (PRDP) provision should be the same as in other FMMOs: A plant qualifies as a PRDP if not more than 25 percent of its total route disposition is within the marketing area.
The Cooperative witness defined a producer as any dairy farmer producing Grade A milk received by a pool plant or a cooperative handler. This definition would allow dairy farmers located inside or outside of the marketing area to qualify as producers under the order, the witness added. The witness said a majority of the producer milk pooled on
The Cooperative witness explained that Proposal 1 would prohibit milk from being diverted to nonpool plants outside of the marketing area and qualifying for pooling on a California FMMO until five days' production is delivered to a pool plant; subsequent diversions would be limited according to the amount the plant delivers to distributing plants. The witness said the California market appears to have an adequate reserve supply of Class I milk, so strict diversion limit standards are needed to ensure that additional milk being pooled is needed in the market.
The Cooperative witness provided examples of previous FMMO changes that the witness described as significant policy shifts, including the elimination of individual handler pools in favor of marketwide pools, the regulation of large producer-handlers, adoption of multiple component pricing, and the establishment of transportation credit programs. The witness said that in these examples the Department found it appropriate to significantly deviate from historical precedent because market conditions justified such changes. The witness stated Federal Order Reform provided a FMMO foundation national in scope, while also allowing for some provisions to be tailored to meet the marketing conditions of individual orders. The witness concluded the AMAA provides the Department the flexibility to tailor pooling provisions, and Proposal 1 recognizes the unique needs of the California market.
Another Cooperative witness offered testimony modifying Proposal 1 to include call provisions. The witness explained that call provisions are currently contained in the CSO, and while not often utilized, their existence alone encourages milk to be supplied to fluid processing plants when needed. As proposed, the witness said, call provisions should only be used on a temporary basis when the market's milk supply cannot meet distributing plant demand, not when an individual distributing plant is short on milk.
The Cooperatives' post-hearing brief reiterated the justification for the inclusive pooling provisions contained in Proposal 1. The brief stressed the AMAA authorizes the pooling of milk, irrespective of use.
The Cooperatives' post-hearing brief also offered a modification to extend exempt plant status to small plants that process products other than, or in addition to, fluid milk products. The modification would increase the exempt plant production limit from route sales under 150,000 pounds of fluid milk product to sales under 300,000 pounds of milk in Class I, II, III or IV products during the month. The brief explained this would allow for small fluid and manufacturing plants to be exempt from the pricing and pooling provisions of the order that would otherwise be required to participate in the marketwide pool under Proposal 1.
A witness testifying on behalf of WUD said that without inclusive pooling provisions, as outlined in Proposal 1, handlers could opt not to pool large amounts of milk. The witness said this would have a substantial impact on the pool value and consequently lower blend prices to those producers who remain pooled.
An Institute witness testified regarding the pooling provisions contained in Proposal 2. The witness explained how current FMMO provisions work together to assure an adequate milk supply for fluid use. First, said the witness, higher Class I revenues attract producers and producer milk to participate in the pool, then pooling provisions direct the producer milk to fluid plants. Class I plants, which by regulation are required to be pooled and pay the higher Class I price, receive in exchange the assurance that the regulations provide them an adequate supply of milk, the witness explained. The witness summarized a previous USDA decision finding that performance-based pooling provisions are the appropriate method for determining those producers who are eligible to share in the marketwide pool. The witness stressed performance-based pooling provisions are essential in maintaining orderly milk movements to Class I.
The Institute witness objected to the Cooperatives' assertion that Class I premiums would be sufficient to move milk to Class I use. The witness was of the opinion that Class I plants already pay a high regulated Class I price and they should not have to pay additional over-order Class I premiums to attract milk to their plant. The witness questioned the purpose of Class I differentials if the use of premiums would be the primary way to attract milk for fluid uses in a California FMMO.
The Institute witness also spoke to Proposal 1's dependence on transportation credits to ensure the Class I market is served. The witness was of the opinion that transportation credits are not an appropriate substitute for performance-based pooling standards.
The Institute witness testified that Proposal 1 provides no incentive for plants to serve the Class I market in order to qualify its producers to share in the market's Class I revenues. Instead, said the witness, Proposal 1 would allow plants to gain access to Class I revenues for their producers without bearing any burden in servicing the Class I market, thus making pooling provisions ineffective.
Another issue the Institute witness highlighted was inclusive pooling provisions in combination with regulated classified prices that are not market-clearing. The witness asserted that if regulated classified prices are set above what plants can pay for that milk, many of those plants would exit the industry and available market plant capacity would shrink. According to the witness, this would lead to uneconomic milk movements, as excess milk would need to find willing processing capacity.
The Institute witness opposed Proposal 1's provision to automatically grant pooling status to any dairy manufacturing plant located in Churchill County, Nevada. The witness said that all plants, whether located in state or out of state, should qualify for pooling by meeting appropriate performance-based pooling standards.
The Institute witness concluded that pooling standards play a pivotal role in ensuring consumers an adequate supply of fluid milk. Inclusive pooling challenges the usefulness of pooling standards by allowing producers and handlers to benefit from the pool without actually being required to serve the Class I market, the witness said. The witness urged the Department to adopt the performance-based pooling standards contained in Proposal 2.
The Institute's post-hearing brief reiterated its position that the Department's policy has consistently ensured marketwide pool proceeds are distributed to those who demonstrate service to the Class I market. The brief maintained this standard should be upheld through performance-based pooling standards in a California FMMO. The Institute stressed the inclusion of provisions to recognize the California quota program is not an adequate justification to exclude performance-based pooling standards.
The Institute also raised the issue in its post-hearing brief that adoption of mandatory pooling in California would result in trade barriers prohibited by the AMAA. The brief stressed that with no way to avoid minimum regulatory pricing, California handlers would be at
A Dean Foods witness, on behalf of the Institute, testified regarding specific pooling provisions contained in Proposal 2. The witness revised Proposal 2 and expressed support for the distributing plant in-area route disposition standard of 25 percent offered by the Cooperatives. The witness explained the Class I route disposition levels that determine a plant's pool status are set by each of the individual orders, depending on the Class I utilization of the market, among other factors. The witness was of the opinion that a 25 percent in-area route disposition standard is appropriate for a California FMMO with a low Class I utilization.
The Dean Foods witness also supported the unit pooling provision provided in Proposal 2. The witness testified that the unit pooling provision would allow two or more plants, operated by the same handler and located in the marketing area, to qualify for pooling as a unit by meeting the total and in-area route disposition standards as an individual distributing plant. Proposal 2 would require one of the plants to qualify as a distributing plant and other plant(s) in the unit to process 50 percent or more of the total milk processed or diverted by the plant into Class I or II products.
The witness expressed concern that the pooling provisions contained in Proposal 1 would not ensure an adequate milk supply to meet Dean Foods' needs because the provisions offered no incentive to supply Class I plants.
A Hilmar consultant testified on behalf of the Institute regarding the pool supply plant performance standards contained in Proposal 2. The witness explained the proposed supply plant performance standards and diversion limits would establish the volume of milk that could be associated with the California marketwide pool. The witness said that 10 percent is an appropriate base shipping standard for supply plants seeking to be pooled on a California FMMO. The witness explained this standard is similar to that in the Upper Midwest FMMO, which has a similar Class I utilization. The witness described Proposal 2's sliding scale system that would automatically change the supply plant shipping standard based on market Class I utilization over the previous three months. The witness was of the opinion that the sliding scale system would ensure the Class I market is adequately served by automatically adjusting, should there be a change in the market's Class I utilization.
The Hilmar consultant witness also described different performance standards proposed for pool supply plants that receive quota milk. Proposal 2 would require 60 percent, or a volume equivalent, of a pool supply plant's quota receipts to be delivered to pool distributing plants, the witness said. The witness was of the opinion this additional requirement on quota milk would ensure that Class I needs would always be met. However, if additional milk is needed, that responsibility would fall first on quota milk, as the Market Administrator would have the ability to adjust the quota milk shipping standard up to 85 percent if warranted. The witness added that this additional standard on quota milk is similar to provisions in the CSO.
The Hilmar consultant witness also testified that servicing the fluid milk needs of the market, the responsibility of quota milk to service the fluid market, and flexibility and supply chain efficiency should guide the Department in its decision making. The witness highlighted additional proposed provisions that would provide regulatory flexibility, such as allowing for split-plants, the pooling of supply plant systems, and a provision to allow the Market Administrator to investigate market conditions and adjust shipping percentages if warranted by current market conditions.
The Hilmar consultant witness also addressed what Hilmar believes are appropriate producer milk provisions for a California FMMO, namely provisions modeled after the Upper Midwest FMMO. The witness was of the opinion that an appropriate producer touch-base standard would be the lesser of one-day's production or 48,000 pounds of milk, delivered to a pool plant during the first month the dairy farmer is a producer. In the following months, explained the witness, the producer's milk would be eligible for diversion to nonpool plants and still be pooled and priced under the terms of a California FMMO. The witness testified that handlers should not be allowed to pool more than 125 percent of the volume they pooled during the previous month, except during March when the appropriate limit should be 135 percent, due to the fewer number of days in February. The witness testified that the Institute relied on justification and methodology provided in Upper Midwest FMMO rulemaking decisions to determine appropriate repooling standards for a California FMMO.
In addition, the Hilmar consultant witness said that a California FMMO should not allow milk to be simultaneously pooled on a FMMO and a State order with marketwide pooling. Handlers, or a group of handlers, should be penalized if they attempt to not pool large volumes of Class III or Class IV milk to avoid pooling standards, the witness added.
A Leprino witness expressed opposition to mandatory-regulated minimum prices as advanced in Proposal 1. The witness characterized the inclusive pooling provisions of Proposal 1 as actually being mandatory minimum pricing provisions because they would cause all California milk to be pooled and priced under the terms of the FMMO. The witness explained how the CSO has applied minimum regulated pricing to all Grade A milk produced and processed in the state for decades, which the witness believed has led to negative market impacts. For example, the witness described how mandatory pricing and pooling has reduced competition across manufactured product classes and lessened incentives for milk to move to higher-valued uses.
The Leprino witness did not characterize the CSO as disorderly, but rather explained how there had been periods of dysfunction when CDFA set regulated minimum prices that exceeded market-clearing levels, leading to overproduction of milk. The witness added that when there have been periods of large milk surpluses, milk has been shipped and sold outside of the state at discounted rates. The witness said this led to losses for California producers that could have been reduced under a more flexible regulatory scheme.
The Leprino witness stressed that a California FMMO should have voluntary pricing and pooling for manufactured milk, as is the case in all other FMMOs. The witness was of the opinion this promotes market efficiency, allowing milk to move to its highest valued use. In its brief, Leprino stated that the inclusive pooling provisions that would regulate all milk are over-reaching and inconsistent with the goals of the AMAA. Leprino stated that
Another witness appeared on behalf of HP Hood in support of adoption of Proposal 2. HP Hood operates fluid milk processing facilities in California and in existing FMMO areas, and is a member of the Institute. The witness testified that if a California FMMO were adopted that included inclusive pooling, there would be an oversupply of California milk, leading to decreased investment in dairy product manufacturing facilities. The witness supported a California FMMO that allows for optional milk pooling for non-fluid milk uses.
A Gallo Farms consultant witness testified that unlike under other FMMOs, Proposal 1 would not allow handlers the option not to pool manufacturing milk, which would lead to disorderly marketing conditions and increased operational costs for cheese plants. The witness supported the ability of cheese plants to elect not to pool milk, as provided in Proposal 2.
A witness spoke on behalf of Nestle S.A. (Nestle) in support of Proposal 2. Nestle is the world's largest food company, headquartered in Switzerland. Its U.S. operations include Nestle USA, Nestle Nutrition, Nestle Purina Pet Care Company, and Nestle Waters North America.
The Nestle witness was of the opinion that milk marketing in California is orderly. However, if a California FMMO is adopted, Nestle supports Proposal 2, which would allow for optional pooling of manufactured milk. The witness stated that in all current FMMOs, handlers have the option to pool manufacturing milk. Inclusive pooling as contained in Proposal 1, according to the witness, would place Nestle at a disadvantage with competitors in other FMMOs that can avoid regulated minimum prices. Should mandatory pooling standards, in conjunction with the higher regulated prices contained in Proposal 1 be adopted, the witness asserted that Nestle would seek to move more of its manufacturing outside of the state.
The Nestle witness added that the vast majority of the manufactured dairy powder products it utilizes in its international plants are purchased in California. The witness said that if California regulated prices increase and pooling becomes mandatory, Nestle would look elsewhere globally to replace those products. The witness concluded that Nestle would like to see a consistent approach to regulations in all FMMOs so that its business could continue to be competitive and grow.
Proposal 4 was submitted by Ponderosa Dairy (Ponderosa) in response to the Cooperatives' original Proposal 1. Proposal 4 would amend the provisions that regulate payments by a handler operating a partially-regulated distributing plant—under either Proposal 1 or Proposal 2—to allow handlers to elect partially regulated distributing plant status with respect to milk received from out-of-state farms.
A consultant witness on behalf of Ponderosa testified in support of Proposal 4. The witness described past judicial decisions regarding the treatment of out-of-state milk delivered to California handlers. According to the witness, out-of-state producers cannot currently obtain quota, are not eligible for transportation benefits under the CSO, and do not participate in the CSO marketwide pool. Instead, the witness said, they negotiate separate prices with the California handlers who buy their milk. The witness speculated that out-of-state producers receive the plant's blend price, although that practice is neither enforced nor verified by CDFA. The Ponderosa consultant witness outlined the provisions of Proposal 4, which would modify the standard payment provisions for partially-regulated plants under a California FMMO.
Proposal 4 would allow California handlers to elect partially-regulated status with respect to milk from out-of-state producers, and out-of-state milk would be classified according to the plant's overall utilization and receive the plant blend price. Since the milk would not be pooled under the FMMO, it would not necessarily receive the marketwide blend price. The witness clarified that although the out-of-state milk would be isolated for payment purposes, the handler's status as a fully regulated pool plant should not be lost if it otherwise meets the definition of a pool plant.
The Ponderosa consultant witness said that features of Proposal 4 are similar to those of individual handler pools that are no longer provided in the FMMO system. Such accommodation is needed, the witness said, to counter the inherent inequalities of California's unique quota system, which would otherwise disadvantage out-of-state producers. In the witness's opinion, the provisions of Proposal 4 should be contained in any California FMMO recommended by the Department, as they would establish a regulated and audited pricing mechanism to ensure out-of-state producers receive at least the price they would have if they shipped to an otherwise fully-regulated plant—something that is not provided in the CSO.
A witness representing Ponderosa explained that Ponderosa Dairy was founded in southern Nevada to supply raw milk to the Rockview plant in southern California with the expectation of receiving the plant blend price reflective of Rockview's plant utilization even though the plant was regulated by the CSO. With a Class 1 utilization of approximately 85 percent, the witness said that the plant blend price compensates Ponderosa for its inability to participate in the California quota program and for the higher transportation expenses to haul its milk 280 miles to Rockview.
Another Nevada producer, representing Desert Hills Dairy (Desert Hills), a dairy farm with 4,000 cows that delivers 50 percent of its production to California processing plants, testified in opposition to any California FMMO. However, the witness said that should a FMMO be adopted, Proposal 4 should be included as it most closely resembles the current CSO provisions for out-of-state milk. The witness testified that Desert Hills receives the plant blend price for the milk shipped to California, and that the dairy farm pays all transportation costs. The Desert Hills witness said it would be harmed financially if Proposal 4 is not adopted. Otherwise, the witness claimed, its milk would be pooled on a California FMMO and the price it currently receives for milk shipped to California would be reduced by more than $1.00 per cwt.
Without addressing Ponderosa's concern that out-of-state producers are unable to own quota, the Cooperatives modified Proposal 1 in their post-hearing brief. Modified Proposal 1 would provide for the payment of a blend price adjuster to out-of-state producers so that those producers' total receipts would not be diminished by the deduction of quota premium payments from the marketwide pool.
The Cooperatives' brief argued that out-of-state producers have taken advantage of the fact that the CSO cannot regulate out-of-state milk and have sold milk to California Class 1 handlers for prices higher than the CSO regulated blend price but lower than the CSO classified use value. According to the Cooperatives, modified Proposal 1 would not erect trade barriers as it would provide for uniform payment to California producers in similar circumstances by establishing uniform payments for milk covered by quota, and establishing a uniform blend price for milk not covered by quota.
An Institute witness explained that under Proposal 2, out-of-state producers
The Institute witness explained they originally considered proposing the establishment of two marketwide pools or blend price calculations. The first would pay out-of-state producers, and then the second would recalculate and apportion all the remaining funds to California producers in the pool on the bases of quota/non-quota prices and whether handlers elected to pool their milk. But the witness said that upon further consideration they realized this solution would present additional problems.
The Institute witness provided hypothetical examples of two producers shipping into the same California plant receiving different prices by virtue of their farms' locations. The witness was of the opinion that this treatment would erect a trade barrier, provide non-uniform payments to producers, and violate the AMAA.
The Institute witness said Proposal 2 would address these issues by providing for out-of-state producers to receive the traditional FMMO blend price for their milk pooled on a California FMMO. According to the witness, no trade barrier would be erected with respect to out-of-state milk by paying the traditional blend to out-of-state producers rather than the non-quota price. A consultant witness representing Hilmar supported the Institute's position regarding the treatment of out-of-state milk.
Ponderosa's reply brief argued that the Cooperatives' proposed remedy—the out-of-state adjustment rate—would not resolve the discriminatory trade barrier issue raised in Ponderosa's initial brief. Ponderosa asserted the mechanics of the Cooperatives' proposal are unclear, but they seemed to add complication to the pooling process without fairly compensating out-of-state producers for their inability to participate in the quota program. According to Ponderosa, out-of-state producers can never realize the historic and ongoing benefits of quota ownership and can only avoid discriminatory treatment by being allowed to receive the plant blend price.
Two fundamentally different pooling philosophies have been proposed in this proceeding. The first, contained in Proposal 1, has been termed “inclusive pooling” and would automatically pool all California produced milk delivered to California plants, similar to how milk currently becomes pooled by the CSO. The Cooperatives are of the opinion that any change that would allow handlers to opt not to pool milk would be disorderly in an industry where all of the milk has historically been regulated. The Cooperatives testified that because California has a high percentage of both Class III and Class IV milk, in any given month handlers would elect to not pool a large portion of one of those classes of milk because of price. The Cooperatives estimated there could be an incentive to not pool one or both classes of manufacturing milk 94 percent of the time. The resulting fluctuation in uniform producer prices, they claim, would be disorderly.
The second pooling philosophy, offered by the Institute, relies on performance-based pooling standards that are more typical of the 10 current FMMOs. These standards require the pooling of plants with predominantly Class I milk sales. Handlers have the option of pooling Class II, III and IV milk diverted to unregulated plants. The provisions set out standards for which plants, producers, and producer milk are eligible to be pooled and priced by the FMMO. The Institute testified that the inclusive pooling standards offered in Proposal 1 are not authorized by the AMAA, and that performance-based pooling standards are the only means of ensuring that Class I demand is always met.
The pooling standards of all current FMMOs are contained in the
Ten public comments filed in regard to the recommended decision supported the recommended pooling provisions, agreeing that they would be consistent with those in other FMMOs, would fairly determine those producers and milk eligible to participate in the marketwide pool, and would enable dairy product manufacturers to manage costs and remain competitive in the national market.
The Institute, which continued to argue against the need for a California FMMO, nevertheless concurred with the Department's position that performance-based pooling standards are the appropriate method for determining handlers who are ready, willing, and able to serve the fluid market and should share the benefits of the Class I market. Similar sentiments were expressed in comments from HP Hood, Select, Kroger, Farmdale, NAJ, Dean, and an anonymous commenter, noting that the pooling provisions in the proposed California FMMO would be consistent with the Department's principles and with other FMMOs in the system. Kroger added that the recommended pooling provisions and performance standards are appropriately tailored to local California marketing conditions.
Cacique noted in their comment that the ability to opt out of the marketwide pool allows manufacturers to compete fairly with their counterparts elsewhere in the country. A comment from Pacific Gold added that voluntary depooling is essential to ensure survival for California cheese manufacturers, who would otherwise be faced with Class III prices that are too high under Proposal 1, prices that would not recognize the cost to make or transport California cheese to market.
Comments filed by the Cooperatives took exception to the proposed pooling
DFA filed a separate comment to supplement the Cooperatives' comments and exceptions. DFA concurred with the Cooperatives on the need for inclusive pooling, and opined that voluntary pooling in California would create disparate producer prices and shifting handler advantages on a scale different from any other FMMO.
A comment submitted by WUD stated that allowing high percentages of milk to go in and out of the pool each month would undermine the pool's integrity and lead to unstable producer pricing. WUD said that allowing depooling defeats the California industry's purpose for seeking a FMMO—to enjoy class prices like the rest of the country. CDC echoed WUD's sentiment, commenting that less certainty about milk prices would jeopardize California's dairy farm futures and fail to establish orderly marketing.
While the Cooperatives have continued to argue that inclusive pooling is authorized by the AMAA, the analysis of the record of this proceeding, including the comments on and exceptions to the recommended decision, finds that performance-based pooling standards remain the appropriate method for identifying the producers and producer milk that serve the Class I market. Therefore, performance-based pooling provisions, tailored to the local market, are recommended for a California FMMO.
There are two performance standards applicable to distributing plants. First, this decision continues to find that a minimum of 25 percent of the total quantity of fluid milk products physically received at a pool distributing plant (excluding concentrated milk received from another plant by agreement for other than Class I use) should be disposed of as route disposition or transferred in the form of packaged fluid milk products to other distributing plants. This decision continues to find that a 25 percent route disposition standard for the proposed California FMMO is adequate to determine those plants that are sufficiently associated with the fluid market. The second criterion is an “in-area” standard and is designed to recognize plants that have an adequate association with the fluid market in the California marketing area. The record supports the adoption of the same in-area standard that is found in the 10 current FMMOs, specifying that 25 percent of the pool distributing plant's route distribution or transfers must be to outlets in the marketing area.
The
The record indicates that both the Cooperatives and the Institute used the Upper Midwest FMMO, which contains a 15 percent standard for distributing plants producing ultra-pasteurized or aseptically-processed products, as a template for pooling provisions. However, as explained in the Federal Order Reform Final Decision,
Performance standards for pool supply plants are designed to attract an adequate supply of milk to meet the demands of the fluid milk market by encouraging pool supply plants to move milk to pool distributing plants that service the marketing area. The record shows that California utilizes significant volumes of manufacturing milk, while California Class 1 utilization in 2015 was only 13 percent.
The recommended decision proposed that a pool supply plant should deliver at least 10 percent of its total milk receipts from producers, including milk diverted by the handler, to plants (qualified as pool distributing plants, plants in a distributing plant unit, producer-handlers, partially regulated distributing plants, or distributing plants fully regulated by another order) each month in order to qualify all of the milk associated with the supply plant for pricing and pooling under a California FMMO.
In response to the recommended decision, the Cooperatives commented that a lower supply plant shipping standard of 7.5 percent would prevent uneconomic deliveries made just for the sake of pool eligibility. According to the Cooperatives, the recommended 10 percent performance standard would likely disrupt current supply relationships and cause disorder. The Cooperatives noted that the supply plant shipping standard for the Upper Midwest FMMO had recently been lowered, which should signal a comparably appropriate level for California. In any event, the commenter added that the Market Administrator should be authorized to adjust the level as appropriate.
MPC also urged the Department to propose a lower supply plant shipping
This final decision continues to find that the recommended 10 percent supply plant shipping standard would be appropriate for the proposed California FMMO. The record of this proceeding lacks data from which to justify changing the proposed standard. Given the market's approximate Class I utilization and the fact that the Market Administrator would be able to make adjustments in response to changing circumstances, the standard is reasonable and should help identify the milk that should be associated with the pool. The adjustment to the Upper Midwest FMMO standards was based on market conditions in that marketing area and does not automatically justify a similar adjustment to the proposed standards for California.
To prevent uneconomic shipments of milk solely for the purpose of pool qualification, this final decision continues to propose two additional pooling provisions. First, a unit pooling provision is proposed that would allow two or more plants located in the marketing area and operated by the same handler to qualify for pooling as one unit. This would apply as long as one or more of the plants in the unit qualified as a pool distributing plant and the other plant(s) processed at least 50 percent of its bulk fluid milk products into Class I or II products. The unit pooling provision is designed to provide regulatory flexibility and deter uneconomic milk movements in markets, like California, where there is often specialization in plant operations.
Second, a system pooling provision is proposed to allow two or more supply plants, located in the marketing area and operated by one or more handlers, to qualify for pooling as a system by meeting the supply plant shipping requirements jointly as a single plant. The system pooling provision recognizes the role supply plants play in balancing the market's fluid needs, while ensuring that the plants in the system are consistent market suppliers and therefore eligible to benefit from participation in the marketwide pool. Both unit and system pooling provisions are included in other FMMOs.
The Cooperative and Institute witnesses testified in support of authorizing the market administrator to adjust shipping percentages if warranted by changing market conditions. Public comments filed in response to the recommended decision supported the inclusion of such a provision. This final decision continues to find it appropriate to adopt such a provision, should the market administrator conclude, after conducting an investigation, that adjusting shipping standards for supply plants and systems of supply plants to encourage shipments of milk to meet Class I demand, or to prevent uneconomic shipments of milk, is warranted. This provision would ensure that California FMMO provisions can quickly be adapted to changing market conditions and that orderly marketing can be maintained. Additionally, this flexibility would negate the need to add call provisions, as advanced by the Cooperatives, to ensure that fluid milk demand is always met.
Like other FMMOs, the proposed California FMMO would allow a plant, qualifying as a pool plant in the immediately preceding three months, to be granted relief from performance standards for no more than two consecutive months if it is determined by the market administrator that it cannot meet the performance standards because of circumstances beyond the control of the handler operating the plant. Examples of such circumstances include natural disaster, breakdown of equipment, or work stoppage.
In their post-hearing brief, the Cooperatives offered a modification to the exempt plant definition that would expand exempt plant status to plants with less than 150,000 pounds of Class I route disposition, and less than 300,000 pounds of total Class I, II, III or IV milk usage during the month. This modification was offered to exempt smaller manufacturing plants that would otherwise be regulated under the inclusive pooling provisions of Proposal 1. However, since any size plant with manufacturing uses could elect not to participate in the marketwide pool under the proposed California FMMO, there is no need to alter the exempt plant definition.
Proposal 2 offered a sliding scale supply plant shipping standard that would automatically be adjusted if the average Class I utilization percentage over the prior three months changed. Justification provided for this provision centered on administrative ease and flexibility of the regulations to change in order to reflect market conditions without necessitating a formal rulemaking hearing. However, under the proposed supply plant shipping standards, the market administrator would have flexibility to adjust supply plant shipping standards if warranted by changing market conditions. Therefore, it is not necessary to incorporate automatic adjustments to the standards.
This final decision does not propose separate pooling standards for plants receiving California quota milk, as offered in Proposal 2. As discussed previously, this decision continues to find that proper recognition of the California quota program could be through an authorized deduction from producer payments, if deemed appropriate by CDFA. Therefore, it would not be appropriate for the supply plant shipping standards to differ on the basis of whether a plant receives quota milk.
Proposal 1 contained a provision that would regulate a plant located in Churchill County, Nevada, receiving milk from producers within the county or in the California marketing area. The Cooperatives argued that currently a plant located in Churchill County has a long standing association with the California market, and this provision would ensure the plant would remain associated within the FMMO framework. The recommended decision did not find it appropriate to regulate a supply plant based on its location and not in combination with some form of performance standard. No public comments were submitted on this finding. This final decision continues to find it unnecessary to include such a provision. If the Churchill County plant meets the pool plant provisions of the recommended California FMMO, and thus demonstrates an adequate association to the market, then that plant would become regulated and enjoy the benefits of participating in a California FMMO marketwide pool.
Lastly, this final decision continues to propose the incorporation of provisions contained in all other FMMOs, implementing the provisions of the Milk Regulatory Equity Act of 2005 (MREA). The MREA amended the AMAA to ensure regulatory equity between and among dairy farmers and handlers for sales of packaged fluid milk in FMMO areas and into certain non-Federally regulated milk marketing areas from Federal milk marketing areas. Incorporation of these provisions is required to ensure that the proposed California FMMO does not violate the MREA. No comments were received regarding this proposal, other than the previously mentioned comments generally supporting the provisions that are similar in all FMMOs.
The Cooperatives proposed an additional provision that would identify dairy farmers who had lost their Grade A permit for more than 30 consecutive days as dairy farmers for other markets and therefore would lose their ability to qualify as a producer on a California FMMO for 12 consecutive months. The Cooperatives explained that this provision was part of the inclusive pooling provisions and was designed to prevent producers from voluntarily giving up their Grade A status to avoid regulation. This final decision continues to recommend performance-based pooling provisions, making such a provision as proposed by the Cooperatives unnecessary. The performance-based pooling provisions would serve to identify dairy farmers who meet the producer definition and should be entitled to share in the marketwide pool. Under the proposed order, any dairy farmer who delivers Grade A milk to a pool plant would be considered a producer.
This decision finds that, for the proposed California FMMO, producer milk should be defined as the milk of a producer that is received at a pool plant or received by a cooperative association in its capacity as a handler.
The proposed California FMMO must also provide for the diversion of producer milk to facilitate its orderly and efficient disposition when not needed for fluid use. Diversion provisions are needed to ensure that milk pooled on the order but not used for Class I purposes is part of the legitimate reserve supply of Class I handlers. Providing for milk diversion is a desirable and necessary FMMO feature because it facilitates the orderly and efficient disposition of milk when it is not needed for fluid use.
Accordingly, the proposed California FMMO would allow a pool plant to divert milk to another pool plant, and pool plants and cooperatives in their capacity as handlers could also divert milk to nonpool plants located in California, or in the surrounding states of Arizona, Nevada, and Oregon. Milk could not be diverted to a nonpool plant and remain priced and pooled under the terms of the proposed California FMMO unless at least one day of the dairy farmer's production was physically received as producer milk at a pool plant during the first month the dairy farmer was qualifying as a producer on the order. Given the large supply of milk for manufacturing use in California, the record supports a one-day “touch base” provision during the first month to define the producer milk that should be included in a California marketwide pool. Proposal 2 offered an alternative touch base standard of the lesser of one-day's production or 48,000 pounds. This final decision continues to find that a one-day touch base standard is an adequate demonstration of a dairy farmer's ability to service the market. Conversely, a higher standard, such as the five-day standard contained in Proposal 1, could lead to uneconomic milk movements for the sole purpose of meeting regulatory standards.
It is equally appropriate to safeguard against excessive milk supplies becoming associated with the market, as the proposed California FMMO one-day touch base standard could lead to milk from far distances associating with a California marketwide pool without actually being available to service the market's fluid needs. Therefore, this final decision proposes that diversions be limited to 100 percent minus the supply plant shipping percentage (or 90 percent of all milk being pooled by the handler). Diversions would further be limited to nonpool plants within California and its surrounding states. This limit should allow the economic movement of milk to balance the fluid needs of the market, while simultaneously preventing the milk of distant producers from associating with the California FMMO pool, and thus receiving the order's blend price, when most of the milk is diverted to distant plants and not a legitimate reserve supply of the market.
The proposed California FMMO includes repooling limits of 125 percent for the months of April through February, and 135 percent for the month of March, of the producer milk receipts pooled by the handler in the previous month. The record contains evidence that other FMMOs have experienced large swings in the volume of milk pooled on the order. This volatility was attributed to manufacturing handlers opting to not pool all their eligible milk in order to avoid payment to the marketwide pool for a given month. The Department has found unrestricted repooling conditions in some FMMO's to be inequitable and contrary to the intent of the FMMO system based on the hearing record of those proceedings.
In comments to the recommended decision, the Institute was of the opinion that the proposed repooling standards were an appropriate starting level given the lack of historical California data that could be used as a basis for change.
In their comments to the recommended decision, the Cooperatives and MPC supported lowering the repooling standards to 110 percent in order to further discourage handlers from electing to not pool large volumes of milk if inclusive pooling standards are not adopted.
Cacique commented that the recommended repooling limits proposed for California are more restrictive than those in other low Class I utilization orders and advocated for uniform repooling limits throughout the FMMO system.
Hilmar noted that even through the proposed California FMMO would provide manufacturers the option to not pool, the proposed repooling limits would competitively harm California manufacturers who compete with manufacturers in nearby FMMOs (Pacific Northwest and Arizona) whose provisions do not contain repooling limits.
In their exceptions to the recommended decision, DFA cautioned that significant volumes of milk could be depooled under the proposed California FMMO, a condition that the Department previously characterized as disorderly. DFA explained that because
Several factors were considered when evaluating the need for repooling standards and the appropriate levels. When determining appropriate levels, it was important to not set levels so low that they could not account for normal fluctuations in production volumes due to the number of days in each month and to the natural seasonality of milk production and manufacturing. As well, handlers need the ability to absorb unexpected surpluses while continuing to have the option to pool all the producer milk associated with that handler. If repooling limits are too restrictive, handlers may be unwilling to manufacture additional milk volumes because they would not have the flexibility to pool the additional milk volume.
This final decision continues to find repooling standards are justified for the proposed California FMMO to ensure orderly marketing conditions. The hearing record reflects that the proposed repooling standards were offered because of the similarities between California and the Upper Midwest FMMO, which currently has the same repooling standards.
Typically, when determining repooling standards, record data considered includes monthly and daily fluctuations in handler pooled volumes. As California is currently regulated by the CSO, which does not provide for voluntary pooling, there is no data on the record to discern which milk plants would qualify as pool plants, and how much milk would be associated with those plants on the recommended California FMMO. Lacking additional record evidence, the proposed 125 and 135 percent repooling standards serve as a starting point for identifying a handler's consistent supply of milk available to service the market's fluid milk needs under a California FMMO.
FMMOs are tailored to the local Class I market and therefore their provisions may not be identical in all cases. The Hilmar comment mentioned that two of California's neighboring marketing areas have no repooling limits which Hilmar claims put California manufacturers at a competitive disadvantage as they would be subject to repooling limits. The pooling provisions for those areas were established based on the dairy industry market characteristics of those marketing order areas. Likewise, the pooling provisions proposed in this final decision are intended to fit the specific needs of the California milk market.
It should be noted that any milk delivered to a pool distributing plant in excess of the previous month's pooled volume would not be subject to the repooling standards. The recommended California FMMO would also authorize the market administrator to waive these restrictions for new handlers, or for existing handlers with significant changes in their milk supplies due to unusual circumstances.
Lastly, milk that is subject to inclusion and participation in a State-authorized marketwide equalization pool and classification system should not be considered producer milk. Without such exclusion, milk could be simultaneously pooled on a California FMMO and on a marketwide equalization pool administered by another government entity, resulting in a double payment on the same milk and giving rise to competitive equity issues between producers.
The record indicates that milk serving the California Class 1 market, but produced from outside the state, is not currently priced and pooled under the CSO. According to witnesses, out-of-state producers commonly receive the plant blend price. Proposal 4 seeks to allow plants that would otherwise qualify as fully regulated distributing plants to elect partially regulated distributing plant status with respect to milk received from out-of-state farms. If Proposal 4 were adopted, the proposed California FMMO would enforce payment to out-of-state producers of at least the plant blend price on the out-of-state milk and out-of-state producers would presumably continue to receive the same prices they do now.
Throughout the hearing, California producers extolled the virtues of joining the FMMO system and enjoying system wide uniform product classification and pricing, which they believed would put them on a level-playing field with their producer counterparts across the country. In an effort to fairly compensate out-of-state producers while accommodating the California quota program under the proposed FMMO, proponents offered various payment alternatives. Under the modified provisions of Proposal 1, out-of-state producers would be entitled to a uniform blend price adjusted for quota. Under Proposal 2, out-of-state producers would be entitled to the traditional FMMO blend price calculated before quota premiums are paid.
Proponents of Proposal 4 argued that out-of-state producers should be allowed to continue receiving the plant blend price for milk shipped to plants regulated under a California FMMO to compensate for the fact that they have not historically been entitled to own and benefit from California quota and cannot expect to do so in the future. Under Proposal 4, otherwise fully regulated handlers could elect partially regulated distributing plant status with respect to out-of-state milk, for which they would pay the plant's blend price, based on classified use.
The record reflects that out-of-state milk is not priced and pooled by the CSO because the State of California, like all other states, is prohibited from regulating interstate commerce. One benefit of Federal regulation is the ability to regulate interstate milk marketing. FMMO provisions ensure that all milk servicing a market's Class I needs is appropriately classified and priced, and the producers who supply that milk share in the marketwide revenues from all Class I sales in the market.
A key feature of FMMOs is that producer milk is classified and priced at the plant where it is utilized, regardless of its source. Similarly situated handlers pay at least the class prices under each order, and producers are paid at least the order's minimum uniform blend price, determined through marketwide pooling. This allows producers to share equally in the classified use value of milk in the market, while minimizing uneconomic milk movements.
Three commenters, the Cooperatives, CDC and MPC, supported the recommended regulation of milk from outside the state, which would be pooled on the proposed California FMMO in the same manner of treatment as in other FMMOs. CDC wrote that California producers have been harmed by out-of-state milk sales not subject to the CSO because handlers can purchase that milk for less than the price of CSO pooled milk. Both the Cooperatives and MPC commented that regulating out-of-state milk would enhance orderly marketing.
As explained earlier, this final decision continues to propose that a California FMMO operate independent of the State's quota program. Under the proposed provisions, no quota premium would be subtracted from the FMMO pool, and all producers delivering to regulated pool plants under the order would be paid at least the same minimum producer blend price, less
Accordingly, this final decision continues to find no justification for differential producer treatment for milk servicing California's Class I needs when it is produced outside the marketing area. If an out-of-state dairy farmer qualifies as a producer under the proposed California FMMO, the producer's milk would be priced and pooled uniformly with the milk of all other producers serving the Class I market.
Transportation credits were contained in both Proposals 1 and 2 to reimburse handlers for part of the cost of transporting milk to Class I and/or Class II use. This final decision continues to propose no transportation credit provisions for a California FMMO.
A witness appearing on behalf of the Cooperatives testified in support of the transportation credit provisions contained in Proposal 1. The witness said that transportation credits are needed because Class I differentials are not high enough to cover the cost of moving milk from the Central Valley where most of the milk is produced, to Class I distributing plants, which are primarily located on the coast where most of the population resides.
The Cooperative witness utilized April 2013 to October 2014 CDFA hauling cost data of milk deliveries to plants with Class 1, 2 and/or 3 utilization, and compared it to the proposed California FMMO Class I differentials that would be applicable for comparable hauls. The witness said the average cost to haul a load of milk from a supply region to a demand region was $0.75 per cwt, with a range of $0.35 to $1.82 per cwt. According to the witness, in all instances, the difference in FMMO Class I differentials between the two locations was much less than the actual haul cost, therefore an additional cost recovery mechanism is needed to assure orderly movements of milk to Class I plants.
The Cooperative witness explained that Proposal 1 contains transportation credit provisions similar to the current CSO where marketwide pool monies are used to provide a credit for farm-to-plant milk movements within designated transportation zones to handlers with greater than 50 percent Class 1, 2, and/or 3 utilization. The witness said that the transportation credit zones represent current market procurement patterns where transportation credit assistance is necessary, and a similar credit system should be incorporated into a California FMMO. The witness stressed that the proposed credits would be mileage and transaction based, with a reimbursement rate cap of 175 miles,
The Cooperative witness explained that their proposed reimbursement equations were a result of Cooperative members' transportation cost data analyzed by the Pacific Northwest FMMO office. The Cooperatives requested that the FMMO office analyze the data and determine cost equations based on actual observed costs, minus $0.30 per cwt, which represents the producer's responsibility for a local haul. The witness said that the resulting equations are valid because they calculated a $5.205 million payment, which was close to the actual observed costs of $5.261 million. The witness explained that because diesel prices are a key variable cost to transportation, a monthly fuel cost adjustor is needed to ensure that the transportation credit provisions maintain an accurate reflection of costs. The witness noted that Proposal 1 does not contain transportation credit reimbursement for plant-to-plant milk movements.
The Cooperative witness elaborated that Proposal 1 seeks to pay all producers the same FMMO blend price, unadjusted for location. Therefore the incentive to supply milk to Class I plants is borne solely through their proposed transportation credit provisions. The witness said that because all producers share in the higher valued class uses, it is appropriate that they share in the cost of supplying and balancing those markets by using marketwide pool monies to provide a handler credit on those milk movements.
The Institute, in its post-hearing brief, expressed support for the transportation credit provisions contained in Proposal 1, subject to the transportation credits being adjusted for the difference in location differentials.
A witness representing Ponderosa testified that any proposed California FMMO should allow for transportation credits of out-of-state milk that serves the California Class I and/or Class II market. The witness explained that Ponderosa experiences high transportation costs because they haul their milk approximately 280 miles to a southern California Class I plant. The witness was of the opinion that this milk should be eligible for transportation credits if it is serving the California fluid market.
The record of this proceeding reflects that the California fluid market is structured such that some handlers and cooperative associations rely on the current CSO transportation credit system to assist them in making an adequate milk supply available for fluid use. The record reveals the Los Angeles, San Francisco, San Diego, and Sacramento metropolitan areas contain an overwhelming majority of the state's population, as well as the Class I plants servicing those areas. However, these plants must often source milk from milk production regions of the state located farther away. The record reveals that this supply/demand imbalance, coupled with flat producer pricing, necessitated the development of the CSO transportation credits for milk deliveries from designated supply regions to Class 1, 2, and/or 3 handlers located in demand regions where a majority of the population resides. The Cooperatives designed their transportation credit proposal to replicate the transportation credits currently paid by the CSO on farm-to-plant milk shipments, but attempted to make the proposed system more transaction based.
As previously discussed, this decision does not recommend flat producer pricing. The record of this proceeding supports the finding that producer payments should be adjusted to reflect the applicable producer location adjustment for the handler location where their milk is received. Therefore, the incentive to producers to supply Class I plants is embodied within the proposed producer payment provisions. As in all FMMOs, producers are responsible for finding a market for their milk, and consequently bear the cost of transporting their milk to a plant. Therefore the record of this proceeding does not support reducing the producers' value of the marketwide pool through the payment of transportation credits to handlers.
Comments filed by the Cooperatives took exception with the Department's finding on this issue. According to the
Comments filed by Dean Foods expressed support for the Cooperatives' position on transportation credits. Other commenters opined that the proposed Class I differentials would not be adequate to draw the necessary milk supplies to the Southern California deficit area, and argued that lack of transportation assistance of some sort would be detrimental to producers, handlers, and ultimately consumers.
Comments filed by HP Hood recognized that while Class I differentials were intended to attract milk to processing plants, California has long had a transportation assistance program funded through the pool that has helped attract milk to fluid plants.
Comments filed by Kroger noted that both the Cooperatives and the Institute offered workable proposals for transportation assistance. Kroger stated that existing location differentials are not adequate to draw enough milk into the Southern California deficit area, which is why the CSO adopted its current system of transportation credits and allowances.
Comments filed by the Institute urged the Department to reconsider its position on transportation credits, but agreed with the Department's finding that flat producer pricing must not be implemented in a California FMMO.
Comments filed by MPC supported the Department's recommendation and reiterated its opposition to any producer-funded transportation subsidy system that would deduct producer revenue from the pool.
This decision continues to find that including a producer-funded transportation credit program in a California FMMO is not warranted. In their exceptions, the Cooperatives suggested implementing a processor-funded transportation credit program. This suggestion was not part of any proposal evaluated at the hearing and the record lacks evident to support its adoption.
Currently, the CSO uses a flat producer payment, which contains no built-in incentive for moving milk from production to population areas. The CSO accomplishes this milk movement through transportation credits. Implementing a FMMO would change the current CSO flat producer payment structure into a Class I differential structure with higher differentials for California's population centers. The incentive to producers to supply Class I plants is therefore embodied within the FMMO Class I differential structure, as producers would receive the higher location differential for supplying plants located in major metropolitan areas, as the cost to supply those plants is higher. Some commenters noted that this would result in neighboring producers receiving different prices based on where there milk is delivered. The objective of the producer price surface is to encourage producers to service Class I plants through a higher location differential. While this will lead to producers receiving different prices, those producers receiving the higher differential also incur higher costs to service those plants. If additional monies are needed above minimum classified prices to supply Class I plants, marketplace principles should dictate the source and amount of those additional funds.
This section discusses the various miscellaneous and administrative provisions necessary to administer the proposed California FMMO. All current FMMOs contain administrative provisions that provide for the handler reporting dates, announcements by the Market Administrator, and payment dates necessary to administer the provisions of the FMMOs. A California FMMO likewise needs similar administrative provisions to ensure its proper administration. The provisions outlined below generally conform to provisions contained in the 10 current FMMOs with reporting and payment dates tailored to the California dairy market.
The producer-settlement fund ensures all handlers would be able to return the market blend price to producers whose milk was pooled under the order. Payments into the producer-settlement fund would be made each month by handlers whose total classified use value of milk exceeds the values of such milk calculated at the announced producer prices. In a California FMMO, handlers would be required to pay into the producer-settlement fund by the 16th day following the end of the month.
Payments out of the producer-settlement fund would be made each month to any handler whose use value is below the value of their milk at producer prices. Under a California FMMO, the Market Administrator
In view of the need to make timely payments to handlers from the producer-settlement fund, it is essential that money due to the fund is received by the due date. Accordingly, payment to the producer-settlement fund is considered made upon receipt of funds by the Market Administrator. Payment cannot be received on a non-business day. Therefore, if the due date for a payment, including a payment to or from the producer-settlement fund, falls on a Saturday, Sunday, or national holiday, the payment would not be due until the next business day.
As in other FMMOs, producer associations would be allowed to “reblend” their payments to their producer members. The Capper Volstead Act and the AMAA make it clear that cooperative associations are unique in this regard.
A California FMMO would require handlers to make at least one partial payment to producers in advance of the announcement of the applicable uniform prices. The partial payment rate for milk received during the first 15 days of the month could not be less than the lowest announced class price for the preceding month, and would be paid to producers by the last day of the month. The final payment for milk under a California FMMO would be required to be made so that it is received by producers no later than the 19th day after the end of the month.
Handlers would pay Cooperatives for bulk milk and skim milk, and for bulk milk received by transfer from a cooperative's pool plant, on the terms described for individual producers, with the exception that payment would be due one day earlier. An earlier payment date for cooperative associations is warranted because it would then give cooperative associations the time they need to distribute payments to individual producer members.
All payment dates specified in the proposed California FMMO are receipt dates. Since payment cannot be received on a non-business day, payment dates that fall on a Saturday, Sunday, or national holiday would be delayed until the next business day. While this has the effect of delaying payments to cooperatives and producers, the delay is offset by the shift from “date of payment” to “date of payment receipt.”
The proposed California FMMO provides regulatory options for a partially regulated plant handler. All partially regulated plant handlers would account to the California FMMO producer-settlement fund on the volume of packaged Class I sales in the California marketing area that exceeds receipts previously priced as Class I under a FMMO. Under the first option, a payment could be made by the partially regulated plant handler into the producer-settlement fund of the California FMMO at a rate equal to the difference between the Class I price and the California FMMO uniform price. Under the second option, the operator of a partially regulated plant handler could pay any positive difference between the gross obligation of the plant, had it been fully regulated, and the actual payments made for its milk supply. This is commonly referred to as the Wichita Option. The third option applies to a partially regulated plant handler that is subject to a marketwide pool operated under the authority of a state. In this last case, the partially regulated plant handler would account to the producer settlement fund at the difference between the Federal order Class I value and the value at which the handler accounts to the State order pool on such route sales, but not less than zero.
In accordance with 7 CFR 900.8, USDA published a Request for Public Comments (82 FR 37827; published August 14, 2017) (request) inviting interested parties to submit comments on whether various documents were relevant to the material issues of this proceeding. Three public comments were received. All the commenters supported taking official notice of the documents listed in the request. Accordingly, official notice is taken of the documents listed in the notice (82 FR 37827).
In addition to the documents referenced above, commenters highlighted the unintentional omission of 31 documents for consideration. Those documents are either previous
Agricultural Marketing Service (AMS) Data and Publications:
• AMS FMMO Reform Basic Formula Price Committee, Preliminary Report, April 1997;
• AMS FMMO Reform Classification Committee, Preliminary Report, November 1996;
• AMS FMMO Reform Identical Provisions Committee, Preliminary Report, November 1996;
• AMS FMMO Reform Price Structure Committee, Preliminary Report, November 1996; and
• AMS National Dairy Product Sales Reports National Average Survey Prices for Commodity Butter and Nonfat Dry Milk, January 2016-July 2016
California Department of Food and Agriculture (CDFA) Data and Publications:
• CDFA Commodity Butter Market Price Reports, January 2016-July 2016;
• CDFA Nonfat Dry Milk Market Price Reports, January 2016-July 2016;
USDA Office of the Chief Economist Publication:
• North American Drought Monitor Map: April 2017, released May 12, 2017;
• 30 FR 13143, 13144 regarding milk in the Tampa Bay marketing area, October 1965;
• 31 FR 7062, 7065 regarding a Puget Sound, Washington, market area expansion and amendments to producer-handler definition, May 1966;
• 34 FR 960, 962 regarding milk in the Georgia marketing area, January 1969;
• 46 FR 21944, 21950-21951 regarding milk in the Southwestern Idaho and Eastern Oregon marketing area, April 1981;
• 47 FR 5214, 5125-5128 regarding milk in the Alabama-West Florida marketing area, February 1982;
• 52 FR 38240 regarding Milk in the Chicago marketing area, October 1987;
• 53 FR 49154, 49169-49170 regarding milk in the Oregon-Washington and Puget Sound-Inland Empire marketing areas, December 1988;
• 54 FR 27179, 27182 regarding milk in the Texas and Southwest Plains marketing areas, June 1989;
• 56 FR 42240, 42248 regarding milk in the Rio Grande Valley and Other Marketing Areas, August 1991;
• 59 FR 12436, 12461-12462 regarding milk in the Minneapolis-St. Paul and Other Marketing Areas, March 1976;
• 64 FR 16026-16169 regarding milk in the Northeast and Other Marketing Areas, April 1999;
• 67 FR 67906, 67939 regarding Milk in the Northeast and Other Marketing Areas, November 2002;
• 68 FR 37674, 37678 regarding Milk in the Upper Midwest Marketing Area, April 2004;
• 69 FR 18834, 18838 regarding Milk in the Pacific Northwest Marketing Area, April 2004;
• 69 FR 19292, 19298 regarding Milk in the Mideast Marketing Area, April 2004;
• 69 FR 57233, 57238-57239 regarding Milk in the Northeast and Other Marketing Areas, September 2004;
• 70 FR 4932, 4943 regarding Milk in the Northeast Marketing Area, January 2005;
• 70 FR 74166, 74185-74186, 74188 regarding amendments to the Pacific Northwest and Arizona-Las Vegas Marketing Areas, December 2005;
• 71 FR 54152, 54157 regarding Milk in the Central Marketing Area, September 2006;
• 75 FR 10122, 10151-1015 regarding Milk in the Northeast and Other Marketing Areas, March 2010; and
• 79 FR 12963, 12976 regarding Milk in the Appalachian, Florida and Southeast Marketing Areas, March 2014.
In accordance with the Administrative Procedure Act, 5 U.S.C. 557(c), USDA has analyzed and reached a conclusion on all material issues of facts, law, and discretion presented on the record. Briefs, proposed findings and conclusions, comments and exceptions, and the evidence in the record were considered in making the findings and conclusions set forth in this final decision. To the extent that the suggested findings and conclusions filed by interested parties are inconsistent with the findings and conclusions of this final decision, the requests to make such findings or reach such conclusions are denied for the reasons stated in this decision.
(a) The proposed marketing agreement and order, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;
(b) The parity prices of milk, as determined pursuant to Section 2 of the AMAA, are not reasonable in view of the price of feeds, available supplies of feeds, and other economic conditions that affect market supply and demand for the milk in the marketing area, and the minimum prices specified in the proposed marketing agreement and order are such prices as will reflect the aforesaid factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interest; and
(c) The proposed marketing agreement and order will regulate the handling of milk in the same manner as, and will be applicable only to, persons in the
(d) All milk and milk products handled by handlers covered by the proposed marketing agreement and order are in the current of interstate commerce or directly burden, obstruct, or affect interstate commerce in milk or its products; and
(e) It is hereby found that the necessary expense of the market administrator for the maintenance and functioning of such agency will require the payment by each handler, as their
(This order shall not become effective until the requirements of 7 CFR 900.14 of the rules of practice and procedure governing proceedings to formulate marketing agreements and marketing orders have been met.)
The proposed order regulating the handling of milk in the California marketing area is recommended as the detailed and appropriate means by which the foregoing conclusions may be carried out. The proposed marketing agreement is not included in this decision because the regulatory provisions thereof would be the same as those contained in the order, as hereby proposed to be established.
The agent of the Secretary of Agriculture to conduct such referenda is hereby designated to be the Director of Operations and Accountability, Dairy Program, AMS, USDA.
Milk marketing orders.
7 U.S.C. 601-608.
The terms, definitions, and provisions in part 1000 of this chapter apply to this part unless otherwise specified. In this part, all references to sections in part 1000 refer to part 1000 of this chapter.
The marketing area means all territory within the bounds of the following states and political subdivisions, including all piers, docks, and wharves connected therewith and all craft moored thereat, and all territory occupied by government (municipal, State, or Federal) reservations, installations, institutions, or other similar establishments if any part thereof is within any of the listed states or political subdivisions:
All of the State of California.
See § 1000.3 of this chapter.
See § 1000.4 of this chapter.
See § 1000.5 of this chapter.
See § 1000.6 of this chapter.
(a) A distributing plant, other than a plant qualified as a pool plant pursuant to paragraph (b) of this section or§ ____.7(b) of any other Federal milk order, from which during the month 25 percent or more of the total quantity of fluid milk products physically received at the plant (excluding concentrated milk received from another plant by agreement for other than Class I use) are disposed of as route disposition or are transferred in the form of packaged fluid milk products to other distributing plants. At least 25 percent of such route disposition and transfers must be to outlets in the marketing area.
(b) Any distributing plant located in the marketing area which during the month processed at least 25 percent of the total quantity of fluid milk products physically received at the plant (excluding concentrated milk received from another plant by agreement for other than Class I use) into ultra-pasteurized or aseptically-processed fluid milk products.
(c) A supply plant from which the quantity of bulk fluid milk products shipped to (and physically unloaded into) plants described in paragraph (c)(1) of this section is not less than 10 percent of the Grade A milk received from dairy farmers (except dairy farmers described in § 1051.12(b) of this chapter) and handlers described in § 1000.9(c) of this chapter, including milk diverted pursuant to § 1051.13 of this chapter, subject to the following conditions:
(1) Qualifying shipments may be made to plants described in paragraphs (c)(1)(i) through (iv) of this section, except that whenever shipping requirements are increased pursuant to paragraph (g) of this section, only shipments to pool plants described in paragraphs (a), (b), and (d) of this section shall count as qualifying shipments for the purpose of meeting the increased shipments:
(i) Pool plants described in § 1051.7(a), (b), and (d) of this chapter;
(ii) Plants of producer-handlers;
(iii) Partially regulated distributing plants, except that credit for such shipments shall be limited to the amount of such milk classified as Class I at the transferee plant; and
(iv) Distributing plants fully regulated under other Federal orders, except that credit for shipments to such plants shall be limited to the quantity shipped to (and physically unloaded into) pool distributing plants during the month and credits for shipments to other order plants shall not include any such shipments made on the basis of agreed-upon Class II, Class III, or Class IV utilization.
(2) Concentrated milk transferred from the supply plant to a distributing plant for an agreed-upon use other than Class I shall be excluded from the supply plant's shipments in computing the supply plant's shipping percentage.
(d) Two or more plants operated by the same handler and located in the marketing area may qualify for pool status as a unit by meeting the total and in-area route disposition requirements of a pool distributing plant specified in paragraph (a) of this section and subject to the following additional requirements:
(1) At least one of the plants in the unit must qualify as a pool plant pursuant to paragraph (a) of this section;
(2) Other plants in the unit must process Class I or Class II products, using 50 percent or more of the total Grade A fluid milk products received in bulk form at such plant or diverted therefrom by the plant operator in Class I or Class II products; and
(3) The operator of the unit has filed a written request with the market administrator prior to the first day of the month for which such status is desired to be effective. The unit shall continue from month-to-month thereafter without further notification. The handler shall notify the market administrator in writing prior to the first day of any month for which termination or any change of the unit is desired.
(e) A system of two or more supply plants operated by one or more handlers may qualify for pooling by meeting the shipping requirements of paragraph (c) of this section in the same manner as a single plant subject to the following additional requirements:
(1) Each plant in the system is located within the marketing area. Cooperative associations or other handlers may not use shipments pursuant to § 1000.9(c) of this chapter to qualify supply plants located outside the marketing area;
(2) The handler(s) establishing the system submits a written request to the market administrator on or before July 15 requesting that such plants qualify as a system for the period of August through July of the following year. Such request will contain a list of the plants participating in the system in the order, beginning with the last plant, in which the plants will be dropped from the system if the system fails to qualify. Each plant that qualifies as a pool plant within a system shall continue each month as a plant in the system through the following July unless the handler(s) establishing the system submits a written request to the market administrator that the plant be deleted from the system or that the system be discontinued. Any plant that has been so deleted from a system, or that has failed to qualify in any month, will not be part of any system for the remaining months through July. The handler(s) that have established a system may add a plant operated by such handler(s) to a system if such plant has been a pool plant each of the 6 prior months and would otherwise be eligible to be in a system, upon written request to the market administrator no later than the 15th day of the prior month. In the event of an ownership change or the business failure of a handler who is a participant in a system, the system may be reorganized to reflect such changes if a written request to file a new marketing agreement is submitted to the market administrator; and
(3) If a system fails to qualify under the requirements of this paragraph (e), the handler responsible for qualifying the system shall notify the market administrator which plant or plants will be deleted from the system so that the remaining plants may be pooled as a system. If the handler fails to do so, the market administrator shall exclude one or more plants, beginning at the bottom of the list of plants in the system and continuing up the list as necessary until the deliveries are sufficient to qualify the remaining plants in the system.
(f) Any distributing plant, located within the marketing area as described in § 1051.2 of this chapter:
(1) From which there is route disposition and/or transfers of packaged fluid milk products in any non-federally regulated marketing area(s) located within one or more States that require handlers to pay minimum prices for raw milk, provided that 25 percent or more of the total quantity of fluid milk products physically received at such plant (excluding concentrated milk received from another plant by agreement for other than Class 1 use) is disposed of as route disposition and/or is transferred in the form of packaged fluid milk products to other plants. At least 25 percent of such route disposition and/or transfers, in aggregate, are in any non-federally regulated marketing area(s) located within one or more States that require handlers to pay minimum prices for raw
(i) The plant is described in § 1051.7(a), (b), or (e) of this chapter;
(ii) The plant is subject to the pricing provisions of a State-operated milk pricing plan which provides for the payment of minimum class prices for raw milk;
(iii) The plant is described in § 1000.8(a) or (e) of this chapter; or
(iv) A producer-handler described in § 1051.10 of this chapter with less than three million pounds during the month of route disposition and/or transfers of packaged fluid milk products to other plants.
(2) [Reserved]
(g) The applicable shipping percentages of paragraphs (c) and (e) of this section and § 1051.13(d)(2) and (3) of this chapter may be increased or decreased, for all or part of the marketing area, by the market administrator if the market administrator finds that such adjustment is necessary to encourage needed shipments or to prevent uneconomic shipments. Before making such a finding, the market administrator shall investigate the need for adjustment either on the market administrator's own initiative or at the request of interested parties if the request is made in writing at least 15 days prior to the month for which the requested revision is desired effective. If the investigation shows that an adjustment of the shipping percentages might be appropriate, the market administrator shall issue a notice stating that an adjustment is being considered and invite data, views, and arguments. Any decision to revise an applicable shipping or diversion percentage must be issued in writing at least one day before the effective date.
(h) The term pool plant shall not apply to the following plants:
(1) A producer-handler as defined under any Federal order;
(2) An exempt plant as defined in § 1000.8(e) of this chapter;
(3) A plant located within the marketing area and qualified pursuant to paragraph (a) of this section which meets the pooling requirements of another Federal order, and from which more than 50 percent of its route disposition has been in the other Federal order marketing area for 3 consecutive months;
(4) A plant located outside any Federal order marketing area and qualified pursuant to paragraph (a) of this section that meets the pooling requirements of another Federal order and has had greater route disposition in such other Federal order's marketing area for 3 consecutive months;
(5) A plant located in another Federal order marketing area and qualified pursuant to paragraph (a) of this section that meets the pooling requirements of such other Federal order and does not have a majority of its route disposition in this marketing area for 3 consecutive months, or if the plant is required to be regulated under such other Federal order without regard to its route disposition in any other Federal order marketing area;
(6) A plant qualified pursuant to paragraph (c) of this section which also meets the pooling requirements of another Federal order and from which greater qualifying shipments are made to plants regulated under the other Federal order than are made to plants regulated under the order in this part, or the plant has automatic pooling status under the other Federal order; and
(7) That portion of a regulated plant designated as a nonpool plant that is physically separate and operated separately from the pool portion of such plant. The designation of a portion of a regulated plant as a nonpool plant must be requested in advance and in writing by the handler and must be approved by the market administrator.
(i) Any plant that qualifies as a pool plant in each of the immediately preceding 3 months pursuant to paragraph (a) of this section or the shipping percentages in paragraph (c) of this section that is unable to meet such performance standards for the current month because of unavoidable circumstances determined by the market administrator to be beyond the control of the handler operating the plant, such as a natural disaster (ice storm, wind storm, flood, fire, earthquake, breakdown of equipment, or work stoppage, shall be considered to have met the minimum performance standards during the period of such unavoidable circumstances, but such relief shall not be granted for more than 2 consecutive months.
See § 1000.8 of this chapter.
See § 1000.9 of this chapter.
(a)
(1) The care and management of the dairy animals and the other resources and facilities designated in paragraph (b)(1) of this section necessary to produce all Class I milk handled (excluding receipts from handlers fully regulated under any Federal order) are under the complete and exclusive control, ownership, and management of the producer-handler and are operated as the producer-handler's own enterprise and at its sole risk.
(2) The plant operation designated in paragraph (b)(2) of this section at which the producer-handler processes and packages, and from which it distributes, its own milk production is under the complete and exclusive control, ownership, and management of the producer-handler and is operated as the producer-handler's own enterprise and at its sole risk.
(3) The producer-handler neither receives at its designated milk production resources and facilities nor receives, handles, processes, or distributes at or through any of its designated milk handling, processing, or distributing resources and facilities other source milk products for reconstitution into fluid milk products or fluid milk products derived from any source other than:
(i) Its designated milk production resources and facilities (own farm production);
(ii) Pool handlers and plants regulated under any Federal order within the limitation specified in paragraph (c)(2) of this section; or
(iii) Nonfat milk solids which are used to fortify fluid milk products.
(4) The producer-handler is neither directly nor indirectly associated with the business control or management of, nor has a financial interest in, another handler's operation; nor is any other handler so associated with the producer-handler's operation.
(5) No milk produced by the herd(s) or on the farm(s) that supplies milk to the producer-handler's plant operation is:
(i) Subject to inclusion and participation in a marketwide equalization pool under a milk classification and pricing program under the authority of a State government maintaining marketwide pooling of returns; or
(ii) Marketed in any part as Class I milk to the non-pool distributing plant of any other handler.
(b)
(1) Milk production resources and facilities shall include all resources and facilities (milking herd(s), buildings housing such herd(s), and the land on which such buildings are located) used for the production of milk which are solely owned, operated, and which the producer-handler has designated as a source of milk supply for the producer-handler's plant operation. However, for purposes of this paragraph (b)(1), any such milk production resources and facilities which do not constitute an actual or potential source of milk supply for the producer-handler's operation shall not be considered a part of the producer-handler's milk production resources and facilities.
(2) Milk handling, processing, and distribution resources and facilities shall include all resources and facilities (including store outlets) used for handling, processing, and distributing fluid milk products which are solely owned by, and directly operated or controlled by the producer-handler or in which the producer-handler in any way has an interest, including any contractual arrangement, or over which the producer-handler directly or indirectly exercises any degree of management control.
(3) All designations shall remain in effect until canceled pursuant to paragraph (c) of this section.
(c)
(1) Milk from the milk production resources and facilities of the producer-handler, designated in paragraph (b)(1) of this section, is delivered in the name of another person as producer milk to another handler.
(2) The producer-handler handles fluid milk products derived from sources other than the milk production facilities and resources designated in paragraph (b)(1) of this section, except that it may receive at its plant, or acquire for route disposition, fluid milk products from fully regulated plants and handlers under any Federal order if such receipts do not exceed 150,000 pounds monthly. This limitation shall not apply if the producer-handler's own-farm production is less than 150,000 pounds during the month.
(3) Milk from the milk production resources and facilities of the producer-handler is subject to inclusion and participation in a marketwide equalization pool under a milk classification and pricing plan operating under the authority of a State government.
(d)
(1) The name, plant location(s), and farm location(s) of persons designated as producer-handlers;
(2) The names of those persons whose designations have been cancelled; and
(3) The effective dates of producer-handler status or loss of producer-handler status for each. Such announcements shall be controlling with respect to the accounting at plants of other handlers for fluid milk products received from any producer-handler.
(e)
(f) Any producer-handler with Class I route dispositions and/or transfers of packaged fluid milk products in the marketing area described in § 1131.2 of this chapter of this chapter shall be subject to payments into the Order 1131 producer settlement fund on such dispositions pursuant to § 1000.76(a) of this chapter and payments into the Order 1131 administrative fund, provided such dispositions are less than three million pounds in the current month and such producer-handler had total Class I route dispositions and/or transfers of packaged fluid milk products from own farm production of three million pounds or more the previous month. If the producer-handler has Class I route dispositions and/or transfers of packaged fluid milk products into the marketing area described in § 1131.2 of this chapter of three million pounds or more during the current month, such producer-handler shall be subject to the provisions described in § 1131.7 of this chapter or § 1000.76(a) of this chapter.
(a) Except as provided in paragraph (b) of this section,
(1) Received at a pool plant directly from the producer or diverted by the plant operator in accordance with § 1051.13 of this chapter; or
(2) Received by a handler described in § 1000.9(c) of this chapter.
(b) Producer shall not include:
(1) A producer-handler as defined in any Federal order;
(2) A dairy farmer whose milk is received at an exempt plant, excluding producer milk diverted to the exempt plant pursuant to § 1051.13(d) of this chapter;
(3) A dairy farmer whose milk is received by diversion at a pool plant from a handler regulated under another Federal order if the other Federal order designates the dairy farmer as a producer under that order and that milk is allocated by request to a utilization other than Class I; and
(4) A dairy farmer whose milk is reported as diverted to a plant fully regulated under another Federal order with respect to that portion of the milk so diverted that is assigned to Class I under the provisions of such other order.
Except as provided for in paragraph (e) of this section,
(a) Received by the operator of a pool plant directly from a producer or a
(b) Received by a handler described in § 1000.9(c) of this chapter in excess of the quantity delivered to pool plants;
(c) Diverted by a pool plant operator to another pool plant. Milk so diverted shall be priced at the location of the plant to which diverted; or
(d) Diverted by the operator of a pool plant or a cooperative association described in § 1000.9(c) of this chapter to a nonpool plant located in the States of California, Arizona, Nevada, or Oregon, subject to the following conditions:
(1) Milk of a dairy farmer shall not be eligible for diversion unless at least one day's production of such dairy farmer is physically received as producer milk at a pool plant during the first month the dairy farmer is a producer. If a dairy farmer loses producer status under the order in this part (except as a result of a temporary loss of Grade A approval or as a result of the handler of the dairy farmer's milk failing to pool the milk under any order), the dairy farmer's milk shall not be eligible for diversion unless at least one day's production of the dairy farmer has been physically received as producer milk at a pool plant during the first month the dairy farmer is re-associated with the market;
(2) The quantity of milk diverted by a handler described in § 1000.9(c) of this chapter may not exceed 90 percent of the producer milk receipts reported by the handler pursuant to § 1051.30(c) of this chapter provided that not less than 10 percent of such receipts are delivered to plants described in § 1051.7(c)(1)(i) through (iii) of this chapter. These percentages are subject to any adjustments that may be made pursuant to § 1051.7(g) of this chapter; an
(3) The quantity of milk diverted to nonpool plants by the operator of a pool plant described in § 1051.7(a), (b) or (d) of this chapter may not exceed 90 percent of the Grade A milk received from dairy farmers (except dairy farmers described in § 1051.12(b) of this chapter) including milk diverted pursuant to this section. These percentages are subject to any adjustments that may be made pursuant to § 1051.7(g) of this chapter.
(4) Diverted milk shall be priced at the location of the plant to which diverted.
(e) Producer milk shall not include milk of a producer that is subject to inclusion and participation in a marketwide equalization pool under a milk classification and pricing program imposed under the authority of a State government maintaining marketwide pooling of returns.
(f) The quantity of milk reported by a handler pursuant to either § 1051.30(a)(1) or (c)(1) of this chapter for April through February may not exceed 125 percent, and for March may not exceed 135 percent, of the producer milk receipts pooled by the handler during the prior month. Milk diverted to nonpool plants reported in excess of this limit shall be removed from the pool. Milk in excess of this limit received at pool plants, other than pool distributing plants, shall be classified pursuant to § 1000.44(a)(3)(v) and (b) of this chapter. The handler must designate, by producer pick-up, which milk is to be removed from the pool. If the handler fails to provide this information, the market administrator will make the determination. The following provisions apply:
(1) Milk shipped to and physically received at pool distributing plants in excess of the previous month's pooled volume shall not be subject to the 125 or 135 percent limitation;
(2) Producer milk qualified pursuant to § __.13 of any other Federal Order and continuously pooled in any Federal Order for the previous six months shall not be included in the computation of the 125 or 135 percent limitation;
(3) The market administrator may waive the 125 or 135 percent limitation:
(i) For a new handler on the order, subject to the provisions of paragraph (f)(4) of this section; or
(ii) For an existing handler with significantly changed milk supply conditions due to unusual circumstances; and
(4) A bloc of milk may be considered ineligible for pooling if the market administrator determines that handlers altered the reporting of such milk for the purpose of evading the provisions of this paragraph (f).
See § 1000.14 of this chapter.
See § 1000.15 of this chapter.
See § 1000.16 of this chapter.
See § 1000.18 of this chapter.
See § 1000.19 of this chapter.
See § 1000.25 of this chapter.
See § 1000.26 of this chapter.
See § 1000.27 of this chapter.
See § 1000.28 of this chapter.
Each handler shall report monthly so that the market administrator's office receives the report on or before the 9th day after the end of the month, in the detail and on the prescribed forms, as follows:
(a) Each handler that operates a pool plant shall report for each of its operations the following information:
(1) Product pounds, pounds of butterfat, pounds of protein, pounds of solids-not-fat other than protein (other solids) contained in or represented by:
(i) Receipts of producer milk, including producer milk diverted by the reporting handler, from sources other than handlers described in § 1000.9(c) of this chapter; and
(ii) Receipts of milk from handlers described in § 1000.9(c) of this chapter;
(2) Product pounds and pounds of butterfat contained in:
(i) Receipts of fluid milk products and bulk fluid cream products from other pool plants;
(ii) Receipts of other source milk; and
(iii) Inventories at the beginning and end of the month of fluid milk products and bulk fluid cream products;
(3) The utilization or disposition of all milk and milk products required to be reported pursuant to this paragraph (a); and
(4) Such other information with respect to the receipts and utilization of skim milk, butterfat, milk protein, and other nonfat solids as the market administrator may prescribe.
(b) Each handler operating a partially regulated distributing plant shall report with respect to such plant in the same manner as prescribed for reports required by paragraph (a) of this section. Receipts of milk that would have been producer milk if the plant had been fully regulated shall be reported in lieu of producer milk. The report shall show also the quantity of any reconstituted
(c) Each handler described in § 1000.9(c) of this chapter shall report:
(1) The product pounds, pounds of butterfat, pounds of protein, pounds of solids-not-fat other than protein (other solids) contained in receipts of milk from producers; and
(2) The utilization or disposition of such receipts.
(d) Each handler not specified in paragraphs (a) through (c) of this section shall report with respect to its receipts and utilization of milk and milk products in such manner as the market administrator may prescribe.
(a) On or before the 20th day after the end of each month, each handler that operates a pool plant pursuant to § 1051.7 of this chapter and each handler described in § 1000.9(c) of this chapter shall report to the market administrator its producer payroll for the month, in the detail prescribed by the market administrator, showing for each producer the information described in § 1051.73(f) of this chapter.
(b) Each handler operating a partially regulated distributing plant who elects to make payment pursuant to § 1000.76(b) of this chapter shall report for each dairy farmer who would have been a producer if the plant had been fully regulated in the same manner as prescribed for reports required by paragraph (a) of this section.
In addition to the reports required pursuant to §§ 1051.30 and 1051.31 of this chapter, each handler shall report any information the market administrator deems necessary to verify or establish each handler's obligation under the order.
See § 1000.40 of this chapter.
See § 1000.42 of this chapter.
See § 1000.43 of this chapter.
See § 1000.44 of this chapter.
See § 1000.45 of this chapter.
See § 1000.50 of this chapter.
The Class I differential shall be the differential established for Los Angeles County, California, which is reported in § 1000.52 of this chapter. The Class I price shall be the price computed pursuant to § 1000.50(a) of this chapter for Los Angeles County, California.
See § 1000.52 of this chapter.
See § 1000.53 of this chapter.
See § 1000.54 of this chapter.
For the purpose of computing a handler's obligation for producer milk, the market administrator shall determine for each month the value of milk of each handler with respect to each of the handler's pool plants and of each handler described in § 1000.9(c) of this chapter with respect to milk that was not received at a pool plant by adding the amounts computed in paragraphs (a) through (h) of this section and subtracting from that total amount the values computed in paragraphs (i) and (j) of this section. Unless otherwise specified, the skim milk, butterfat, and the combined pounds of skim milk and butterfat referred to in this section shall result from the steps set forth in § 1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat components of producer milk in each class shall be based upon the proportion of such components in producer skim milk. Receipts of nonfluid milk products that are distributed as labeled reconstituted milk for which payments are made to the producer-settlement fund of another Federal order under § 1000.76(a)(4) or (d) of this chapter shall be excluded from pricing under this section.
(a) Class I value.
(1) Multiply the hundredweight of skim milk in Class I by the Class I skim milk price; and
(2) Add an amount obtained by multiplying the pounds of butterfat in Class I by the Class I butterfat price; and
(b) Class II value.
(1) Multiply the pounds of nonfat solids in Class II skim milk by the Class II nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat in Class II times the Class II butterfat price.
(c) Class III value.
(1) Multiply the pounds of protein in Class III skim milk by the protein price;
(2) Add an amount obtained by multiplying the pounds of other solids in Class III skim milk by the other solids price; and
(3) Add an amount obtained by multiplying the pounds of butterfat in Class III by the butterfat price.
(d) Class IV value.
(1) Multiply the pounds of nonfat solids in Class IV skim milk by the nonfat solids price; and
(2) Add an amount obtained by multiplying the pounds of butterfat in Class IV by the butterfat price.
(e) Multiply the pounds of skim milk and butterfat overage assigned to each class pursuant to § 1000.44(a)(11) of this chapter and the corresponding step of § 1000.44(b) by the skim milk prices and butterfat prices applicable to each class.
(f) Multiply the difference between the current month's Class I, II, or III price, as the case may be, and the Class IV price for the preceding month and by the hundredweight of skim milk and butterfat subtracted from Class I, II, or III, respectively, pursuant to § 1000.44(a)(7) of this chapter and the corresponding step of § 1000.44(b).
(g) Multiply the difference between the Class I price applicable at the location of the pool plant and the Class IV price by the hundredweight of skim milk and butterfat assigned to Class I pursuant to § 1000.43(d) of this chapter and the hundredweight of skim milk and butterfat subtracted from Class I pursuant to § 1000.44(a)(3)(i) through (vi) of this chapter and the corresponding step of § 1000.44(b), excluding receipts of bulk fluid cream products from plants regulated under other Federal orders and bulk concentrated fluid milk products from pool plants, plants regulated under other Federal orders, and unregulated supply plants.
(h) Multiply the difference between the Class I price applicable at the location of the nearest unregulated supply plants from which an equivalent volume was received and the Class III price by the pounds of skim milk and butterfat in receipts of concentrated fluid milk products assigned to Class I pursuant to §§ 1000.43(d) of this chapter and 1000.44(a)(3)(i) of this chapter and the corresponding step of § 1000.44(b) and the pounds of skim milk and butterfat subtracted from Class I pursuant to § 1000.44(a)(8) and the corresponding step of § 1000.44(b), excluding such skim milk and butterfat
(i) For reconstituted milk made from receipts of nonfluid milk products, multiply $1.00 (but not more than the difference between the Class I price applicable at the location of the pool plant and the Class IV price) by the hundredweight of skim milk and butterfat contained in receipts of nonfluid milk products that are allocated to Class I use pursuant to § 1000.43(d) of this chapter.
For each month the market administrator shall compute a producer price differential per hundredweight. The report of any handler who has not made payments required pursuant to § 1051.71 of this chapter for the preceding month shall not be included in the computation of the producer price differential, and such handler's report shall not be included in the computation for succeeding months until the handler has made full payment of outstanding monthly obligations. Subject to the conditions of this introductory paragraph, the market administrator shall compute the producer price differential in the following manner:
(a) Combine into one total the values computed pursuant to § 1051.60 of this chapter for all handlers required to file reports prescribed in § 1051.30 of this chapter;
(b) Subtract the total values obtained by multiplying each handler's total pounds of protein, other solids, and butterfat contained in the milk for which an obligation was computed pursuant to § 1051.60 of this chapter by the protein price, other solids price, and the butterfat price, respectively;
(c) Add an amount equal to the minus location adjustments and subtract an amount equal to the plus location adjustments computed pursuant to § 1051.75 of this chapter;
(d) Add an amount equal to not less than one-half of the unobligated balance in the producer-settlement fund;
(e) Divide the resulting amount by the sum of the following for all handlers included in these computations:
(1) The total hundredweight of producer milk; and
(2) The total hundredweight for which a value is computed pursuant to § 1051.60(i) of this chapter; and
(f) Subtract not less than 4 cents nor more than 5 cents from the price computed pursuant to paragraph (e) of this section. The result shall be known as the producer price differential for the month.
On or before the 14th day after the end of each month, the market administrator shall announce publicly the following prices and information:
(a) The producer price differential;
(b) The protein price;
(c) The nonfat solids price;
(d) The other solids price;
(e) The butterfat price;
(f) The average butterfat, nonfat solids, protein and other solids content of producer milk; and
(g) The statistical uniform price for milk containing 3.5 percent butterfat, computed by combining the Class III price and the producer price differential.
See § 1000.70 of this chapter.
Each handler shall make payment to the producer-settlement fund in a manner that provides receipt of the funds by the market administrator no later than the 16th day after the end of the month (except as provided in § 1000.90 of this chapter). Payment shall be the amount, if any, by which the amount specified in paragraph (a) of this section exceeds the amount specified in paragraph (b) of this section:
(a) The total value of milk to the handler for the month as determined pursuant to § 1051.60 of this chapter.
(b) The sum of:
(1) An amount obtained by multiplying the total hundredweight of producer milk as determined pursuant to § 1000.44(c) of this chapter by the producer price differential as adjusted pursuant to § 1051.75 of this chapter;
(2) An amount obtained by multiplying the total pounds of protein, other solids, and butterfat contained in producer milk by the protein, other solids, and butterfat prices respectively; and
(3) An amount obtained by multiplying the pounds of skim milk and butterfat for which a value was computed pursuant to § 1051.60(i) of this chapter by the producer price differential as adjusted pursuant to § 1051.75 of this chapter for the location of the plant from which received.
No later than the 18th day after the end of each month (except as provided in § 1000.90 of this chapter), the market administrator shall pay to each handler the amount, if any, by which the amount computed pursuant to § 1051.71(b) of this chapter exceeds the amount computed pursuant to § 1051.71(a). If, at such time, the balance in the producer-settlement fund is insufficient to make all payments pursuant to this section, the market administrator shall reduce uniformly such payments and shall complete the payments as soon as the funds are available.
(a) Each handler shall pay each producer for producer milk for which payment is not made to a cooperative association pursuant to paragraph (b) of this section, as follows:
(1)
(2)
(i) The hundredweight of producer milk received times the producer price differential for the month as adjusted pursuant to § 1051.75 of this chapter;
(ii) The pounds of butterfat received times the butterfat price for the month;
(iii) The pounds of protein received times the protein price for the month;
(iv) The pounds of other solids received times the other solids price for the month;
(v) Less any payment made pursuant to paragraph (a)(1) of this section;
(vi) Less proper deductions authorized in writing by such producer, and plus or minus adjustments for errors in previous payments to such producer subject to approval by the market administrator;
(vii) Less deductions for marketing services pursuant to § 1000.86 of this chapter; and
(viii) Less deductions authorized by CDFA for the California Quota Program pursuant to § 1051.11 of this chapter.
(b)
(c)
(1) For bulk fluid milk products and bulk fluid cream products received from a cooperative association in its capacity as the operator of a pool plant and for milk received from a cooperative association in its capacity as a handler pursuant to § 1000.9(c) of this chapter during the first 15 days of the month, at not less than the lowest announced class prices per hundredweight for the preceding month;
(2) For the total quantity of bulk fluid milk products and bulk fluid cream products received from a cooperative association in its capacity as the operator of a pool plant, at not less than the total value of such products received from the association's pool plants, as determined by multiplying the respective quantities assigned to each class under § 1000.44 of this chapter, as follows:
(i) The hundredweight of Class I skim milk times the Class I skim milk price for the month plus the pounds of Class I butterfat times the Class I butterfat price for the month. The Class I price to be used shall be that price effective at the location of the receiving plant;
(ii) The pounds of nonfat solids in Class II skim milk by the Class II nonfat solids price;
(iii) The pounds of butterfat in Class II times the Class II butterfat price;
(iv) The pounds of nonfat solids in Class IV times the nonfat solids price;
(v) The pounds of butterfat in Class III and Class IV milk times the butterfat price;
(vi) The pounds of protein in Class III milk times the protein price;
(vii) The pounds of other solids in Class III milk times the other solids price; and
(vii) Add together the amounts computed in paragraphs (c)(2)(i) through (vii) of this section and from that sum deduct any payment made pursuant to paragraph (c)(1) of this section; and
(3) For the total quantity of milk received during the month from a cooperative association in its capacity as a handler under § 1000.9(c) of this chapter as follows:
(i) The hundredweight of producer milk received times the producer price differential as adjusted pursuant to § 1051.75 of this chapter;
(ii) The pounds of butterfat received times the butterfat price for the month;
(iii) The pounds of protein received times the protein price for the month;
(iv) The pounds of other solids received times the other solids price for the month; and
(v) Add together the amounts computed in paragraphs (c)(3)(i) through (v) of this section and from that sum deduct any payment made pursuant to paragraph (c)(1) of this section.
(d) If a handler has not received full payment from the market administrator pursuant to § 1051.72 of this chapter by the payment date specified in paragraph (a), (b), or (c) of this section, the handler may reduce pro rata its payments to producers or to the cooperative association (with respect to receipts described in paragraph (b) of this section, prorating the underpayment to the volume of milk received from the cooperative association in proportion to the total milk received from producers by the handler), but not by more than the amount of the underpayment. The payments shall be completed on the next scheduled payment date after receipt of the balance due from the market administrator.
(e) If a handler claims that a required payment to a producer cannot be made because the producer is deceased or cannot be located, or because the cooperative association or its lawful successor or assignee is no longer in existence, the payment shall be made to the producer-settlement fund, and in the event that the handler subsequently locates and pays the producer or a lawful claimant, or in the event that the handler no longer exists and a lawful claim is later established, the market administrator shall make the required payment from the producer-settlement fund to the handler or to the lawful claimant, as the case may be.
(f) In making payments to producers pursuant to this section, each handler shall furnish each producer, except a producer whose milk was received from a cooperative association handler described in § 1000.9(a) or (c) of this chapter, a supporting statement in a form that may be retained by the recipient which shall show:
(1) The name, address, Grade A identifier assigned by a duly constituted regulatory agency, and payroll number of the producer;
(2) The daily and total pounds, and the month and dates such milk was received from that producer;
(3) The total pounds of butterfat, protein, and other solids contained in the producer's milk;
(4) The minimum rate or rates at which payment to the producer is required pursuant to the order in this part;
(5) The rate used in making payment if the rate is other than the applicable minimum rate;
(6) The amount, or rate per hundredweight, or rate per pound of component, and the nature of each deduction claimed by the handler; and
(7) The net amount of payment to the producer or cooperative association.
For purposes of making payments for producer milk and nonpool milk, a plant location adjustment shall be determined by subtracting the Class I price specified in § 1051.51 of this chapter from the Class I price at the plant's location. The difference, plus or minus as the case may be, shall be used to adjust the payments required pursuant to §§ 1051.73 and 1000.76 of this chapter.
See § 1000.76 of this chapter.
See § 1000.77 of this chapter.
See § 1000.78 of this chapter.
On or before the payment receipt date specified under § 1051.71 of this chapter, each handler shall pay to the market administrator its pro rata share of the expense of administration of the order at a rate specified by the market administrator that is no more than 8 cents per hundredweight with respect to:
(a) Receipts of producer milk (including the handler's own production) other than such receipts by a handler described in § 1000.9(c) of this chapter that were delivered to pool plants of other handlers;
(b) Receipts from a handler described in § 1000.9(c) of this chapter;
(c) Receipts of concentrated fluid milk products from unregulated supply plants and receipts of nonfluid milk products assigned to Class I use pursuant to § 1000.43(d) of this chapter and other source milk allocated to Class I pursuant to § 1000.44(a)(3) and (8) of this chapter and the corresponding steps of § 1000.44(b), except other source milk that is excluded from the computations pursuant to § 1051.60 (h) and (i) of this chapter; and
(d) Route disposition in the marketing area from a partially regulated distributing plant that exceeds the skim milk and butterfat subtracted pursuant to § 1000.76(a)(1)(i) and (ii) of this chapter.
See § 1000.86 of this chapter.
See § 1000.90 of this chapter.
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The parties hereto, in order to effectuate the declared policy of the Act, and in accordance with the rules of practice and procedure effective thereunder (7 CFR part 900), desire to enter into this marketing agreement and do hereby agree that the provisions referred to in paragraph I hereof, as augmented by the provisions specified in paragraph II hereof, shall be and are the provisions of this marketing agreement as if set out in full herein.
I. The findings and determinations, order relative to handling, and the provisions of § 1051.1 to 1051.90
II. The following provisions: § 1051.91
(a) Record of milk handled. The undersigned certifies that he/she handled during the month of May 2017
(b) Authorization to correct typographical errors. The undersigned hereby authorizes the Deputy Administrator, or Acting Deputy Administrator, Dairy Programs, Agricultural Marketing Service, to correct any typographical errors which may have been made in this marketing agreement.
Effective date. This marketing agreement shall become effective upon the execution of a counterpart hereof by the Department in accordance with section 900.14(a) of the aforesaid rules of practice and procedure.
In Witness Whereof, the contracting handlers, acting under the provisions of the Act, for the purposes and subject to the limitations herein contained and not otherwise, have hereunto set their respective hands and seals.
Signature
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration |