As published, the final regulation omitted a definition name in an amendatory instruction for § 531.203. This correcting amendment adds that name to the instruction so that the definition is properly revised in the CFR.

The Child Nutrition and WIC Reauthorization Act of 2004 (Pub. L. 108-265, June 30, 2004) amended Section 9(b) of the Richard B. Russell National School Lunch Act (NSLA) concerning verification of households' applications for free and reduced price meals in the National School Lunch Program (NSLP) and the School Breakfast Program (SBP). In sections 104 and 105, Public Law 108-265 added a number of provisions and also incorporated into the NSLA provisions concerning verification activities that were previously addressed only in regulations (7 CFR 245.6a) or guidance (primarily an instruction entitled “Eligibility Guidance for School Meals Manual,” August, 2001). New requirements and modifications made by Public Law 108-265 to existing procedures are discussed in this preamble.

The primary changes made by Public Law 108-265 concerning verification are:

• Transferring the responsibility for conducting verification from the school food authority (SFA) to the local educational agency (LEA);

• Establishing a new standard verification sample size of three percent which is both the maximum and minimum requirement;

• Reducing sample sizes for LEAs that improve their verification response rates;

• Permitting LEAs to replace applications in the sample, on a case-by-case basis, when complying with the request for verification may pose a particular challenge to the selected household;

• Requiring LEAs to conduct a confirmation review of applications selected for verification to check for approval errors;

• Requiring LEAs to have a telephone number that households may call, at no charge, for assistance with verification;

• Establishing direct verification methods which use records from certain public agencies;

• Requiring follow-up by the LEA with households selected for verification; and

• Revising deadlines for completing verification activities.

This preamble discusses these changes in this order to provide the reader with a sequential overview of the verification process and an understanding of any new procedures as well as how existing procedures are affected. Please note that other related provisions of Public Law 108-265 concerning free and reduced price eligibility and certification are addressed in separate rulemakings.

Because the statutory amendments addressed in this interim rule became effective on July 1, 2005, the Food and Nutrition Service (FNS) issued a series of implementation memoranda, as required by section 501(a) of Public Law 108-265, to help administering agencies initiate implementation of the statutory provisions and assess how these changes would affect their existing verification procedures. It was especially important for LEAs to know how verification efforts conducted for School Year 2004-2005 could affect their eligibility for alternative sample sizes in subsequent school years. The first memorandum was dated August 25, 2004 (SP-5) concerning the period for acceptable verification. Another memorandum dated November 15, 2004 (SP-8) concerned direct verification. The purpose of that memorandum, which also discussed the provision on mandatory direct certification of children who are members of households receiving food stamps, was to encourage State child nutrition agencies to work with their counterparts in State agencies administering means-tested programs that could be sources for direct verification. The next memorandum was dated November 19, 2004 (SP-9). That memorandum explained that if the non-response rate for School Year 2004-2005 was less than twenty percent, then the LEA would qualify to use an alternative sample size in School Year 2005-2006, the first year the new verification procedures were to be followed. It also explained that for School Year 2006-2007, an LEA was qualified to use an alternative sample size if there was at least a ten percent improvement between the non-response rate in School Year 2004-2005 and in School Year 2005-2006. Another memorandum was issued on March 10, 2005 (SP-13) addressing the new verification activities for LEAs including confirmation reviews, substitution of applications and follow-up. An April 19, 2005 (SP-14), memorandum discussed State education agency agreements with their counterparts to conduct direct verification. Other memoranda were issued on August 30, 2005 (SP-16), September 14, 2005 (SP-22), September 21, 2005 (SP-19), September 26, 2005 (SP-21), and September 27, 2005 (SP-18). These memoranda discussed and clarified various verification procedures. A July 25, 2006 memorandum (SP-27-2006) clarified that the standard sample size for verification is both a minimum and a maximum. A memorandum dated August 31, 2006 (SP-32-2006), provided clarification for direct certification. All of these memoranda may be found on the Child Nutrition Web site ( http://www.fns.usda.gov/cnd. )

Public Law 108-265 specified, in section 105(a), that in newly designated section 9(b)(3)(D)(ii) of the NSLA, the LEA must conduct the verification activities as well as activities related to certifying children as eligible for free or reduced price meals or free milk and section 108(b) added a definition of LEA in section 12(d)(4) of the NSLA. Prior to this amendment, the NSLA indicated that the SFA, which is defined only in regulations, had the responsibility for conducting certification and verification activities. An SFA, as provided in existing regulations at 7 CFR 210.2, is the governing body responsible for the administration of one or more schools and which has the legal authority to operate the NSLP and SBP in those schools. Because the NSLA now specifies that the LEA is responsible for NSLP and SBP certification and verification activities, this rule uses the term LEA. While this change may only have modest immediate effect in implementation and program operations, it is important because it recognizes that income eligibility determinations may be used for a broad array of educational-related benefits and are no longer used exclusively for meal benefits. We note that this distinction was discussed in the House Report 108-445, which accompanied H. R. 3873, a bill related to the Senate bill which eventually became Public Law 108-265. That House Report noted that “[b]ecause eligibility determinations* * *are used for purposes that extend beyond the receipt of free or reduced-price school meals, the Committee believes that school and district administrators, not food service personnel, should be held accountable for the accuracy of meal certifications reported to the state and the Secretary of Agriculture.”

The existing regulations at 7 CFR 245.6a(a)(1) specify the period of time for acceptable income documentation; e.g. , the household must submit information for the most recent full month available. This rule adds a paragraph at 7 CFR 245.6a(f)(2) to permit households to submit documentation verifying the source, amount and frequency of their income for any point in time within that period. Timing for documentation for direct verification purposes is discussed in V. Direct Verification.

Each school year, LEAs are required to verify the eligibility of children in a sample of household applications approved for free or reduced price meal benefits. Under the existing regulations at 7 CFR 245.6a(a), the SFA may verify a sample of randomly selected applications or a sample of focused applications. Under random sampling, all applications have an equal chance of being selected for verification and the sample size is the lesser of three percent (3%) or 3,000 approved applications. Under focused sampling, the sample size is the lesser of one percent (1%) or 1,000 of all approved applications selected from applications with household monthly income within $100 ($1200 annually) of the free/reduced price income limit PLUS the lesser of one-half of one percent (.5%) or 500 applications with a Food Stamp Program, Food Distribution Program on Indian Reservations (FDPIR) or Temporary Assistance to Needy Families Program (TANF) case number, provided in lieu of household income information.

Section 105(a) of Public Law 108-265 amended section 9(b)(3) of the NSLA, 42 U.S.C. 1758(b)(3), by specifying a new standard sample size as well as alternative sample sizes for which LEAs may qualify. The law also revised the date for determining the sample size.

The existing regulatory date for determining the sample size is October 31 of the current school year. Public Law 108-265 amended the NSLA at section 9(b)(3)(D), 42 U.S.C. 1758(b)(3)(D), to establish October 1 of the current school year as the date for determining the sample size based on the number of approved free and reduced price meal applications on file for the current school year. This action changes the date the sample size is determined from October 31 to October 1. The earlier date should assist households selected for verification and should result in changes in eligibility status being acted upon more quickly. The provision on the date for sample size determination may be found in this interim rule at 7 CFR 245.6a(a)(5).

While LEAs must determine the required sample size based on the number of applications on file as of October 1, it may be that they begin their verification activities prior to October 1. This should assist LEAs in completing verification within the required timeframes.

Section 105(a) of Public Law 108-265 amended section 9(b) of the NSLA, which specified that the new standard sample size is the lesser of three percent (3%) of all applications approved by the LEA for the School Year as of October 1 or 3,000 error prone applications approved by the LEA for the School Year as of October 1. Public Law 108-265 also added a definition of error prone application at section 9(b)(3)(D)(i)(I), which is all household applications approved by the LEA as of October 1 that indicate monthly income within $100 of the monthly limit or annual income within $1200 of the annual limit of the applicable income eligibility guidelines. This is similar to the way income applications are selected under the existing focused sampling.

The new standard verification requirement established in Section 105(a) of Public Law 108-265 amended section 9(b) of the NSLA, which concentrates on error prone applications in the interest of improved accuracy of eligibility determinations. The definitions of error prone applications and standard sample size may be found in this interim rule at 7 CFR 245.6a(a)(2) and 7 CFR 245.6a(c)(3), respectively.

Section 105(a) of Public Law 108-265 amended section 9(b)(3)(D)(i)(I)(bb) of the NSLA to permit the Secretary to establish other criteria for error prone applications in lieu of the error prone application standards. At this time, we are not establishing any other criteria and are requesting suggestions on potential criteria for error prone applications. Some possible parameters include different thresholds depending on household size, or different triggers for consideration as an error prone application. Commenters should keep in mind the limited amounts of household information included on the meal benefit application.

The NSLA, as amended by Public Law 108-265, specifies that the sample size is three percent or 3,000 applications, whichever is less. This is both a minimum and a maximum sample size. Local educational agencies may no longer choose to verify a larger sample of applications as part of their normal verification activity. This includes LEAs with a small number of free or reduced price applications that have previously verified all applications.

However, LEAs are encouraged, on a case-by-case basis, to verify “for cause” any application which is questionable. Verification for cause may include situations in which a household reports zero income or when the LEA is aware of additional income or persons in the household. If the LEA verifies a household's application for cause, the household must be notified in accordance with existing regulatory procedures and, if there is a decrease in benefits, the household would receive a notice of adverse action and would have the opportunity to appeal the LEA's decision. This interim rule is codifying this procedure at 7 CFR 245.6a(c)(7) which previously was only specified in program guidance.

Section 105(a) of Public Law 108-265 amended section 9(b)(3)(d)(iv) to provide two alternative sample sizes available to an LEA which qualifies through its efforts to improve the verification response rate (see below). The alternative sample sizes available to LEAs that qualify are: The lesser of 3,000 or three percent of all approved applications selected at random; or the lesser of 1,000 or one percent of error prone applications plus the lesser of 500 or one-half of one percent (0.5%) of approved applications with a Food Stamp Program, FDPIR or TANF case number provided in lieu of income information. These alternatives are also based on the number of approved applications as of October 1. The alternative sample sizes may be found at 7 CFR 245.6a(c)(4) in this interim rule.

Some LEAs will not have enough error prone applications to meet the standard or the 1000/1% element of that alternative sample size, as applicable. Section 9(b)(3)(D)(v) of the NSLA, as amended by section 105(a) of Public Law 108-265, states that the LEA must select additional approved applications at random to meet the applicable standard sample size or the 1000/1% element of that alternative. This provision is included in this interim rule at 7 CFR 245.6a(c)(5).

An LEA may qualify for an alternative verification sample size if it has a non-response rate for the preceding school year of less than twenty percent (20%). This requirement may be found in this interim rule at 7 CFR 245.6a(d)(2). In recognition of the effect of a household's failure to respond to verification requests, Section 105 of Public Law 108-265 added incentives to LEAs to decrease their non-response rates. In 2002, FNS conducted a review of nearly 3,500 applications selected for verification in 14 large SFAs. A key finding of this review was that non-response to the verification process accounted for the most changes in benefits. Seventy-seven to eighty percent (77-80%) of reductions/terminations of benefits were the result of non-response. In an effort to determine the extent of verification non-responses, FNS added a regulatory requirement (68 FR 53483; September 11, 2003) that SFAs report information on verification activities, including the number of non-responses to their State agency. Non-response rates are then reported annually by each State to FNS on the FNS-742, the Verification Summary Report. FNS will use the data from these reports to determine the effects on changes in non-response rates as a result of States' efforts to decrease the number of children who lose benefits because of the household's failure to respond.

The existing regulations do not define non-response rate. Section 105 of Public Law 108-265 added a definition of non-response rate. The statutory definition of non-response rate is the percentage of approved applications for which verification was not obtained after all required attempts; this definition may be found at 7 CFR 245.6a(a)(3) of this interim rule. (Also see the discussion in this preamble concerning what constitutes a non-response for the purposes of the LEAs' obligation for follow-up activities.)

Section 105 of Public Law 108-265 amended section 9(b)(3)(D)(iv)(IV) to provide criteria by which large LEAs may qualify for sample size alternatives. A large LEA is defined as one with more than 20,000 children approved by application (excluding children eligible through the direct certification process) as eligible for free or reduced price meals as of October 1 of the school year. To qualify for this alternative, a large LEA must have a non-response rate in the preceding school year which is at least ten percent (10%) below the rate for the second preceding school year. To meet this criterion, a large LEA would compare its non-response rates from one school year to another and determine if there is adequate improvement (at least ten percent (10%)) between the second preceding school year and the preceding school year.

For example, in School Year 2004-2005, the LEA had:

• 21,000 children approved for free and reduced price meal benefits based on a total of 6,000 approved applications; therefore, 180 household applications (3% of 6,000) are subject to verification;

• 45 households failed to respond to verification requests;

• Therefore, the non-response rate is 25% (45 ÷ 180 as a percentage).

The LEA would then calculate the level of improvement needed for School Year 2005-2006 as follows:

• The LEA must improve the non-response by at least 10%, with the 10% improvement determined by taking the previous non-response rate of 25% and multiplying it by 10%, which is 2.5%;

• The improvement level of 2.5% is then subtracted from the previous non-response rate (25.0% −2.5%) which is 22.5%;

• Therefore, the LEA needs a non-response rate of 22.5% or less to meet the 10% minimum improvement level in order to qualify to use an alternative sample size.

In School Year 2005-2006:

• The LEA again had 6,000 approved applications, so the sample size is 180 (3% of 6,000);

• The number of non-respondents is 40 which is a non-response rate of 22.2% (40 ÷ 180 as a percentage);

• 22.2% is less than the minimum non-response rate of 22.5% needed to qualify for this option; therefore, this LEA may use the alternative sample sizes in School Year 2006-07.

This provision may be found at 7 CFR 245.6a(d)(4) of this interim rule.

As discussed above, Section 105 of Public Law 108-265 permits LEAs to qualify for alternative sample sizes by improving the rate of household responses to their verification efforts. An LEA must annually determine if it can qualify to use an alternative sample size. If the LEA does not reevaluate its eligibility for alternative sample sizes on an annual basis, it must use the standard sample size in 7 CFR 245.6a(c)(3) of this interim rule. Once the LEA determines that it qualifies, it must notify the State agency of the intended use of an alternative sample size, specify which option and indicate the basis for qualifying. The State agency may establish a deadline for notification and may establish criteria for reviewing and approving use of alternative sample sizes. This provision is found at 7 CFR 245.6a(d)(1) of this interim rule.

Section 105 of Public Law 108-265 amended section 9(b)(3)(J) of the NSLA to allow an LEA to replace up to five percent of approved applications selected for verification upon individual review in accordance with criteria established by the Secretary. This provision effectively allows the LEA some flexibility in verifying applications from families/households that the LEA determines may not be able to satisfactorily respond to the verification request because of instability or communication difficulties. This should minimize the possibility that truly needy families may lose benefits simply due to their inability to fully understand the requirements of the verification process. This interim rule is adopting this approach as the criteria that LEAs would use to remove applications and then select substitutes.

This procedure would be conducted, if the LEA chooses to use this option, once the applications are selected for verification. For each application removed from the verification sample, the LEA would replace it with another approved application. The maximum number of replacements is five percent of the sample selected. Prior to any contact with the selected households, the LEA would consider which households may have difficulties with completing the verification process and replace those applications. Replacement applications would be selected in accordance with the LEA's applicable procedures ( i.e. , an error-prone application that is selected must be replaced with an error-prone application). Once the replacement process is complete, the LEA would notify the remaining households of the verification process. This provision does not permit an LEA to replace an application once the household is notified of its selection for verification. Further, this provision does not permit the LEA to eliminate a category of applications such as those from a particular group or community. The Department of Agriculture (the Department) will provide additional assistance to LEAs in selecting specific applications if it proves necessary. This provision may be found at 7 CFR 245.6a(e)(2) of this interim final rule.

Section 105(a) of Public Law 108-265 added provisions concerning follow-up with households selected for verification. These provisions are designed to improve and streamline the process for LEAs as well as to provide additional ways to assist households with completing the verification process, and reduce the non-response rate. Section 105(a) of Public Law 108-265 also added a requirement that LEAs must review applications selected for accuracy of each eligibility determination including math or other errors, prior to contacting the household. Section 105(a) also added section 9(b)(3)(F) allowing LEAs to use direct verification—a process in which information from specific means-tested programs is used as the basis for verifying application data.

Section 105(a) of Public Law 108-265 added a requirement that the LEA check the accuracy of the certification before proceeding with verification of any application. In the statute, this is referred to as a “preliminary review.” The Department is using the term “confirmation review” in this preamble and in the regulatory language to emphasize that, while this review is the first verification activity conducted by the LEA, it is a confirmation of the original decision made on the application. The confirmation review must be made by someone other than the person who made the original determination. This procedure is intended to detect any arithmetic or other errors prior to beginning verification so that the LEA can appropriately review the documentation submitted by the household. Please note that any LEA or school that conducts confirmation reviews of all applications as part of its certification process meets this requirement.

The LEA must document that confirmation reviews were conducted. To this end, the prototype free/reduced price application developed by FNS includes a signature line for the person who conducted the confirmation review. The LEA may also maintain a list of applications and their disposition with the reviewer's signature attesting to completing this requirement. The person who conducts the confirmation review must not be the person who makes the initial eligibility determination. However, the provision does not preclude the person who completes the confirmation review from conducting the verification process. These provisions are found at 7 CFR 245.6a(e)(1) in this interim rule.

Section 105(a) of Public Law 108-265 also recognizes that some LEAs use electronic data systems that provide a high level of accuracy in making the initial eligibility determination, in accordance with the certification requirements of the NSLP, on applications for free or reduced price meals. If an LEA uses an electronic data system that rejects inconsistent or incomplete application information and that accurately determines eligibility based on income level and household size or other information establishing categorical eligibility for free meals, it is not subject to the requirement to conduct separate confirmation reviews.

An LEA with such a system must notify the State agency that it is not conducting confirmation reviews because its initial eligibility system accurately processes applications consistent with the income eligibility guidelines. State agencies may require additional documentation of the accuracy of the system and may require the LEA to conduct confirmation reviews if they consider the system to be inadequate. This provision may be found at 7 CFR 245.6a(e)(1)(ii) of this interim rule.

The confirmation review can occur at one of two times—immediately after the initial review which makes it part of the certification process or as part of the verification process as a double check on only those applications selected for verification. When the confirmation review is part of the application process, the notice of eligibility reflects any adjustments made to the initial determination made as a result of the “up-front” confirmation review.

However, when the confirmation review is part of the verification process, the following requirements apply—

• If the confirmation review indicates that there should be an increase in benefits, the LEA must make the change as soon as possible, notify the household and proceed with verification;

• If the confirmation review shows that there should be a decrease in benefits from free to reduced price, the LEA should proceed with and complete verification before any notification of a new eligibility status is given. If the decrease is substantiated by the documentation submitted by the household or the household fails to respond (subsequent to at least one follow-up attempt by the LEA), the LEA will then provide the household with a notice of adverse action which will inform the household of the pending action and of their appeal rights.

• If the confirmation review indicates that the application should have been denied initially, the LEA would remove that application from the verification sample, select another like application (for example, another error prone application) and would provide the household with a notice of adverse action which will inform the household of the pending action to terminate their free or reduced price benefits and of their appeal rights.

These procedures are designed to avoid a possible unnecessary reduction in benefits. The verification notice requirements are not changed by adoption of the confirmation review; that is, the verification notice continues to explain that the application was selected, to detail the process and required documentation, to assign a deadline for receipt of documentation, and to provide a no-charge phone number to call for assistance. These provisions may be found at 7 CFR 245.6a(f) of this interim rule.

Section 105(a) of Public Law 108-265 provides for a procedure called “direct verification.” The NSLA was amended to include, at section 9(b)(3)(F), an option for LEAs to directly verify applications selected for verification. This procedure is similar to the existing direct certification process. Direct verification allows the LEA to request information from an agency administering one of the means-tested programs listed in the NSLA without contacting the household. Contact with one of the means-tested programs is the first verification effort. Although existing regulations do not specifically include direct verification, existing 7 CFR 245.6a(b)(3) provides for use of agency records from a State or local agency that administers the Food Stamp Program, FDPIR or TANF program which have similar eligibility limits and information maintained by the State employment office. This procedure is discussed in detail in this preamble under V. Direct Verification.

As indicated earlier, the existing regulatory provision requiring that the LEA notify the household in writing of its selection for verification (except for those households' whose eligibility status is verified through direct verification) did not change. However, Section 105(a) of Public Law 108-265 added provisions concerning contacts with households selected for verification.

The existing regulations do not require that the SFA provide a telephone number for households to call concerning verification, but the prototype application and verification forms as well as guidance encourage SFAs to provide a telephone contact for verification activities. Section 105(a) of Public Law 108-265 amended the NSLA to require that the written notification to households concerning verification include a telephone number that the household may call without charge. The telephone number could be toll-free. The toll-free telephone number must be to a source that can respond to the household's questions about the verification process. This provision is found at 7 CFR 245.6a(f)(5) of this interim rule.

Section 105(a) of Public Law 108-265 also added a requirement that the LEA make at least one follow-up attempt to contact any household that fails to respond to a request for verification. This rule does not specify the method of follow-up or the timing; the follow-up attempt may be in writing, via e-mail, through a telephone call or in person. The LEA must document the attempt. Many LEAs already perform follow-up contacts.

As permitted in section 9(b)(3)(G)(iv) of the NSLA, this rule allows the LEA to contract with a third party to conduct the follow-up activity. Any use of a third party is subject to the confidentiality requirements in Section 9(b) of the NSLA and 7 CFR Part 245. Any contract is also subject to the procurement requirements in existing 7 CFR 210.21. The provision on third party contracts may be found in 7 CFR 245.6a(f)(6) of this interim rule. The use of a third party to perform follow-up contacts would facilitate this process for LEAs which may not have the staff resources to readily absorb this required function. It is important to note, however, that the information the contractors will be using is subject to the use and disclosure requirements in the NSLA and program regulations. All such information must be carefully controlled, remains the property of the LEA and may not be used by the contractor for any other purpose.

A non-response, for the purposes of a follow-up contact, would arise when the LEA is unable to verify the household's status for school meal benefits for which it was certified. A non-respondent household would be a household that failed to provide documentation that enables the LEA to resolve or confirm its eligibility status.

Follow-up contacts can assist families in continuing meal benefits for their children as well as improve LEAs' verification completion rates. Examples of situations which indicate the need for a follow-up contact by the LEA would be—

• The household has not, in any way, contacted the LEA concerning its initial request for verification documentation.

• The household contacted the LEA and has submitted some but not all needed documentation. This could include needed written material from the household itself or the inability of the LEA to complete a collateral contact. In the latter situation, the household may need to indicate another collateral contact or provide other written evidence.

• The household contacted the LEA but the communication was inconclusive and the LEA needs additional information.

• Information obtained from a public agency is incomplete or inconsistent with information on the application.

The existing regulations establish the deadline for completing verification as December 15. Section 105(a) of Public Law 108-265 changed this date to November 15. This change will result in more timely determinations of the accuracy of children's eligibility for free or reduced price meals or free milk. Shifting this date closer to the beginning of the school year will allow LEAs to more promptly make necessary adjustments to eligibility status and thus target meal benefits more appropriately. The deadline is found at 7 CFR 245.6a(b)(1) of this interim rule.

Please note that the October 31 date for reporting data on the number of children eligible for free and reduced price meals and free milk has not changed. This date is a point in time used to ensure consistent data on program participants. The reference to the verification deadline in 7 CFR 210.18(h)(1)(iv) is also revised by this interim rule.

Section 105(a) of Public Law 108-265 also amended the NSLA to allow the State agency to extend the verification deadline to December 15 under criteria established by the Department. The regulations will now permit extensions of the verification deadline on a case-by-case basis, depending on justification submitted by the LEA. Reasons for extensions may include, but are not limited to, strikes or labor disputes or natural disasters. This provision is found at 7 CFR 245.6a(b)(2)(i) of this interim rule.

Section 105(a) of Public Law 108-265 amended the NSLA to address verification alternatives when local conditions warrant. Section 9(b)(3)(I) specifies that the Department may allow alternatives to the sample size, the sample size selection criteria and to the verification deadline when a natural disaster, civil disorder, strike or other similar conditions exist. This allows LEAs flexibility in completing verification activities when circumstances prevent timely or complete compliance with the requirements. The law directs the Secretary to establish criteria for extensions and alternatives. Requests under this provision would be necessary only if the LEA were requesting different sample size and selection criteria and/or an extension for completing verification beyond December 15. We emphasize that these requests would be made on a case-by-case basis and that approval would be given only when necessitated by unusual circumstances. Section 245.6a(b)(1)(ii) will now allow the State agency to request use of alternative sample sizes or sample selection and/or an extension of the deadline beyond December 15 through a written request to FNS.

As discussed briefly above, section 105(a) of Public Law 108-265 amended section 9(b)(3)(F) of the NSLA to permit LEAs to directly verify households through information obtained from the State agency administering the Food Stamp Program, FDPIR, TANF or State Medicaid programs under title XIX of the Social Security Act (42 U.S.C. 1396 et seq. ) and any similar income-tested program or other source of information determined by the Secretary.

Direct verification is a procedure that uses information directly obtained from an agency that administers a means-tested program (such as the Food Stamp Program) or that maintains information about income or wages (such as the State unemployment offices). Direct verification is similar to using agency records as a means of verification of information on a household's application. However, direct verification is conducted prior to contacting the household of its selection for verification. If the source of the direct verification information confirms the household's eligibility status, the household will not need to be notified of its selection as verification was completed through the agency contacts.

The use of direct verification can help LEAs in completing the verification process in a timely manner and lower the non-response rate since households do not need to be contacted if the eligibility status can be verified through extant data sources.

The direct verification process is discussed below as follows: (1) Information sources and the age and type of acceptable data; (2) direct verification using Food Stamp Program, FDPIR and TANF sources; (3) direct verification using state Medicaid program sources; (4) direct verification using State Children's Health Insurance Program (SCHIP) sources; and (5) using Medicaid/SCHIP information in States with higher income limits.

Section 9(b)(3)(F)(i) of the NSLA specifies that direct verification may be achieved through systems of records maintained by the public agency administering the Food Stamp Program, FDPIR, TANF, or the State Medicaid program. It also permits the Department to include similar means-tested programs or sources of information. This interim rule incorporates the statutorily identified programs at 7 CFR 245.6a(g). Please note that while children are categorically eligible for free meals if they are in a Food Stamp Program or FDPIR household or in most TANF households (see below for a discussion of the exception), Medicaid recipients are not categorically eligible. In addition, because income eligibility limits for Medicaid vary from State to State and may exceed the threshold for free/reduced price meal benefits, a State agency must first determine what the limits are in its State. It must then determine whether the Medicaid office is able to provide household income information or an indication (such as the percentage of the Federal poverty line) of whether the household's income is within the limits for either free or reduced price benefits. These are the first steps in implementing direct verification with Medicaid.

Under the authority in the NSLA, we have determined that SCHIP, which is authorized under title XXI of the Social Security Act, should be included as a potential source for direct verification as it is an adjunct of the Medicaid program. As with the Medicaid program, SCHIP recipients are not categorically eligible for free or reduced price benefits and the income limits vary by State. Again, the first step for a State agency would be to determine how the SCHIP program is structured in its state. SCHIP is defined in 7 CFR 245.2 of the existing regulations.

Public Law 108-265 specified that the direct verification information from public agencies must be the most recent information available. The “most recently available information” is described in the NSLA as information reflecting program participation or income during the 180-day period immediately prior to the date of school meals application. The data need only indicate eligibility for the program at that point in time, not that the child was certified for that program's benefits within the 180-day period.

In order to be consistent with the documentation permitted for households notified of their selection for verification, LEAs have flexibility with identifying acceptable documentation for direct verification purposes. As discussed earlier, household being verified may provide documentation for any point in time between the month prior to application and the time the household is required to provide income documentation. For consistency between verification and direct verification activities, this interim rule, at 7 CFR 245.6a(g)(5), therefore states that direct verification efforts may use information from any point in time between the month prior to application and the time direct verification is conducted. In other words, for direct verification LEAs must use information (which may never be more than 180 days old) that is the most recent available information; information from any one month from the period one month prior to application through the month direct verification is conducted; or information for all months from the month prior to application through the month direct verification is conducted.

LEAs or State agencies conducting direct verification must only submit the names of the eligible children and not names of other members of the household, such as parents, grandparents or non-school age siblings. This provision may be found at 7 CFR 245.6a(g)(1) of this interim rule.

Under section 9(b)(3)(F)(i)(I)-(III) of the NSLA, as amended by Public Law 108-265, LEAs may submit a list of identifiers for children listed on applications selected for verification to the agencies that administer the Food Stamp Program, FDPIR or TANF.

These programs would then indicate if they have information that supports the child's eligibility for free or reduced meal benefits. This may be done even if the school meals application does not indicate receipt of benefits from one of these programs. This “direct verification” contact would occur prior to notifying the household of its selection for verification. If the data obtained was within the time frames discussed above and shows that a child was a member of a household participating in one of these programs, the child's eligibility for free meals is validated. If data indicates that one eligible child is a member of a household participating in the FSP, FDPIR, TANF, or Medicaid, all eligible children in that child's household are verified. If none of the children's participation is confirmed by the direct verification source, regular verification procedures must be followed. For consistency, this approach is now applied to applications selected for verification that contain case numbers. This change may be found at 7 CFR 245.6a(f)(3) in this interim rule.

With respect to the TANF program, eligibility for that program continues to be subject to the provision in the NSLA concerning TANF eligibility standards in place in 1995. Section 9(d)(2)(C) of the NSLA specifies that a child is eligible for free meals if the standards used for the State's TANF program are comparable to or more restrictive than the eligibility standards in effect on June 1, 1995. Therefore, direct verification to determine eligibility for free meals based on TANF information may be used only in those States that currently meet this criterion or in States that can provide the household's income level or indicate that the family's income is less than 130% of the applicable poverty guideline. Please note that while this section of the NSLA also addresses eligibility for reduced price meals, children in households receiving Food Stamp Program, TANF or FDPIR benefits are categorically eligible for free meal benefits.

Public Law 108-265 amended the NSLA at section 9(b)(3)(F) to allow use of State Medicaid income and program participation information as sources of direct verification. The NSLA specifies that eligibility for free meals may be confirmed when the Medicaid income limit is 133% or less of the official poverty line and that eligibility for reduced price meals may be confirmed when the Medicaid income eligibility limit is no more than 185% of the official poverty line.

The LEA may verify children's eligibility for either free or reduced price meals based on Medicaid data. Medicaid and SCHIP (as added under the discretion provided to the Secretary) eligibility standards vary from State to State. If the State's Medicaid limit is between 133% and 185% of poverty, the Medicaid/SCHIP agency must also be able to provide a household's income and size or the percentage of the official poverty line that the household's income represents; otherwise, direct verification may not be feasible when there are different eligibility standards for receipt of Medicaid.

If the State's Medicaid program's eligibility standards are 133% or under of the poverty limits, the LEA can use information from the Medicaid agency to verify free status. While the income limit for free meals is 130% of the applicable poverty guideline, section 105(a) of Public Law 108-265 permits use of the greater percentage. The 133% figure was used because this is the Medicaid limit in a number of states for school-age children. When the Medicaid agency can identify which households are participating, the LEA has documented the child's eligibility for free meals. No additional individual documentation is needed. In states with Medicaid limits of 133% or below, there is no need to have the household's income because eligibility status is confirmed solely through Medicaid participation. These provisions may be found at 7 CFR 245.6a(g)(3) of this interim rule.

If the State's Medicaid limit is between 133% and 185% of the poverty limits and the Medicaid agency can provide the percentage or amount of income used, the LEA could use Medicaid information to verify the child's eligibility either for free or for reduced rice benefits, depending on the basis for the child's Medicaid eligibility. In these states, the agency administering the Medicaid program must be able to provide the income amount and household size used to determine Medicaid eligibility or the percentage of the applicable poverty guideline for that income. That information can be used to confirm the child's status for free or reduced price meals, as appropriate. These provisions may be found at 7 CFR 245.6a(g)(4) of this interim rule.

Some States have used their SCHIP grants to expand their Medicaid coverage for children through higher income limits. Other States have separate SCHIP programs. For the latter States, the State agency must determine the income limits and establish the same type of parameters discussed above for State Medicaid programs.

For the purposes of direct verification, the LEA submits the names and other identifiers, such as birthdates and addresses for a child certified for free or reduced price meals and selected for verification. Therefore, direct verification potentially establishes a child's participation in one of the eligible programs, thereby confirming their eligibility for free or reduced price meals. Any child listed on the application who is certified for free or reduced price school meals who is established as participating in one or more sources of direct verification (within the applicable limits for the various programs) is verified. The LEA has completed verification for that household and household contact is not required. If the information received from sources of direct verification is inconsistent or inconclusive, the LEA must notify the household that it is subject to verification and the household must provide documentation of their income.

Public Law 108-265 expanded Section 9(b)(3)(F) of the NSLA to permit the use of direct verification by LEAs, although it is still optional. The law specifies that the decision to use direct verification is made at the LEA level. State agencies must support and assist any LEA's decision to use direct verification. State agencies should also work towards establishing contacts with their state-level counterparts to coordinate direct verification use and to develop a State-wide system to encourage the use of direct verification by LEAs.

If an LEA chooses to use direct verification, the State agency must work with the LEA in determining the best method for doing direct verification and assist in facilitating contacts with State-level agencies, as needed, to establish the mechanism for doing direct verification. Because administrative systems vary greatly among States, the Department is not establishing any specific procedural criteria in the regulations for conducting direct verification. This will provide State agencies with flexibility in developing procedures that best meet their needs.

Section 104(b) of Public Law 108-265 amended the Food Stamp Act of 1977 by adding Section 11(u), 7 U.S.C. 2020 (u), to require an agreement between the State agency administering the school meals programs and the State agency administering the Food Stamp Program. The Food Stamp Act of 1977 requires that State agencies to establish procedures to conduct direct verification for children eligible for free or reduced price school meals. All States have such agreements in place. For direct verification with other programs, the Department suggests that the State education agency enter into an agreement spelling out procedures, available data, etc., with each different State agency that will be a direct verification source.

Public Law 108-265 allows the Secretary to permit direct verification with similar means-tested programs or other sources of information. Prior to extending direct verification to additional programs, the Department would need to determine which programs have comparable eligibility standards and which are accessible to State agencies and/or LEAs. As mentioned above, we have extended direct verification to SCHIP. To assist us in expanding this provision further, we are requesting comments on any additional programs that could be included as sources for direct verification.

Some of the existing regulations in 7 CFR 245.6a are modified by this interim rule while others are unchanged but may be relocated. Under existing regulations, directly certified households are not subject to verification because their status was already determined through contact with the appropriate agency. This exception is not changed. However, the following categories of children were added as not subject to verification as authorized by Public Law 108-265—children who are homeless, as defined under section 725(2) of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(2)); children served by a runaway and homeless youth grant program established under the Runaway and Homeless Youth Act (42 U.S.C. 5701 et seq. ); or migratory children as defined in section 1309 of the Elementary and Secondary Education Act of 1965 (ESEA) (20 U.S.C. 6399). These groups will also be addressed in separate rulemakings. This provision is relocated by this interim rule from existing 7 CFR 245.6a(a)(5) to 7 CFR 245.6a(c)(2).

Existing regulations also provide for other exceptions from verification for children in residential child care institutions and schools. Further, LEAs using the special certification/reimbursement procedures in 7 CFR 245.9 are not required to conduct verification except in the base year when applications are submitted. These exceptions remain in effect but are relocated from 7 CFR 245.6a(a)(5) to 7 CFR 245.6a(c)(2) by this interim rule.

LEAs, through their State agencies, submit the FNS-742, School Food Authority Verification Summary Report. We are clarifying, in newly redesignated 7 CFR 245.6a(h), that LEAs and State agencies only report on statutorily required verification activities. For example, an LEA would only report on the results of verifying the required three percent (up to 3,000 applications) of error prone applications. The verification report would not include any applications verified for cause as permitted in 7 CFR 245.6a(c)(7) as set forth in this interim rule.

The following chart shows other existing verification provisions that have been relocated and rewritten to improve their clarity and conformity with the provisions revised by this interim rule. These policies and procedures provided in these provisions are otherwise unchanged.

This interim rule has been determined to be significant and was reviewed by the Office of Management and Budget under Executive Order 12866.

This interim rule amends regulations to reflect changes made to the NSLA by Public Law 108-265, the Child Nutrition and WIC Reauthorization Act of 2004, regarding the verification of applications approved for free or reduced price meals in the NSLP and SBP. The provisions of this interim rule are expected to enhance verification efforts which will improve the accuracy of benefits distribution. FNS estimates that the net increase in administrative burden from implementing the provisions of this interim rule will be outweighed by the benefits of improved accuracy in the targeting of benefits.

The interim rule is expected to better target NSLP and SBP benefits to eligible children. The rule's requirement that LEAs make greater use of an error-prone sampling method to select applications for verification is expected to reduce the value of improper federal reimbursements. Increased reliance on focused sampling should also reduce the loss of benefits to otherwise eligible applicants who fail to respond to verification requests. Other provisions, such as moving the verification process closer to the beginning of the school year, and requiring LEAs to help applicants through the verification process, are also expected to better align benefit approval with applicant eligibility. Over the fiscal year 2008-2012 period, FNS estimates that the verification process will reduce improper federal meal reimbursements by $19.7 million. This estimate considers only the direct savings that result from recertifying a subset of children whose applications were selected for verification. Additional savings are expected to follow as the data collected from the verification process, and from the FNS' Access, Participation, Eligibility and Certification (APEC) study, facilitates the development of guidance, training, and policy options to further reduce certification error.

FNS estimates that the net increase in administrative burden to LEAs will total $0.13 million over the fiscal year 2008-2012 period.

This interim rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). Nancy Montanez Johner, Under Secretary for Food, Nutrition and Consumer Services, has certified that this rule will not have a significant economic impact on a substantial number of small entities. Local educational agencies already must conduct verification of a sample of applications for free and reduced school meals. This interim regulation provides additional options for local educational agencies that improve their verification techniques. The Department of Agriculture (the Department) does not anticipate any adverse fiscal impact resulting from implementation of this rulemaking; rather, the Department anticipates that benefits will be more targeted towards eligible children and that local educational agencies will have incentives to work towards improvements in their verification efforts to be able to have more flexibility. Although there may be some burdens associated with this rule, the burdens would not be significant and would be outweighed by the benefits of improved accuracy in the targeting of benefits and in enhanced flexibility for local school districts.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes a requirement for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the Department generally prepares a written statement, including a cost-benefit analysis. This is done for proposed and final rules that have “Federal mandates” which may result in expenditures of $100 million or more in any one year by State, local, or tribal governments, in the aggregate, or by the private sector. When this statement is needed for a rule, section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives. It must then adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule.

This interim rule contains no Federal mandates of $100 million or more in any one year (under regulatory provisions of Title II of the UMRA) for State, local, and tribal governments or the private sector. Thus, this interim rule is not subject to the requirements of sections 202 and 205 of the UMRA.

The National School Lunch Program and the School Breakfast Program are listed in the Catalog of Federal Domestic Assistance under Nos. 10.555 and 10.553, respectively. For the reasons set forth in the final rule in 7 CFR Part 3015, Subpart V, and final rule related notice at 48 FR 29114, June 24, 1983, these programs are included in the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials.

Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulation describing the agency's considerations in terms of the three categories called for under section (6)(a)(B) of Executive Order 13132:

Prior to drafting this interim final rule, we received input from State and local agencies at various times including national and regional meetings. The Child Nutrition Programs are State administered, federally funded programs. FNS sponsored a meeting in September 2004 to brief State agencies on the amendments to the NSLA and Child Nutrition Act made by the Child Nutrition and WIC Reauthorization Act of 2004 (Pub. L. 108-265). FNS received a number of comments from participants at that meeting as well as from meetings held within various states. In addition, FNS staff had informal and formal discussions with State and local officials on an ongoing basis regarding program implementation and performance. Upon request, representatives of FNS have attended state-sponsored meetings to brief both State and local cooperators on the changes and to obtain feedback that forms the basis for any discretionary decisions in this rule.

State and local agencies are generally concerned about the paperwork and financial burdens placed on food service to conduct verification, especially in light of the potential for larger sample sizes and additional follow-up activities while local educational agencies are continuing to implement other changes to the verification reporting process.

The issuance of an interim rule was permitted by amendments made to the Richard B. Russell National School Lunch Act in section 501(b) of Public Law 108-265. This rule implements provision of Public Law 108-265. FNS plans to assist States with implementing the revised verification procedures and to issue additional guidance as needed in response to operational issues. The comment period will also allow States to share their operational concerns so that problems may be addressed in development of the final rule.

We believe that we adequately address the issues of paperwork and financial burdens by providing State and local flexibility in the manner in which local educational agencies implement the required verification sample sizes and other required activities. Additionally, expansion of the categories of children who are not subject to verification reduces the burden placed on local educational agencies and households. Those local educational agencies can reduce the number of applications/households that are subject to verification by qualifying for one of the verification sample size alternatives.

This rule is intended to have a preemptive effect on any State law that conflicts with its provisions or that would otherwise impede its full implementation. To the extent the rule includes discretionary changes, the Department has established compliance timeframes which give due consideration to State agency processes for notification of customers and stakeholders for the implementation of the new procedures in local offices.

This interim final rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would impede its full implementation. This rule is not intended to have retroactive effect unless that is specified in the Dates section of the preamble of the rule. Before any judicial challenge to the provisions of this rule or the application of its provisions, all administrative procedures that apply must be followed. The only administrative appeal procedures relevant to this interim rule are the hearings that local educational agencies must provide for decisions relating to eligibility for free and reduced price meals and free milk which are found at 7 CFR 245.7 for the NSLP, SBP, and SMP in schools.

FNS has reviewed this interim rule in accordance with the Department Regulations 4300-4, “Civil Rights Impact Analysis,” to identify any major civil rights impacts the rule might have on children on the basis of race, color, national origin, sex, age or disability. After a careful review of the rule's intent and provisions, FNS has determined that this interim rule facilitates the participation of all eligible participants and does not establish any new burdens.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR part 1320) this rule contains information collections that are subject to review and approval by the Office of Management and Budget (OMB) before they can be implemented. FNS invites comments on information collection requirements contained in this interim rule for which FNS intends to seek approval. Those requirements will not become effective until approved by OMB. When these information collection requirements have been approved, FNS will publish separate action in the Federal Register .

Comments on the information collection requirements contained in this interim rule will be accepted under an abbreviated comment period of 30 days. To be assured of consideration, comments must be received by January 20, 2009.

Comments may be sent to the Office of Information and Regulatory Affairs (OIRA), either by fax to 202-395-6974 or by e-mail to OIRA submission@omb.eop.gov marked “attention, desk office for FNS.” Please also send a copy of your comments or requests for information to: Ms. Lynn Rodgers-Kuperman, Chief, Program Analysis and Monitoring Branch, Child Nutrition Division, Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park Center Drive, Room 640, Alexandria, Virginia 22302. Comments will also be accepted if sent through http://www.regulations.gov by 11:59 p.m. on January 20, 2009. For further information or copies of the information collection, please contact Ms. Rodgers-Kuperman at the above address.

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 will have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. All responses to this Notice will be summarized and included in the request for OMB approval and will become a matter of public record.

Title: 7 CFR Part 245 Determining Eligibility for Free and Reduced Price Meals and Free Milk in Schools.

OMB Number: 0584-0026.

Expiration Date: 01/21/2010 .

Type of Request: Revision of currently approved information collection.

Abstract: Section 105 of the Child Nutrition and WIC Reauthorization Act of 2004 (Pub. L. 108-265), amends section 9(b) of the Richard B. Russell National School Lunch Act (42. U.S.C. 1728(a)) by revising the requirements and procedures for conducting verification of a sample of applications approved for free or reduced price school meals. These new requirements are being codified under 7 CFR Part 245, Determining Eligibility for Free and Reduced Priced Meals and Milk in Schools, and 7 CFR Part 210, National School Lunch Program.

This interim rule implements direct verification procedures that allow local education agencies (LEAs) to request information from a State or local agency administering the Food Stamp Program, Food Distribution Program on Indian Reservations or Temporary Assistance to Needy Families Programs, which have similar eligibility limits without contacting the household directly. Without this provision, all households would be contacted when selected for verification. Also, this rule requires LEAs to follow up with any household that fails to respond to a request for verification. The paperwork burden for LEAs is due to the requirement to conduct direct verification with the Food Stamp Program and because of the requirement to conduct follow-up with households that fail to respond to the request to provide documentation to verify eligibility.

Affected Public: Local educational agencies.

Estimated Number of Respondents: 16,342.

Estimated Number of Responses per Respondent: 2.

Estimated Hours per Response: .09.

Estimated Total Annual Burden: 1,498.6.

FNS is committed to compliance 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.

This interim rule is being published without prior notice or public comment under authority of 5 U.S.C. 553(b)(3)(A) and (B). In recognition of the need to implement the provisions on verification and direct verification, as promptly as possible, in order to reduce the burden on participants and local educational agencies, section 501(b)(4) of Public Law 108-265 allows the Department to issue interim rules on these and other provisions in that law. This rule implements a number of provisions of Public Law 108-265 which were described in very specific statutory language. Consequently, these procedures were largely non-discretionary; including standard and alternative verification sample sizes, local educational agency qualifications for using an alternative sample size, detailed requirements for confirmation reviews and household contacts and mandatory dates for various aspects of the verification process. Further, due to the statutory mandate in section 501(a) of Public Law 108-265 to implement these provisions as soon as possible through guidance, these procedures have been in effect since School Year 2004-2005. Based on these factors, the Department has determined in accordance with 5 U.S.C. 553(b) that Notice of Proposed Rulemaking and Opportunity for Public Comments prior to codification is unnecessary and contrary to the public interest. However, this rule is being promulgated as an interim rule and, as such, provides for a public comment period of 90 days. Comments received during this period will enable the Department to make, in the final rule, identified and need changes resulting from the experience of local educational agencies.

The emerald ash borer (EAB, Agrilus planipennis ) is a highly destructive wood-boring insect that attacks ash trees ( Fraxinus spp., including green ash, white ash, black ash, and several horticultural varieties of ash). The insect, which is indigenous to Asia and known to occur in China, Korea, Japan, Mongolia, the Russian Far East, and Taiwan, eventually kills healthy ash trees after it bores beneath their bark and disrupts their vascular tissues. We do not know the full extent of the distribution of EAB throughout Asia and in other regions, nor do we know if there are other serious plant pests affecting Fraxinus spp. plants for planting present elsewhere in the world.

The regulations in 7 CFR part 319, “Foreign Quarantine Notices,” prohibit or restrict the importation of certain plants and plant products to prevent the introduction or dissemination of plant pests and noxious weeds in the United States. In an interim rule  1 effective and published in the Federal Register on September 23, 2008 (73 FR 54665-54667, Docket No. APHIS-2007-0111), we amended the regulations in § 319.37-2(a) to prohibit imports of ash ( Fraxinus spp.) plants for planting, except seed, from all foreign countries, with the exception of areas of Canada that are not regulated for EAB. To reflect that prohibition, we also amended § 319.37-7(a)(3) by removing Fraxinus spp. from the list of plants requiring postentry quarantine.

Comments on the interim rule were required to be received on or before November 24, 2008. We received one comment by that date. The comment was from a State entomologist who expressed support for the interim rule. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule without change.

This action also affirms information contained in the interim rule concerning Executive Order 12866 and the Regulatory Flexibility Act, Executive Order 12988, and the Paperwork Reduction Act. Further, for this action, the Office of Management and Budget has waived its review under Executive Order 12866.

The regulations in “Subpart-Fruits and Vegetables” (7 CFR 319.56 through 319.56-47, referred to below as the regulations) prohibit or restrict the importation of fruits and vegetables into the United States from certain parts of the world to prevent the introduction and dissemination of plant pests that are new to or not widely distributed within the United States.

On May 16, 2008, we published in the Federal Register (73 FR 28372-28377, Docket No. APHIS-2007-0144) a proposal  1 to amend the fruits and vegetables regulations to allow the importation into the continental United States of baby squash and baby courgettes from Zambia. As a condition of entry, we proposed to require that both commodities be produced in accordance with a systems approach that would include requirements for pest exclusion at the production site, fruit fly trapping inside and outside the production site, and pest-excluding packinghouse procedures. We also proposed to require that both commodities be accompanied by a phytosanitary certificate with an additional declaration stating that the baby squash or baby courgettes have been produced in accordance with the proposed requirements.

We solicited comments concerning our proposal for 60 days ending July 15, 2008. We received one comment by that date, from a representative of a State government. The issues raised in that comment are discussed below.

The systems approach we proposed was designed to mitigate, among other quarantine pests, three moths, Diaphania indica, Helicoverpa armigera, and Spodoptera littoralis. The commenter stated that, because these pests are internal feeders, inspection and detection at origin and destination are problematic, and reliance on inspection places the commenter's State at high risk of introduction of these pests. The commenter further stated that the two pests that have the highest unmitigated risk, H. armigera and S. littoralis, are of great concern in the commenter's State. Yet, the commenter stated, there are no real mitigative measures to exclude these pests other than insect-exclusionary greenhouses; there is no trapping requirement or specific inspection regime to assure there have been no breaches of greenhouses.

Under the final rule, the greenhouses and packinghouses will have to be approved jointly by the Zambian national plant protection organization (NPPO) and APHIS and designed to be pest-free. In addition, inspection will not be performed solely on the commodities; the greenhouses themselves will be inspected monthly for the presence of the pests. If any quarantine pests are found in a greenhouse, that greenhouse will be prohibited from exporting until corrective action is taken. Thus, we are employing more mitigations than simple commodity inspection to prevent baby squash and baby courgettes imported from Zambia from being infested with these pests.

We have employed measures similar to the ones we proposed to mitigate the risk associated with H. armigera and S. littoralis in other import programs. For example, the regulations in § 319.56-28(e), which allow the importation of tomatoes from Australia under certain conditions, require greenhouses to be registered with and approved by the Australian NPPO and to be inspected by the Australian NPPO to establish freedom from H. armigera and S. littoralis. Similar measures are used to mitigate the risk associated with H. armigera and S. littoralis in the regulations governing the importation of peppers from Korea in § 319.56-42. These measures have been effective at preventing the introduction of H. armigera and S. littoralis into the United States via the importation of those commodities. We have determined that they will be equally effective when employed to prevent the introduction of these pests via baby squash and baby courgettes from Zambia.

We proposed that the Zambian NPPO or its approved designee be authorized to carry out certain functions. The commenter asked who would be the designee and who would approve the designee.

As discussed in the proposed rule, an approved designee is an entity with which the NPPO creates a formal agreement that allows that entity to certify that the appropriate procedures have been followed. Thus, the NPPO approves an approved designee. The approved designee can be a contracted entity, a coalition of growers, or the growers themselves. APHIS authorizes NPPOs to use designees to perform certain phytosanitary functions in other import programs, such as the cut flower import program described in § 319.74-2.

The commenter stated that the proposal indicates APHIS can monitor the production sites before and during harvest. The commenter further stated that the word “can” is meaningless and recommended that the text in question read “APHIS will monitor the production sites.”

The proposed language specifically stated that APHIS must be allowed to inspect or monitor the greenhouses. We consider this language to be appropriate, as it may not be necessary for APHIS to inspect or monitor the greenhouses in all cases. We will inspect or monitor the greenhouses if we have reason to believe that the risks associated with the quarantine pests might not be effectively mitigated in the greenhouses.

The commenter stated that the use of McPhail traps as a detection tool is problematic, as they have very limited sensitivity in detecting low-level fruit fly populations.

We have determined that McPhail traps are the appropriate type to use for the trapping due to their capacity to catch important fruit fly species of quarantine significance for which no specific lures exist, such as the Dacus spp. fruit flies identified as quarantine pests in the pest risk assessment. Accordingly, the risk management document provided along with the proposed rule reflects this. However, the regulations specifically require the use of traps approved by APHIS, meaning that we can change the type of fruit fly trap used if a trap better suited to Dacus spp. fruit flies becomes available.

Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, without change.

This final rule has been reviewed under Executive Order 12866. The rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

In accordance with the Regulatory Flexibility Act, we have analyzed the potential economic effects of this action on small entities.

This analysis examines potential impacts for U.S. small entities from the importation of baby squash and baby courgettes (zucchini) from Zambia into the United States. The analysis is set forth in terms of squash generally. As background, we provide a brief overview of squash production and trade by the United States. This is followed with an estimate of price and welfare effects of the rule based on assumed levels of squash imports from Zambia. Finally, we describe the expected impact on small entities.

The United States is a major squash producer and importer. 2 The United States produced 430,100 metric tons (MT) of squash valued at $229 million in 2006, while imports that year totaled 240,590 MT. Squash production occurs in many States. However, the top 10 States (Georgia, Florida, California, New York, Michigan, Ohio, Texas, North Carolina, Oregon, and New Jersey) accounted for 98 percent of total cash receipts in 2006. 3

As shown in table 1, U.S. squash production increased from 398,800 MT in 2002 to 430,100 MT in 2006, an annual growth rate of about 1.6 percent. Similarly, consumption increased from 605,970 MT to 665,730 MT. During the same period, U.S. squash imports increased from 210,930 MT in 2002 to 240,590 MT in 2006. Mexico accounted by far for the largest share of U.S. imports (95.6 percent), followed distantly by Costa Rica (1.6 percent), and Canada (1.1 percent). Other minor suppliers include Honduras, Panama, New Zealand, Guatemala, and Nicaragua. The United States was a net importer throughout this period, with average annual imports (over 234,000 MT) dwarfing exports (less than 4,300 MT). Imports from Zambia will be small compared to an already large import base. 4

We estimate the impact of baby squash and baby courgettes imports from Zambia on U.S. production, consumption, and prices using a net trade welfare model. The data used were obtained from the Foreign Agricultural Service (FAS); The Global Trade Atlas: Global Trade Information Services, Inc., Country Edition, August 2007; and United Nations' Food and Agriculture Organization FAOstat data ( http://faostat.fao.org ). The demand and supply elasticities used are −0.66 and 0.12, respectively. 5

Our analysis is in terms of the overall squash industry of the United States. If data were available that would allow us to estimate the impact of this rule only in terms of the markets for baby squash and baby courgettes, we would expect the effects to be somewhat larger than those reported here, but still insignificant.

We model three levels of squash exports to the United States from Zambia: (1) 260 MT, average annual global exports of squash by Zambia (2004-2006); (2) 400 MT, the amount of squash that the Government of Zambia has projected would be exported to the United States; and (3) 1,000 MT, a quantity that is 2 1/2 times Zambia's projected exports to the United States.

Table 2 presents the changes that we estimate could result from the final rule. These include annual changes in U.S. consumption, production, wholesale price, consumer welfare, producer welfare, and net welfare. The medium level of assumed squash exports to the United States of 400 MT (as projected by the Government of Zambia) would result in a decline of $0.89 per MT in the wholesale price of squash and a fall in U.S. production of 41 MT. Consumption would increase by 359 MT. Producer welfare would decline by $347,180 and consumer welfare would increase by $558,240, yielding an annual net benefit of about $211,060. Other results are as shown in table 2 below.

In all three scenarios, consumer welfare gains would outweigh producer welfare losses. Even in the third scenario, in which we assume imports would total 2 1/2 times the level projected by the Government of Zambia, the decline in producer welfare would represent only about two-tenths of 1 percent of cash receipts received from the sale of domestic squash products. The price decline in this third scenario also would be only about two-tenths of 1 percent. Thus, our analysis indicates that U.S. entities will be unlikely to be significantly affected by this rule.

The Small Business Administration (SBA) has established guidelines for determining which types of firms are considered to be small entities under the Regulatory Flexibility Act. This rule could affect U.S. producers of fresh vegetables (North American Industry Classification System 111219) and some importers of fresh squash. Vegetable-producing establishments are classified as small if their annual receipts are not more than $750,000. 6 According to the 2002 Census of Agriculture, there were 11,035 squash operations with production valued at $288 million. These facilities are considered to be small if their annual receipts are not more than $750,000. Over 98.6 percent of these operations (10,883) are considered to be small while the rest (152) are considered large. Based on share of acreage (nearly 60 percent of the total), the small operations had combined annual cash receipts of about $168 million and an average income of about $15,500, while the large operations had combined sales of about $120 million with an average income of about $787,900. As shown in table 3, the impact of potential squash imports on U.S. producers as a result of this rule will be small. The decrease in producer welfare per small entity is less than $47, or about 0.30 percent of average annual sales of small entities, when we assume 1,000 MT of squash are exported to the United States from Zambia (2 1/2 times Zambia's projected annual exports).

Again, table 3 considers a level of importation that is 2 1/2 times the projected imports of baby squash and baby courgettes; at expected levels of importation, the expected economic impacts would be even smaller. In addition, this analysis assumes that gains to Zambian exporters do not come at the expense of any exporting countries; if any displacement occurs, the impact of the rule would be reduced further.

Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.

This final rule allows baby squash and baby courgettes to be imported into the United States from Zambia. State and local laws and regulations regarding baby squash and baby courgettes imported under this rule will be preempted while the fruit is in foreign commerce. Fresh vegetables are generally imported for immediate distribution and sale to the consuming public, and remain in foreign commerce until sold to the ultimate consumer. The question of when foreign commerce ceases in other cases must be addressed on a case-by-case basis. No retroactive effect will be given to this rule, and this rule will not require administrative proceedings before parties may file suit in court challenging this rule.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), the information collection or recordkeeping requirements included in this rule have been approved by the Office of Management and Budget (OMB) under OMB control number 0579-0347.

The Animal and Plant Health Inspection Service is committed to compliance 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. For information pertinent to E-Government Act compliance related to this rule, please contact Mrs. Celeste Sickles, APHIS' Information Collection Coordinator, at (301) 851-2908.

The Office of Management and budget (OMB) has determined that this rule is non-significant for the purposes of Executive Order 12866 and, therefore, it has not been reviewed by OMB.

This rule does not constitute a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35).

FCIC is committed to complying with the E-Government Act of 2002, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.

It has been determined under section 1(a) of Executive Order 13132, Federalism, that this rule does not have sufficient implications to warrant consultation with the States. The provisions contained in this rule will not have a substantial direct effect on 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.

FCIC certifies that this regulation will not have a significant economic impact on a substantial number of small entities. All similarly situated participants are required to comply with the same standard of conduct contained in the Act, the regulations published at 7 CFR chapter IV, the crop policies, and the applicable procedures. For example, any producer, whether growing 10 acres or 10,000 acres, submits the same documentation for insurance and for a claim. All agents, whether selling and servicing five policies or a hundred and five policies, are required to perform the same tasks for each. The consequences for failure to comply with the standards of conduct are also the same for all participants and other persons regardless of the size of their business. A Regulatory Flexibility Analysis has not been prepared since this regulation does not have a significant impact on a substantial number of small entities, and, therefore, this regulation is exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

This program is listed in the Catalog of Federal Domestic Assistance under No. 10.450.

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115, June 24, 1983.

This proposed rule has been reviewed in accordance with Executive Order 12988 on civil justice reform. The provisions of this rule will not have a retroactive effect. The provisions of this rule will preempt State and local laws to the extent such State and local laws are inconsistent herewith.

This action is not expected to have a significant economic impact on the quality of the human environment, health, and safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed.

This rule finalizes changes made to 7 CFR part 400, subpart R, Administrative Remedies for Non-Compliance that was published by FCIC on May 18, 2007, as a notice of proposed rulemaking in the Federal Register at 72 FR 27981-27988. In the Administrative Remedies for Non-Compliance, FCIC proposed to include provisions in its regulation that were enacted with the passage of the Agricultural Rick Protection Act of 2000 (ARPA). Through the enactment of section 515(h) of the Act in ARPA, Congress significantly strengthened FCIC's ability to combat fraud, waste and abuse by establishing a strong system of administrative actions that are now applicable to all participants in the Federal crop insurance program.

Now, producers, agents, loss adjusters, insurance providers and their employees and contractors, and any other persons who willfully and intentionally provide any false or inaccurate information to FCIC or to an approved insurance provider with respect to a policy or plan of insurance or willfully and intentionally failed to comply with a requirement of FCIC are subject to remedial administrative remedies. In addition to disqualification from participating in the Federal crop insurance program, producers will be disqualified from receiving benefits under other various United States Department of Agriculture programs. In addition, civil fines have been increased. Now a civil fine can be imposed for each violation and the civil fine is the greater of $10,000 or the amount of pecuniary gain obtained as a result of the false or inaccurate information provided or the noncompliance with a requirement of FCIC.

The public was afforded 30 days to submit written comments after the regulation was published in the Federal Register . A total of 128 comments were received from 17 commenters. The commenters were seven insurance services organizations, one grower association, four insurance providers, two law firms, one public citizen, one agent, and one government employee. The comments received and FCIC's responses are as follows:

Comment: One commenter stated that FCIC has taken significant actions since the implementation of the Act in 2000 to reduce fraud, waste and abuse of the crop insurance program. The commenter strongly supports FCIC's efforts to combat waste, abuse and fraud in FCIC programs and believes that those who knowingly and willfully abuse the program must be punished.

Response: FCIC will continue to take such actions as are necessary to improve program integrity.

Comment: Several commenters stated that the thirty-day comment period was inadequate. The commenters asked that the comment period be extended by sixty days because of the serious nature of the proposed rule and in order for other affected individuals to comment and to fully understand the legal exposure they could face under the proposed rule.

Response: FCIC usually gives 30 or 60 day comment period depending on the rule. Because this rule is implementing a law that has been in effect since June 2000, FCIC made the decision not to extend the comment period.

Comment: A commenter stated that “waste” and “abuse” are neither offenses defined by statute or regulation and that FCIC never has defined in a regulation, contract, policy, or procedure, the conduct or actions that constitute “waste” and “abuse.” The commenter asked that FCIC define “waste” and “abuse.”

Response: Combating fraud, waste and abuse are the obligation of all Government agencies. The imposition of these sanctions is one means to combat fraud, waste and abuse. However, there are numerous other actions taken by FCIC to combat fraud, waste and abuse. However, in the context of this rule, fraud, waste and abuse are not grounds for the imposition of sanctions. Sanctions are imposed for violations of section 515(h) of the Act and other relevant statutory provisions. The terms fraud, waste and abuse are not used except in the context of a policy statement. Therefore, inclusion of separate definitions may confuse persons into believing that sanctions can be imposed for allegations of fraud, waste and abuse. This is supported by many of the following comments which suggest that fraud must be proven before a sanction under section 515(h) of the Act can be imposed. No change has been made.

Comment: A commenter stated that a person may abuse the crop insurance program without providing false information or violating FCIC procedures.

Response: The crop insurance program may still be abused by a person without providing false information or violating FCIC procedures. Abuse can occur in any number of ways and FCIC continuously reviews the program to tighten program requirements to prevent other types of abuse. However, this rule is intended to preclude the specific abuses associated with the providing of false or inaccurate information and failure to comply with a requirement of FCIC.

Comment: A commenter stated § 400.451(b) is overbroad as it expands the rule to persons outside of the crop insurance program. For example, an accountant knowingly falsifies an insured's Schedule F and an insurance provider overpays on an Adjusted Gross Revenue claim based on that Schedule F, the commenter asked whether the accountant is subject to the sanctions of § 400.454. The commenter asked that FCIC precisely identify the persons to be covered by subpart R.

Response: Section 515(h) of the Act specifically refers to a producer, agent, loss adjuster, insurance provider or “other person” that intentionally provides false or inaccurate information to FCIC or to an approved insurance provider with respect to a policy. In the example given, an accountant who knowingly provides false information on a Schedule F may be subject to sanction under § 400.454. However, unless the accountant is otherwise participating in the crop insurance program, disqualification would not be applicable. However, the accountant could be subject to civil fines. Section 515(h) of the Act was intended to sanction anyone who willfully and intentionally provides false or inaccurate information, not just direct participants. Therefore, its scope could encompass any person. For example, an elevator operator who provides false weight receipts or the seed dealer who falsifies a sales receipt would also be subject to sanctions under section 515(h) of the Act.

Comment: A commenter stated that by making the proposed rule applicable to “any other persons who may provide information to a program participant,” the FCIC was improperly expanding the scope of persons subject to administrative sanctions beyond what is authorized in the Act. In addition, the phrase, “any other persons who may provide information” was imprecise and, therefore, subject to ambiguous construction.

Response: As stated above, section 515(h) of the Act authorizes the scope of the sanction to apply to other than just producers, agents, loss adjusters or insurance providers. Congress expressly refers to “other persons.” Therefore, the scope of this rule is authorized and can apply to virtually anyone who may provide information that is false or inaccurate. Therefore, there is no ambiguity. However, as stated above, persons who may not be participating in the crop insurance program or other United States Department of Agriculture (USDA) programs would likely be subject to civil fines instead of disqualification.

Comment: A commenter is concerned that the proposed rule exposes too many innocent persons to the threat of civil fines and sanctions without focusing on the real wrong-doers. The rule proposes to cover a vast number of “participants in the federal crop insurance program” as well as any other persons who may provide information to a program participant. In addition, the definitions of affiliate, participant, person, and principal are broad and far reaching and may subject innocent persons to the threat of civil fines and sanctions. The commenter recommends these definitions exclude those not actively involved in the submission, purchase or receipt of benefits of crop insurance policies.

Response: In order to be subject to the sanctions under section 515(h) of the Act, FCIC must be able to prove that the person willfully and intentionally provided false or inaccurate information or willfully and intentionally failed to comply with a requirement of FCIC. Therefore, it is not possible for the sanctions to be imposed on innocent persons. Further, the standards for the imputing of improper conduct are the same as that applied in debarments and ensures that only those persons responsible for the violation are sanctioned. As an additional check and balance, persons have the right to contest any sanction before it is imposed before an Administrative Law Judge. This will ensure that the burden of proof has been met.

Comment: Several commenters stated that the proposed rule made the rule retroactive in effect. In the preamble, FCIC states, “the provisions of this rule will not have a retroactive effect.” However, the proposed rule at § 400.451(d) states that the “failure to comply with a requirement” is applicable as of the date the proposed rule become effective. But, the rule with respect to a false or inaccurate statement is applicable to any act or omission occurring after June 20, 2000. The rule and FCIC's explanation of it are inconsistent as to its retroactivity. Because Congress did not grant FCIC the authority to promulgate retroactive rules, they can only be applied prospectively. To impose penalties for past conduct is improper and unlawful. Because it is unclear as to its retroactivity, the rule violates Executive Order 12988. The proposed rule should be changed so that the regulation clearly has no retroactive effect. The commenters asked that the rule become effective on the date rule becomes final.

Response: FCIC has clarified when the provisions of this rule become effective. There is confusion because section 515(h) of the Act, which contains the sanction provisions applicable to false or inaccurate information that are the subject of this rule, have been in effect since June 2000. Further, since that date, those statutory provisions have been used to impose sanctions against persons that have provided false or inaccurate information after June 2000 because the statutory provisions were not in conflict with the regulation sanction provisions that existed during that time. Therefore, false or inaccurate information provided between June 20, 2000, and the date this rule becomes effective will continue to be processed under section 515(h) of the Act and the regulations in effect prior to the date this rule becomes effective. For false or inaccurate information provided after the date this rule is effective will be processed under this rule.

Comment: A commenter stated that the proposed rule expanded the definition of “person” and added 17 more definitions which apply only to this subpart. FCIC does not describe the sources of many of the definitions.

Response: FCIC expanded § 400.452 to include terms used in the proposed rule. Most of the definitions will refer to terms and definitions contained in other regulations, such as the Common Crop Insurance Policy Basic Provisions to ensure consistency. With respect to the other definitions, FCIC has defined the terms in such a manner as to achieve the purpose of this rule. The rulemaking procedures do not require that administrative agencies document the source of all of its information.

Comment: Several commenters make statements regarding removing (1) vague and ambiguous language, and (2) defining terms FCIC normally or routinely uses but has failed to define, such as “benefit,” “fraud,” “waste and abuse,” “wrongdoing,” and “knows or has reason to know.” A commenter stated that the word “benefit” is used in the regulation but not defined. The proposed rule suggests benefit is not limited to monetary gains. The commenters also stated that if FCIC intends to impose sanctions for persons engaged in “waste and abuse,” the terms must be adequately defined to provide notice of the prohibited conduct. One commenter also stated that FCIC should add the definition of “knows or has reason to know” contained in 7 CFR 1.302(o) to the proposed rule and make conforming changes to the balance of the proposed rule consistent with the text of this added definition.

Response: FCIC has revised the rule to add definitions of “benefit,” and “knows or has reason to know.” “Benefit” is defined as any advantage, preference, privilege or favorable consideration a person receives from another person in exchange for certain acts or considerations. A benefit may be monetary or non-monetary. The definition of “knows or should have known” will be the same as that contained in 7 CFR 1.302(o). Further, this rule does not sanction persons for “fraud, waste or abuse.” This rule imposes sanctions for violations of section 515(h) of the Act and other statutory provisions. To the extent that such statutory provision includes some elements of fraud, waste and abuse, the prohibited conduct will be specified therein.

Comment: A commenter stated that FCIC's definition of “affiliate” is inconsistent with the Standard Reinsurance Agreement's (SRA) definition of “affiliate.” The commenter stated that the definition should be amended to mirror the SRA's focus on the control of management of the book of business.

Response: While the narrower definition is appropriate for the SRA, such a narrow definition is not appropriate for this rule, which is intended to determine who a person is for the purposes of this rule. Under the definition of “person” affiliates are also considered as part of the person if the requirements are met. The main reason for defining the term “affiliate” in this rule is to put everyone on notice that the term may be used differently in this rule than it is in other rules or agreements. No change has been made.

Comment: A commenter stated that the definition of “affiliate” is broad and ambiguous because it uses the term “same or similar management” when describing a presumably affiliated business entity. The commenter suggested that the ambiguity can be cured by using either the accepted definition under federal banking and securities law or alternatively by substituting the term “identical or substantially identical management” for “same or similar management.”

Response: The definition was obtained from the definition of “affiliate” in USDA's suspension and debarment regulations published at 7 CFR part 3017. Since a disqualification has a similar effect to a debarment, it was determined that the treatment of affiliates and the definition should be the same for both remedial sanctions. No change has been made.

Comment: A commenter stated that the definition of “participant” was unduly broad in that it contained no materiality or other threshold test for determining the extent of benefit that makes a person a participant. As written, someone who does not have a substantial beneficial interest for purposes of the crop insurance policy could be subject to a sanction.

Response: Any person, regardless of his interest for purposes of the crop insurance policy, who willfully and intentionally makes a false statement or fails to comply with a requirement of FCIC, may be subject to sanction. As stated above, such person may have no connection to the crop insurance program other than to provide certain information that is then provided to FCIC or the insurance provider. If such person willfully and intentionally provides false or inaccurate information, such person can be subject to the sanctions provided in this rule even if they derive no benefit from the crop insurance program. Materiality does not require monetary damages. The false information can be material if it adversely affects program integrity, including damage to the program's reputation. Since the gravity must be considered in determining whether to impose a sanction, FCIC has revised the provision to include a materiality requirement and added a definition of “material.”

Comment: A commenter suggested that a materiality test, percent interest or monetary level of benefit be used as a threshold for defining “participant.”

Response: As stated above, materiality does not require monetary damages or benefits. The false information can be material if it adversely affects program integrity, including damage to its reputation. Further, FCIC has revised the provisions to include a materiality requirement when the gravity of the violation is taken into consideration and defined the term “material.”

Comment: A commenter stated that intentional, willful conduct and fraud are subject to special rules regarding proof in civil litigation. Fraud requires “clear and convincing proof to establish liability.” This is a higher standard than that required under the proposed rule by a preponderance of the evidence. Because fraud connotes intentional misconduct the party charging that conduct is required to prove it to a greater certainty. The commenter stated further that it is improper to reduce the burden of proof by the government when alleging fraud. No justification has been given that alters longstanding rules applicable to civil litigation. Furthermore, intentional and willful acts should be defined to make clear that the person knew the falsity of the statement when made and intended that FCIC act on the basis of the intentional and willful misstatements. Intent and willfulness also must be established by clear and convincing evidence.

Response: Section 515(h) of the Act does not require a showing of fraud. The standard is whether a person willfully and intentionally provided false or inaccurate information. The standard of proof was derived from USDA's suspension and debarment regulations because of the similarity of the effects of disqualification and debarment. Further, debarment must also show evidence of willfulness and knowingly, which is similar to the standards contained in section 515(h) of the Act. The causes for debarment need only be established by a preponderance of the evidence. In addition, this is not a civil litigation. This is an administrative action taken to protect the integrity of the program and misuse of taxpayer dollars. Further, this has been the standard of proof that has been applied since the application of these sanctions in 1993. Section 515(h) of the Act does not contain any requirement that the person who provides the false information intended for FCIC to rely on such information. FCIC does not have to prove fraud. FCIC only needs to prove that a person willfully and intentionally provided false or inaccurate information or failed to comply with a requirement of FCIC.

Comment: A commenter stated that the definition of “preponderance of the evidence” needs to be revised or clarified to clearly state that FCIC has the burden of proof to produce evidence to meet its preponderance of the evidence.

Response: FCIC has revised § 400.454(a) to clarify that FCIC bears the burden of proving that the person willfully and intentionally provided false or inaccurate information or failed to comply with a requirement of FCIC.

Comment: A commenter stated that the definition of “principal” was broad, and includes persons whom the law does not recognize as a principal. In addition, while the concept of “control” is defined by case law, the concept of “critical influence” is not. Theoretically, a data processor has “critical influence” because the incorrect entry of data may have a significant impact on liability. The commenter asked whether FCIC contends that such persons are “principals” under the rule. The commenter also questioned who is a “key employee” and what are the indicia of a “key employee.” The commenter asked who will determine whether an employee is a “key employee”—the insurance provider or FCIC?

Response: The definition of principal has been broadened in this rule because insurance providers have routinely delegated many of their obligations and responsibilities to persons who would not normally have the ability to direct the activities of the business. The definition of “principal” is intended to encompass such persons who may not have the title, but who have functional influence or control over some activities of the insurance provider. This delegation is not unique to the insurance providers. Insureds may also delegate their obligations to other persons, such as farm managers. The use of the term “key employee” is intended to be a catch-all term for employees that have primary management or supervisory responsibilities or have the ability to direct activities or make decisions regarding the crop insurance program. FCIC would initially decide whether an employee is a key employee based upon the person's responsibilities in the entity when determining whether to file a complaint. However, it would be an Administrative Law Judge that will ultimately decide whether the employee is subject to sanction under this rule.

Comment: A commenter said that the definition of “principal” was broad and ambiguous. This problem is magnified by the use of “key employee” (an undefined term with no commonly accepted legal understanding) and “critical influence on or substantive control over the activities of the entity” (also undefined and not susceptible to common legal interpretations from other bodies of law). The commenter suggested that FCIC could cure the ambiguity to defining “principal” by citing position names commonly used in business and limiting the scope of the definition to only certain functions with the organization. The commenter suggested the following definition for “principal”: “A person who is an officer, director, owner or partner within an entity with primary management or supervisory responsibilities over the entity's Federal crop insurance activities.”

Response: FCIC is attempting to avoid being locked into titles because they do not fit all the business entities that can be involved directly or indirectly with the crop insurance program. This is why the term “key employee” has been added. This definition is trying to identify those persons who perform or exert some type of management or control or decision making over at least some activities related to the crop insurance program. Those are the persons who will be treated as principals. Given the practice of delegation that occurs in the insurance and farming industries, the definition would be too limiting to name the specific titles.

Comment: Several commenters stated that the definition of “requirement of FCIC” is overly board, ambiguous, and vague. As written, the rule could include informal communications, such as e-mails, from RMA personnel writing without actual approval by supervisory or managerial personnel with the agency. The definition does not define the form in which the written communication must take. Thus, a requirement of FCIC could take the form of any writing, including an e-mail. The commenter asked what types of communications are included in “other written communications.”

Response: FCIC has revised the definition to specify that requirements will be contained in formal communications such as regulations, procedures, policy provisions, reinsurance agreements, memorandums, bulletins, handbooks, manuals, findings, directives or letters signed or issued by persons who have been provided the authority to issue such communications on behalf of FCIC. The definition is also revised to clarify that e-mails are not formal communications although they can be used to transmit formal communications.

Comment: Several commenters stated that the definition of “Requirement of FCIC” does not specify from whom within the FCIC the written communication may come. The written communication could come from any FCIC employee, regardless of status or level, to anyone associated with the insurance provider.

Response: As stated above, the provision as been revised to specify that written communications that will qualify as a “requirement of FCIC” will be originated by a FCIC employee that has been delegated the authority to issue such communications on behalf of FCIC. The current delegations are found at http://www.rma.usda.gov/news/managers/2000/PDF/mgr-00-016-1.pdf, http://www.rma.usda.gov/news/managers/2000/PDF/mgr-00-016-2.pdf, http://www.rma.usda.gov/news/managers/2000/PDF/mgr-00-016-3.pdf , and these delegations include documents that would qualify as “requirements of FCIC.” To the extent that other persons may also receive delegated authority, other bulletins containing such delegation will be issued.

Comment: A commenter stated that no “other written communication from FCIC” should qualify as a “Requirement of FCIC” unless FCIC has sent the communication to the insurance provider's designated recipients. The commenter pointed out that the SRA, in Appendix II, paragraph 6, requires each insurance provider to designate persons with authority to receive written communications from FCIC.

Response: To the extent that the “requirement of FCIC” is in the form of letters and other individual communications, such documents will be provided to the designated recipients of the insurance providers. However, documents such as regulations, procedures, bulletins, reinsurance agreements, etc. may also be considered requirements of FCIC under certain circumstances. Such documents will continue to be released in the customary manner.

Comment: A commenter suggested the phrase “other written communications from FCIC” be removed or at least restricted to require that the FCIC official sending the “other written communication” have express authority to send the communication and require that the communication be sent to the insurance provider's designee for the specifically stated type of communication.

Response: As stated above, FCIC has previously delegated persons to provide written communication on behalf of FCIC. FCIC will issue other bulletins if other persons will be delegated this authority. Further, as stated above, to the extent that such communication is a letter or other such individual communication, such communication will be sent to the insurance provider's designee. However, all other communications will be released in the customary manner.

Comment: One commenter questioned whether the Common Crop Insurance Policy falls within the definition of requirement of FCIC. The commenter asked if the Common Crop Insurance Policy is a requirement of FCIC only for agents, adjusters, and producers because the SRA's remedy applies only to insurance providers. This same conundrum exists for various handbooks and manuals.

Response: As stated in the rule, documents such as the Common Crop Insurance Policy are considered a requirement of FCIC unless such documents contain their own sanctions for violations. Further, even if such documents contain sanctions, they may still be considered a requirement of FCIC if there are multiple violations of the same provision or multiple violations of different provisions. FCIC has clarified that the remedial sanction is in addition to any other remedy contained in such document. The requirement of FCIC will only apply the persons to whom the document applies. For example, all regulations, including the Common Crop Insurance Policy, are applicable to insurance providers, agents, loss adjusters, and producers. However, the SRA is only applicable to insurance providers. The question will be whether the person is legally obligated to comply with the document through the force of law or contract.

Comment: One commenter asked: (1) Who is the arbiter of whether the “breach rises to the level where remedial action is appropriate;” (2) what standard is used to make a determination that a breach occurred under “requirement of FCIC;” and (3) whether materiality of the breach or injury to FCIC is a consideration for “requirement of FCIC.”

Response: FCIC will initially determine whether a breach rises to the level where remedial action should be taken when it issues the complaint. However, persons have the ability to contest any proposed sanction before an Administrative Law Judge, who will be the ultimate arbiter. Further, as stated above, the rule states the standards applicable. For a document that has its own remedy for a violation, such document will only be considered a requirement of FCIC when there are multiple violations of the same or different provisions. If the document is directed to a specific person or group of persons, or does not contain a remedy for a violation, and requires such person or persons to take or cease from taking a specific action, the document is considered a requirement of FCIC. As stated above, FCIC has revised the provisions to include materiality, which applies to both false or inaccurate statements and failing to comply with a requirement of FCIC. However, as stated above materiality does not require monetary damages. The false information or the failure to comply can be material if it adversely affects program integrity, including damage to the crop insurance program's reputation.

Comment: One commenter stated that definition of “requirement of FCIC” states that a breach will not be considered a requirement of FCIC unless the breach rises to the level where remedial action is appropriate. The proposed rule imposes a subjective standard of reviewing conduct. The commenter asked at what level does conduct rise to “the level where remedial action is appropriate.”

Response: The rule makes it clear that when the communication has its own remedy there must be multiple violations before the conduct arises to the level where remedial action, in addition to the remedy contained in the communication, is necessary. With respect to other communications, there is a subjective element. However, as stated above, the gravity of the violation must be taken into consideration when determining whether to impose a sanction, which would include whether conduct arises to the level where remedial action is appropriate. In addition, the ultimate decision maker regarding whether the conduct arises to the level where remedial action is necessary will be the Administrative Law Judge. For the purpose of clarity, FCIC has used the term “violation” in place of “breach” because breach may mistakenly imply that the definition only applies to contracts or agreements when the definition clearly refers to other types of documents.

Comment: A few commenters stated that the definition of “requirement of FCIC” includes not only regulations and policy provision, but also procedures and other written communications from FCIC. The proposed rule does not address the potential conflicting nature of these requirements. It also imposes the same sanctions for violating non-binding informal procedures and communications as for violating binding rules and regulations. Neither the law nor the Administrative Procedures Act gives the same type of formality, equality or deference to these types of agency decisions.

Response: To the extent that there is a conflict between the regulations, policy provisions, and procedures, the regulations resolve such conflict in the order of priority. To the extent that other written communications may be in conflict, any provision that has the force of law, such as statutory or regulatory provisions, would take precedence. Further, neither the Act nor the Administrative Procedures Act precludes the use of any particular form of communication to impose requirements on a person. If FCIC has the authority to require that certain action be done or ceased, the Act provides the authority to provide sanctions for non-compliance. The nature of the crop insurance program makes it impractical to put all requirements in regulations or reinsurance agreements. Circumstances may arise during the year that requires immediate action and FCIC must have the means to ensure such action is taken. In determining whether to impose a sanction, FCIC must look at the nature of the violation. If the person fails to take a specific action required by FCIC or FCIC mandates that it cease a specific action, it does not matter the form of the communication. The person is required to comply and failure to comply can result in the imposition of sanctions.

Comment: One commenter is concerned that a person without access to FCIC's regulations, policies, procedures or other written communications and those who may have misinterpreted those regulations, policies and procedures, may be subject to sanctions. The commenter stated that the definition should include regulations, policies, procedures or other written communications the person knew or should have known or had received a specific notice of alleged violation.

Response: As stated above, sanctions can only be imposed for a violation of requirement of FCIC if such requirement is applicable to the person. If applicable, the person should have notice of the requirement. For example, bulletins are not applicable to producers unless such bulletin is provided to the producer or directs the agent or insurance provider to provide such bulletin to the producer. In addition, the gravity of the violation will be taken into consideration before imposing any sanction. No change has been made.

Comment: One commenter stated that, as proposed, the FCIC has virtually unlimited discretion in determining what constitutes a “requirement.” Insurance providers are often forced to make on the spot interpretations of ambiguous regulations without any guidance from FCIC, only to have FCIC later determine that the insurance provider's interpretation was incorrect. Allowing FCIC to go one step further and disqualify an insurance provider because it disagrees with the insurance provider's interpretation of an ambiguous “requirement,” is unreasonable, unworkable, and unfair.

Response: FCIC does not disqualify an insurance provider because it disagrees with the FCIC. If FCIC determines that an insurance provider has made an incorrect interpretation, it would notify the insurance provider of its misinterpretation and request that any actions taken based on the misinterpretation be corrected. Sanction would only be considered if the insurance provider does not comply with FCIC's request. Further, if the insurance provider believes that FCIC's interpretation is incorrect or that it does not have the authority to require the specific action, it can always appeal FCIC's action to the Civilian Board of Contract Appeals. No sanction could be imposed during this appeal process.

Comment: One commenter stated that the definition of “violation” leaves far too much room for interpretation as to what constitutes a single violation and what results in multiple violations. For example, assume that a farmer submits a single claim under his policy, but that the claim involves three separate units of insurance. The farmer submits three false production worksheets in connection with the one claim. The commenter asked whether the farmer committed one violation or three violations.

Response: To be subject to a sanction, the person must have willfully and intentionally provided false or inaccurate information. Each false or inaccurate piece of information would constitute a violation. Therefore, if in the acreage report the producer falsely reports the number of acres in the unit and the share, this would be two violations. In the example given, the farmer has committed four violations. The proposed rule defines violation as “each act or omission” made by a person that satisfies all required elements for a sanction is a violation. The farmer signed his name on three separate production worksheets and one claim, four times he “certified” the information provided, to the best of his knowledge to be true and complete; when in fact, he knew the information was false.

Comment: One commenter stated that “willful and intentional” acts should be defined to make clear that the person knew the falsity of the statement when made and intended that FCIC act on that misstatement.

Response: A “willful and intentional” act is providing information by a person who had “knowledge that the statement was false or inaccurate at the time.” The requirement that the person “intended that FCIC act on that misstatement” is an element of fraud. However, under section 515(h) of the Act, to impose a sanction, the person only needs to have willfully and intentionally provided false or inaccurate information. The term “fraud” is not found in section 515(h) of the Act and if Congress wanted to require reliance by FCIC as an element, it could have so required. No change has been made.

Comment: One commenter stated that the definition “Willful and intentional” is incomplete and inaccurate as a standard of proof for the conduct under the proposed rule. Intent and willfulness must be established by clear and convincing evidence.

Response: The general standard of proof in administrative cases is preponderance of the evidence. This is consistent with USDA's suspension and debarment regulations, which serve a similar purpose. Further, this has been the standard of proof that has been applied since the application of these sanctions in 1993. No change has been made.

Comment: One commenter stated that FCIC should clearly require that scienter must be proven with respect to willful and intentional statements prosecuted under the rule to ensure that prosecutions are confined to fraudulent statements or acts or omissions, rather than non-malicious acts or omissions.

Response: In the definition of “willful and intentional,” FCIC has included the requirement that the person know that the statement was false or inaccurate at the time the statement was made or the person know that the act or omission was not in compliance with a requirement of FCIC at the time the act or omission occurred. Therefore, sanctions will not be imposed for innocent mistakes. However, maliciousness is not a standard required by the Act. FCIC has structured these provisions to fully comply with the requirements imposed in the Act. No change has been made.

Comment: One commenter stated that the definition of “willful and intentional” deviates from the common law meaning of those terms, and specifically nullifies a showing of malicious intent, an element of common law fraud. The commenter further states that fraud is the very target of 7 U.S.C. 1515(h) and that FCIC may lack the authority to expand the definition of willful and intentional to include conduct outside the common understanding of fraud and to impute knowledge from one individual to another.

Response: Section 515(h) only requires that the person willfully and intentionally provide a false or inaccurate statement or fail to comply with a requirement of FCIC before a sanction can be imposed. Section 515(h) does not use the term “fraud” and that term's other connotations. FCIC has studiously attempted to stay within the requirements of the Act. To that end, FCIC has used the common definitions and common law to determine the meaning of “willful and intentional.” This rule contained the same meaning as has been given the term since FCIC began doing disqualifications after the enactment of the Federal Crop Insurance Reform Act of 1994. With respect to the imputation of knowledge, FCIC has used the Department's debarment regulations as guidance because the burdens and consequences are similar.

Comment: One commenter stated that for the definition of “willful and intentional” FCIC does not specifically define the words separately, and FCIC does not state the source of this definition. FCIC also excludes the showing of malicious intent as unnecessary. FCIC includes “the failure to correct the false or inaccurate statement when its nature becomes known to the person who made it” and includes acts of omission. These additions force agents and agencies to review information for past years, or they may be subject to sanctions.

Response: Defining the words separately would not change the meaning or bring more clarity. The terms will be given their common meaning. The dictionary defines “willful” as “intentional, or knowing, or voluntary.” “Intentional” is defined as “done purposely.” FCIC has also looked to the body of established law regarding the meaning of the terms for the purposes of this rule. There is no requirement in the Act for maliciousness intent. The Act only requires that a person willfully or intentionally provide false or inaccurate information. Therefore, requiring a person to know the information was false or misleading and electing to provide it anyways satisfies the common meaning of the terms. Further, agents are not required to review information for past years. Agents will only be subject to sanctions if they knew the information was false or inaccurate at the time it was provided or if they discover it later and they fail to do anything about it. No change has been made.

Comment: One commenter stated that the definition of “Willful and intentional” should be defined to make clear that the actor knew the falsity of the statement when made and intended that FCIC act on the basis of the intentional misstatements.

Response: As stated above, there is no requirement that the person intended FCIC to act on the false information in section 515(h) of the Act. To be subject to sanctions, the person only needs to have willfully and intentionally provided false or inaccurate information to FCIC or an approved insurance provider. Reliance of the misstatement is an element of fraud, which as stated above, is a term that is not found in section 515(h) of the Act.

Comment: One commenter stated that FCIC must establish a clear indication of how intent will be established with respect to demonstrating whether a statement, act or omission is willful and intentional. A false or inaccurate statement or a noncompliant act or omission alone does not rise to willful and intentional and additional evidence that clearly establishes that a person had sufficient knowledge is necessary before imposing sanctions.

Response: The definition of “willful and intentional” makes it clear that the person must have knowledge of the falseness or inaccuracy of the information. Unless FCIC can establish the person has such knowledge no sanction under section 515(h) of the Act can be imposed. Further, FCIC is not alone in making these decisions. Any person subject to a proposed sanction has a right to contest the sanction before an Administrative Law Judge. The Administrative Law Judge will determine whether FCIC has met its burden before any sanction is imposed.

Comment: One commenter stated that with no showing of intent coupled with the provision that sanctions may be imposed regardless of whether FCIC or the insurance provider sustained monetary losses places all parties in jeopardy of severe punishment for seemingly innocuous mistakes that may have caused little to no harm.

Response: Sanctions cannot be imposed for innocuous mistakes. There must be evidence of willfulness and intent. Further, the fact that no monetary losses may occur does not excuse the improper conduct. All false or inaccurate statements have the capacity to adversely affect program integrity.

Comment: One commenter stated that while the definition may be clear in regards to willful, it is not clear from the definition that there is actually a requirement of intention at all. The commenter suggested that the definition should include knowledge of the inaccuracy and that an intent, malicious or otherwise be associated with the inaccuracy. The definition should be confined to “material” misrepresentations or omissions.

Response: “Intentional” is defined as “done purposely.” FCIC's definition of “willful and intentional” is consistent with that definition in that it requires the person to have provided the information to FCIC or an approved insurance provider even though the person had knowledge that the information was false or inaccurate at the time that the statement was made and still elected to provide the information to FCIC or the approved insurance provider. However, as stated above materiality has been added to the rule but it does not require monetary damages.

Comment: One commenter stated that ARPA required that each policy or plan of insurance to provide notice of the sanctions that could be imposed under ARPA for willfully and intentionally providing false or inaccurate information to FCIC or failing to comply with a requirement of FCIC. FCIC has failed to comply with 1515(h)(5).

Response: Section 27 of the Common Crop Insurance Policy Basic Provisions (Basic Provisions) (7 CFR 457.8) states that if the producer, or someone assisting the producer, has intentionally concealed or misrepresented a material fact, the producer could be subject to the remedial sanctions in 7 CFR part 400, subpart R, which includes disqualification and civil fines. However, FCIC has revised this rule to include more specific language in section 27 of the Basic Provisions and added a new section 22 to the Group Risk Plan Common Policy (7 CFR 407.9) (GRP policy).

Comment: One commenter has concerns that FCIC is not providing producers with the appropriate notice of sanctions as stated under section 515(h)(5). The commenter stated that section 454(a) lacks the required notice to policyholders. Specifically, the commenter stated that the proposed language in section 454(a) does not appear to provide producers the required notice of the sanctions available under 7 U.S.C. 1515(h)(3) as required by 7 U.S.C. 1515(h)(5). That in its present form section 454(a) does not notify producers that they can be disqualified for up to five years from specific programs or that the potential fine could be greater than $10,000.

Response: It is not the specific intent of § 400.454(a) to provide producers notice of sanctions available under section 515(h)(3) of the Act. It is intended to provide all persons of the possible consequences of willfully and intentionally provided false or inaccurate information or willfully and intentionally failing to comply with a requirement of FCIC. As stated above, FCIC has revised the Basic Provisions and the GRP policy to ensure that producers receive the required notice.

Comment: Several commenters stated that the decision to initiate administrative sanctions should not rest solely with the FCIC Manager, but that it should require a determination by the FCIC Board of Directors.

Response: Section 515(h) of the Act confers the authority to impose sanctions on the Secretary, who has subsequently authorized the Manager of FCIC to initiate the process when the rule was originally promulgated in 1993 (58 FR 53110). Since this process has been in place since 1993 and there have not been any allegations that the Manager has abused this authority, the Secretary has elected to allow the authority to initiate sanctions to remain with the Manager of FCIC. In addition, although the Manager initiates the process, it is the Administrative Law Judge that ultimately decides whether there is sufficient evidence to impose a sanction under section 515(h) of the Act.

Comment: Several commenters stated that FCIC uses an inappropriate standard of proof, preponderance of the evidence, for the imposition of any penalty. One commenter stated that the standard of guilt should rest with the party alleging such violation. Instead of requiring a mere ‘preponderance of evidence' the standard of proof should be clear and convincing evidence. There is no justification for holding the crop insurance industry to a lower standard of guilt.

Response: As stated above, this is the same standard applied by the Department for debarments. Because the effects are similar and both can require willful and intentional conduct, it is appropriate to apply that standard to sanctions under this rule. Further, this has been the standard of proof that has been applied since the application of these sanctions in 1993. No change has been made.

Comment: Several commenters stated that the proposed rule imposes a low evidentiary threshold for the imposition of sanctions. The burden of proof should be clear and convincing evidence as opposed to a preponderance of the evidence. The rule only authorizes sanctions for willful and intentional conduct. Such a standard connotes the elements of fraud. In almost every instance, liability for fraud cannot be predicated on a mere preponderance of the evidence; rather, a finding based on at least clear and convincing evidence is required. Therefore, the draft regulations should be amended to reflect a burden of proof of clear and convincing evidence. Commenters stated that FCIC may lack the authority to adopt a burden of proof lower than the clear and convincing standard of proof in fraud cases. One commenter stated that to establish a prima facie claim of fraud, the party alleging it must prove by clear and convincing evidence that there was a false representation or concealment of a material fact, calculated with the intent to deceive. One commenter stated that the rule potentially expands the liability of actions to a degree not enforceable in civil litigation.

Response: Section 515(h) of the Act does not require a finding of fraud. Sanctions can be imposed for willfully and intentionally providing false or inaccurate information. Further, as stated above, this is the same standard applied by the Department for debarments. Because the effects are similar and both can require willful and intentional conduct, it is appropriate to apply that standard to sanctions under this rule. Further, this has been the standard of proof that has been applied since the application of these sanctions in 1993. No change has been made.

Comment: One commenter stated FCIC needs to provide a clear indication of how intent will be established as to whether a statement, act or omission is willful and intentional. Further, scienter must also be established to a statement, act or omission that is willful and intentional.

Response: As stated above, FCIC has defined “willful and intentional” to be consistent with the common definition of these terms and case law. Scienter is not a specific requirement. No change has been made.

Comment: Several commenters stated that the proposed rule must be confined to material misrepresentation or omissions that cause financial loss. One commenter stated that it was the intent of Congress. A commenter stated that FCIC should confine the proposed rule to statements, acts or omissions that cause injury or damages, consistent with general principles of law relative to fraud.

Response: FCIC has revised the provisions to require consideration of materiality when considering whether to impose a sanction and defined the term “material.” However, as stated above materiality does not require monetary damages. The false information can be material if it adversely affects program integrity, including damage to the crop insurance program's reputation or providing or potentially providing benefits that would otherwise not be available. Further, as stated above, fraud is not required to be proven before a sanction can be imposed. There only needs to be a finding that a person willfully and intentionally provided false or inaccurate information or failed to comply with a requirement of FCIC.

Comment: One commenter stated that “gravity” is subjective and vague. It did not tell the public the standard to be applied by FCIC when measuring the severity of a violation. The commenter suggested that FCIC adopt the list of factors under 7 CFR 1.335(b) or develop its own list of mitigating factors to be applied when considering the gravity of a violation.

Response: FCIC has reviewed the list of factors used in the assessment of sanctions in 7 CFR 1.335(b), and has modified the list to be more applicable to the crop insurance program and included it in § 400.454(c).

Comment: One commenter has concerns that cumulative penalties could exceed the gravity of the violation. The commenter urged FCIC to establish appropriate penalties to violations that are always commensurate to the gravity of such violations.

Response: As stated above, FCIC has adopted factors, with modification, used by Department in assessing sanctions. However, Congress specifically revised section 515(h) of the Act to allow the imposition of a separate sanction for each violation. The gravity of each violation will be taken into consideration when imposing a sanction.

Comment: A commenter stated that increased penalties demand an equally elevated system of judgment process and identification of degree. The rule's definition of degree of offense and penalty extends to others who may be oblivious to the error of intention to submit false information. For example, the agent who forwards an actual production history (APH) which was completed and signed by an insured can be totally unaware of erroneous information provided by that insured, unless the submission is blatantly different from other producers in the area. Cumulative penalties could result in disproportionate fines in relation to the offense. Therefore, a minor infraction could have a major impact.

Response: An agent that transmits an APH that is false can only be sanctioned if the agent knew or should have known the information was false and transmitted it anyway. If the agent had no way to know the information was false, no sanction can be applied. However, the producer that provided the false APH may be sanctioned for providing the false information to the agent. In such case, the gravity of the violation will be considered based on the factors FCIC has added to the rule to ensure the sanction is commensurate with the violation. Further, FCIC will consider each person's conduct as it pertains to the provision of false or inaccurate information. Therefore, there should not be the possibility of disproportionate sanctions.

Comment: A few commenters stated that the rule should exclude penalties and suspensions for conduct that is already addressed in the SRA.

Response: There is nothing in the SRA or other contracts that specifically involves willfully and intentionally providing false or inaccurate information or failing to comply with a requirement of FCIC. Further, there may be circumstances where the improper conduct under the SRA is so egregious that the imposition of sanctions may be appropriate. The rule explains those situations. In such cases, the liquidated damage provisions may be inadequate given the gravity of the violation. Further, suspension or termination may not be viable options and the imposition of a civil fine may be more appropriate. However, with respect to any breach of the SRA, FCIC first will look to the remedies in the SRA. Because remedies are available under the SRA, sanctions can only be imposed if there are multiple violations of the same or different provisions.

Comment: Several commenters state that the proposed rule's cumulative penalties violate the excessive fines provision of the Eighth Amendment of the U.S. Constitution. Since its penalties would be cumulative, the proposed rule could result in disproportionate fines. Cumulative penalties are not allowed under the Act, in addition to those found in 7 U.S.C. 1515(h)(3). The commenters stated that the rule should also be clarified to make it clear that the penalties and fines are not cumulative and that if the FCIC chooses to enforce any existing contract-based or regulatory remedies, the rule should be expressly inapplicable. A commenter stated that while the sanctions in 7 U.S.C. 1515(h)(3) potentially are cumulative, there is no statutory basis for punishing the same conduct under other regulations or agreements. Accordingly, any fair reading of the FCIA precludes cumulative penalties in addition to those found at 7 U.S.C. 1515(h)(3). A commenter stated that FCIC should not treat the sanctions as cumulative relative to other sanctions, as this is not anywhere provided for in the plain language or legislative history of the statute.

Response: Section 515(h) of the Act expressly authorizes a separate civil fine for each violation. Therefore, this rule does not contain cumulative civil fines for the same conduct. It would not make sense to impose the same civil fine on a person who committed one violation compared to one who committed two or more violations. When determining the civil fine to apply for each violation, FCIC is to take into consideration the gravity of that violation. Therefore, this allows the sanctions to be proportional to the conduct. However, there is nothing in the Act that would preclude FCIC from enforcing section 515(h) of the Act along with any contractual remedies. When section 515(h) of the Act was enacted, Congress was aware that many contracts and agreements had remedies for a breach. If it wanted the sanctions under section 515(h) of the Act to be the sole remedy for the conduct it could have so required, but it did not do so. The application of any other remedy will be taken into consideration when assessing the sanction to be imposed under this rule so that the result is not disproportionate. Further, this is most likely to arise with respect to the willful and intentional failure to follow a requirement of FCIC, because there is no mention of willfully and intentionally providing false or inaccurate information in the contract or agreement. As stated above, there are situations when the conduct is so egregious, such as with multiple violations, that the imposition of sanctions is appropriate under this rule in addition to the remedies available in the contract or agreement. No change has been made in response to this comment.

Comment: One commenter states that the rule states that it is remedial in nature. However, the rule also states that fines and disqualifications are in addition to any other actions taken by FCIC or others under the terms of the crop insurance policies, other statutes and regulations. Recently the U.S. Supreme Court disregarded its own long-standing position on the remedial nature of the federal False Claims Act and labeled its treble damage provision as “punitive.” Adding additional sanctions on top of those recoverable under the False Claims Act, and other statutes will undoubtedly be punitive, and subject the rule to interpretation and construction consistent with its punitive aims.

Response: The provisions stating that the imposition of sanctions under this rule is in addition to any other sanctions provided in the agreement or contract is not new. It was included in § 400.451(c). Further, it is not FCIC's decision regarding whether other sanctions are imposed. FCIC can only enforce the sanctions available under the contract or agreement and section 515(h) of the Act. FCIC will take into consideration any other sanctions that may have been previously imposed for the conduct to ensure that the sanctions are not disproportionate to the conduct. To the extent that FCIC imposes sanctions under section 515(h) of the Act, in addition to the remedies available under the contract or agreement, the person is able to challenge such imposition before the Administrative Law Judge.

Comment: One commenter stated that because the definition of willful and intentional is broad and sanctions can be applied without resulting monetary damages, it appears that cumulative penalties could easily result from simple mistakes that resulted in little to no damages. Thus, cumulative penalties could be unconstitutional as it may constitute excessive fines under the Eighth Amendment.

Response: Cumulative penalties cannot be applied for simple mistakes. Sanctions under section 515(h) of the Act can only be applied for willfully and intentionally providing false or inaccurate information or failing to comply with a requirement of FCIC. Further, materiality will be considered when determining whether to impose a sanction and a consideration of the gravity will also be done to determine the amount of sanction to apply. This should preclude the imposition of sanctions that is disproportionate to the conduct.

Comment: Two commenters stated that the $100,000 threshold in § 400.454(c)(2) may be appropriate for producers, agents, adjusters, or other program participants, but it is too low to impose on insurance providers. A $100,000 indemnity could represent only a few hundred thousandths of the total indemnities paid by insurance provider. A commenter stated that the proposed penalty is too harsh. Absent any intention on the part of Congress to impose such draconian penalties, the proposed regulations cannot stand. A commenter suggested that $500,000 may be a more appropriate benchmark for insurance providers.

Response: The $100,000 threshold in the aggregate may be low given the amount of indemnities each insurance provider pays out each year. However, on an individual basis, a $100,000 indemnity is a significant amount and the consequences are appropriate, especially given that insurance providers are required to review all claims in excess of $100,000 and annually report the results. The commenter is correct that in the case of multiple violations, a $500,000 threshold is more appropriate.

Comment: One commenter stated that the threshold amount for the imposition of maximum penalties is low and has no rational basis, especially when applied to an insurance provider. Without raising the threshold for imposing the maximum disqualification term or fine, the FCIC could run two serious risks. First, it easily could be imposing civil fines in amounts disproportionate to actual losses and will thus be excessive under the Eighth Amendment of the Constitution. Second, program disqualification for an insurance provider which overpays losses based on such a low threshold is disproportionate that this remedy, too, would violate the Eighth Amendment.

Response: The civil fine is no more than the amount of any pecuniary gain resulting from the improper conduct for which such sanction is sought or $10,000. The $10,000 civil fine is reasonably related to the amount of time and resources required to investigate whether false or inaccurate information was provided to FCIC or the insurance provider and whether such information was provided willfully and intentionally. The Supreme Court has held that civil fines reasonably related to the cost of investigation do not violate the Eighth Amendment. FCIC is unsure of the argument that “program disqualification for an insurance provider which overpays losses based on such a low threshold is disproportionate that this remedy, too, would violate the Eighth Amendment.” The Supreme Court has held that occupational debarments, even permanent ones, are traditionally not viewed as punishments. Therefore, it is difficult to see how an occupational disqualification for a limited term would be “cruel and usual.” Further, while FCIC has added a materiality requirement, it is not dependent on monetary damages. Further, these thresholds are related to the maximum sanctions that can be imposed. Based on the gravity of the violation, amounts smaller than the maximum may be appropriate. No change is made in response to this comment.

Comment: One commenter stated the monetary threshold in § 400.454(c)(2)(ii) (redesignated as 400.454(c)(3)(ii)) is less defensible when one recognizes that it is not tied to a single crop year's overpayments. Hypothetically, disqualification could occur based on more than $100,000 in errors over multiple crop years. An insurance provider could be barred from the program for errors amounting to less than 0.009 percent of indemnities paid. FCIC's approach violates the Eighth Amendment as applied to insurance providers.

Response: As stated above, FCIC has left the single violation at $100,000 but increased the threshold for multiple violations to $500,000 for the imposition of the maximum sanction against insurance providers. The commenter is correct that since insurance providers deal with much larger amounts of claims, the threshold should be higher for the imposition of the maximum sanction. However, as stated above, monetary damages are not required as a condition of imposing a sanction under this rule. Sanctions can be imposed for any willful and intentional providing of false or inaccurate information or willful and intentional failure to comply with a requirement of FCIC. This means that under the Act, a single willful and intentional providing of false or inaccurate information by an insurance provider can subject it to disqualification of a period up to one year. Although not required, FCIC has added a materiality requirement but it is still not conditioned on whether there is a monetary loss.

Comment: One commenter stated that the proposed rule states a single ‘violation’ can be the basis for the imposition of the maximum penalty if the violation results in an overpayment of more than $100,000. This $100,000 threshold is immaterial and statistically insignificant with regard to insurance providers.

Response: A single violation of $100,000 is not statistically insignificant. The average claim paid over the last three crop years is less than $5,300. Further, approved insurance providers have an obligation to verify all claims in excess of $100,000. Therefore, there is a heightened duty with respect to these policies. As a result, FCIC has not increased the single violation threshold. However, as stated above, FCIC has increased the multiple violation threshold for insurance providers to $500,000.

Comment: Several commenters stated that the parameters proposed for the maximum penalties under § 400.454(c)(2) (redesignated as 400.454(c)(3)) were too broadly worded. The commenter asked what constitutes “multiple” violations. If a single claim involves the submission of five fraudulent claims for indemnity, a commenter asked whether the participant has committed multiple violations.

Response: Multiple violations are the number of each willful and intentional false or inaccurate statement and each incident of failing to comply with a requirement of FCIC. One false or inaccurate statement or one incidence of failing to comply with a requirement of FCIC is a single violation. More than one false or inaccurate statement, even if there is only one claim involved, or more than one incidence of failing to comply with a requirement of FCIC constitutes multiple violations. In the example given, each fraudulent claim for indemnity counts as a separate violation so that five fraudulent claims would constitute multiple violations.

Comment: One commenter asked if the multiple violations all have to be of the same nature, or whether they can be completely unrelated violations.

Response: Multiple violations do not all have to be of the same nature. Multiple violations may be completely unrelated. An example of multiple violations of the same nature may be an insured who falsely certified three separate production worksheets that the production was less than the guarantee. An example of multiple unrelated violations may be when a producer falsely reports acreage on an acreage report and then later falsely reports production for the unit and claims a loss.

Comment: One commenter asked how many years does “several crop years” entail.

Response: “Several crop years” is commonly defined as a number of more than two or three, but not many. “Many” is commonly defined as a large number to infinity. Use of the term “several” means that if the improper conduct occurred in more than three crop years, the maximum sanction can be imposed.

Comment: One commenter asked under § 400.454(c)(2) (redesignated as 400.454(c)(3)), how many years back can FCIC look to violations “over several crop years.”

Response: The Act does not limit the number of years RMA can look at to discover fraud, waste or abuse.

Comment: One commenter stated that under the proposed rule one error, immaterial or not, which does not arise to negligence much less fraud, can be mistakenly repeated numerous times. The maximum penalty would appear to apply in the case of multiple violations without materiality or damages.

Response: Sanctions can only be imposed for proven willful and intentional acts that monetarily or non-monetarily harm the program. If the person knows that he or she is committing an error and continues to do so, then this would be willful and intentional conduct that could lead to the imposition of sanctions. In addition, as stated above, FCIC has added a provision regarding materiality although it does not require monetary damages.

Comment: One commenter asked whether there must have been an actual adjudication by FCIC or some other authority of a previous violation.

Response: There is no requirement for an adjudication of a previous violation. However, to be a factor in determining the appropriate length of disqualification or amount of civil fine there must be sufficient evidence to prove that there was a violation and that it was willful and intentional. The Administrative Law Judge will consider whether there is sufficient evidence to support that a previous violation occurred.

Comment: One commenter asked for examples of multiple acts of wrongdoing.

Response: FCIC has reconsidered this provision in light of the other provisions and comments received and realized that only conduct that is willful and intentional can be subject to sanctions and such improper conduct constitutes a violation. Since redesignated § 400.454(c)(3) already covers multiple violations, FCIC has removed the provisions relating to multiple acts of wrongdoing to avoid any ambiguity.

Comment: One commenter asked what is a wrongdoing. Wrongdoing is not a defined term in the proposed regulations. The commenter asked if wrongdoings equate to a violation.

Response: As stated above, this provision has been removed because multiple violations are already covered under redesignated § 400.454(c)(3)(i).

Comment: One commenter asked if multiple acts of wrongdoing span more than one crop year, and if so, how many crop years.

Response: As stated above, the provisions regarding wrongdoings have been removed. Redesignated § 400.454(c)(3) already covers multiple violations.

Comment: One commenter asked what would constitute “multiple” acts of wrongdoing. The commenter stated that “wrongdoing” should be a defined term. The commenter states that a similar problem of “individual” or “multiple” violations arises under § 400.454(f)(1).

Response: As stated above, the provisions regarding wrongdoings have been removed. The term “individual” and “multiple” are given their common usage meaning and, therefore, a definition is not necessary. Individual means one and multiple means more than one.

Comment: Several commenters stated that the phrase “of so serious a nature” provides no objective guidance as to what conduct rises to this level. The commenters suggested that FCIC clearly define precisely what conduct will result in the maximum penalties.

Response: Conduct “of so serious a nature” is one of the standards used in suspension and debarment proceedings and FCIC intends to use the history of the imposition of suspensions and debarments under this standard as guidance under this rule. Further, this standard still requires that the conditions of willful and intentional be met. However, it is not possible to define the actual conduct meeting this standard because each case is based on its own factual situation. No change has been made in response to this comment.

Comment: Several commenters objected to imputation of conduct between individuals and corporations. They claim that section 515(h) does not authorize the imputation of conduct between individuals and corporations. In addition, FCIC's proposed rule provides no evidence that its board of directors has authorized the Manager to impute liability as part of conducting the ‘business’ of FCIC. One commenter stated that the provisions for imputations of conduct of one person to another are unauthorized by the FCIA, inappropriate, legally improper, and both overly broad and vague. One commenter stated that the most troubling is the potential to impute conduct from an individual to an organization. This provision puts insurance providers at risk for unjustified sanctions. However, if RMA proceeds with its inclusion, the scope of potentially imputable conduct must be narrowed.

Response: The Act does not preclude the imputation of improper conduct. The purpose of section 515(h) is to protect the Government from doing business with persons who have willfully and intentionally made misrepresentations. Persons can include entities or individuals. However, all entities are operated by individuals who are responsible for the actions of the entity. Therefore, those individuals should be held responsible for those actions just as much as the entity itself. Conversely, entities that benefit from the improper conduct by its associates should similarly be held responsible. Without the ability to impute improper conduct too many people could find means to shield themselves from their conduct. Further, the factors that must be satisfied before the imputation of conduct should ensure that the truly innocent are not sanctioned. There must be knowledge, approval or acquiescence before knowledge can be imputed. Further, as stated more fully below, FCIC has added provisions to clarify when improper conduct may be imputed and that the factors applicable to determining the gravity of the violation must also be considered with respect to the person upon whom improper conduct is imputed. No change has been made in response to this comment.

Comment: One commenter stated that FCIC cannot rely on 7 CFR part 3017 for the imputation of liability. FCIC cannot rely on 3017 because 3017 provides for imputation of liability by FCIC only for `fraudulent, criminal, or other improper conduct.' The first problem with this concept is that part 3017 was not issued under the authority of FCIA. The second problem with relying on part 3017 is that FCIC has not cited the statutory authority for that set of regulations as authority for the proposed rule. Finally, the rule calls for the imputation of liability for any violation of § 400.454(b), which includes providing false or inaccurate statements and failing to adhere to a `Requirement of FCIC.' A false statement would not be fraudulent unless made with the requisite intent. An inaccurate statement or failure to adhere to a requirement of FCIC could result simply from negligence. Thus, the severity of the conduct embraced by 3017.630 is significantly greater than the conduct covered by proposed § 400.454(b).

Response: Section 515(h) of the Act describes the conduct that is subject to sanctions under this rule, not 7 CFR 3017. The purpose of the imputation of conduct provisions is to preclude individuals from escaping responsibility for their actions by hiding behind entity structures. It is not intended to enlarge the scope of the sanctions or to apply to conduct that is otherwise not sanctionable under section 515(h). However, FCIC must employ all reasonable measures to protect the program from any person who has committed a violation subject to the sanctions in section 515(h). No change has been made in response to this comment.

Comment: One commenter stated that the proposed rule improperly expands, without providing a basis for doing so, the scope of the allowed imputation under 7 CFR 3017.630 to include omissions and failures to act as well as culpable acts performed with intent.

Response: Section 515(h) of the Act describes the conduct that is subject to sanctions under this rule. Section 400.454(d) only seeks to ensure that those persons involved in the conduct described in section 515(h) are held accountable. One way to do this is to preclude individuals from shielding themselves through the use of entities or from entities shielding themselves by claiming the conduct was caused by an individual associated with the entity even though the entity benefited from the conduct. No change has been made in response to this comment.

Comment: One commenter stated imputing conduct would be improved by two fundamental changes. First, conduct only should be imputed when the person to whom the conduct is imputed `knows or has reason to know' of the conduct under the definition contained in 7 CFR 1.302(o). The standards contained in that definition should work for the Federal crop insurance program. Second, the imputation scheme could be improved by revising 400.454(f) to conform to 7 CFR 1.335(b). Providing a non-exhaustive list of aggravating and mitigating factors would create appropriate flexibility for dealing with situations where conduct is imputed.

Response: As stated above, FCIC has already included the definition of “knows or has reason to know” and used that term with respect to the imputation of conduct. Further, FCIC has added a provision that will require the review of the factors added to § 400.454(c)(2) when imposing a sanction on a person to whom conduct was imputed.

Comment: One commenter stated that to impute the improper conduct of a person to another person, such person must know or should have known of the improper conduct. This statement indicates that the government will assess what the knowledge level of an individual should be and prosecute them according to their supposed knowledge. There are many factors that can influence the knowledge level of an agent or insurance provider representative. Not every insured and agent has the same level of knowledge or access to every element of information.

Response: As stated above, imputation of improper conduct provides a means to ensure that those responsible for the improper conduct are held accountable. It is to prevent persons from using entities or other persons as shields against responsibility. Persons should not be permitted to turn a blind eye to what is occurring, while at the same time they are benefiting from the conduct. While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. No change has been made in response to this comment.

Comment: One commenter stated that holding an organization responsible for the acts of an individual is only reasonable if that individual is a principal of that organization, and even then there are perimeters to be established.

Response: The commenter's view is too restrictive. There may be cases where an entity will allow a subordinate to commit violations or turn a blind eye to such conduct in order to obtain the benefits. For example, an agency may knowingly allow agents to falsify records in order to increase premiums and their commissions. The agents may not be a principal of the agency, but the agency by allowing the improper conduct, would be complicit and should be held accountable. There are sufficient parameters in the rule to ensure that persons who have no way of knowing of the improper conduct and have no involvement are not held accountable for the actions of others. No change has been made in response to this comment.

Comment: Two commenters stated it would appear that the rule would hold a person responsible for the acts of another even where such statements, acts or omissions are not fraudulent. The commenter feels that other persons could be held to a higher standard than the person making the statement or committing the act or omission. If there is to be any imputation of liability, it must pertain strictly to fraudulent statements, acts or omissions and require actual knowledge or a reason to know.

Response: Persons to whom conduct may be imputed are not held to a higher standard. The rule requires knowledge, approval or acquiescence before the conduct can be imputed from an individual to the organization. Further, knowledge of or a reason to know is required before conduct can be imputed from an entity to an individual. As stated above, FCIC has added a definition of “knows or has reason to know” obtained from 7 CFR 1.302. While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the improper conduct, there may be no basis to impute the improper conduct. However, as stated above, fraudulent conduct is not required before a sanction may be imposed. Section 515(h) refers to willfully and intentionally providing false or inaccurate information or willfully and intentionally failing to comply with a requirement of FCIC. If such conduct occurs and the requirements for the imputation of such conduct have been met, these persons will be subject to the sanctions contained in the rule. No change has been made in response to this comment.

Comment: One commenter stated that FCIC is proposing to revise § 400.454(d) to allow FCIC to impute the improper conduct of a person to another person if the other person has the power to direct, manage, control or influence the activities of the person that is being cited for improper conduct. Since an insurance provider employs agents to sell policies, it follows the entire organization could potentially be cited for improper conduct of an agent. Both could be disqualified from selling crop insurance.

Response: An insurance provider could only be at risk of sanction if it is proven that the insurance provider had knowledge, approved of or acquiesced to the conduct of the agent that is the subject of the sanction. While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. However, there have been instances in the past where insurance providers have allowed false information, such as backdated documents, to be provided by agents. In such cases, the insurance provider should be held accountable. No change has been made in response to this comment.

Comment: One commenter stated that the proposed rule seems to indicate that suspension and/or debarment may happen without the parties being fully aware of the reasoning behind the penalty. The commenter recommends that this provision be eliminated for ‘participants’ and FCIC fully explain the process.

Response: FCIC is unsure of the basis for the comment. FCIC must prove that a person willfully and intentionally provided false or inaccurate information or willfully and intentionally failed to comply with a requirement of FCIC. Such conduct cannot be imputed to another unless there was knowledge, approval or acquiescence. Further, the process of imposing disqualifications and civil fines has been in place since 1993 and, before any sanction is imposed, the person will have an opportunity to hear the evidence against them and provide evidence in their defense. An Administrative Law Judge will determine whether a sanction under this rule can be imposed. Therefore, there should never be a situation where a person would not be aware of the basis for the sanction. In addition, by statute, sanctions apply to participants. Therefore, there is no basis to remove them from this rule. No change has been made in response to this comment.

Comment: One commenter stated that at a minimum, the scope of potentially imputable conduct must be narrowed to only impute conduct of officers, directors and conduct of employees that is specifically ratified or endorsed by the entity. Moreover, the entity must be given ‘credit’ for having practices that attempt to prevent rule violations and encourage ‘whistleblower complaints’ of suspected violations. Thus, if an entity addresses the allegedly ‘bad’ conduct by its employee or independent contractor after its officers have been made aware of the situation, it should not be subject to any of the penalties under the rule.

Response: The rule requires the knowledge, approval or acquiescence of the entity before improper conduct can be imputed. Unless these standards are met, no conduct can be imputed to the entity. However, it is not practical to limit the imputation of conduct to when such conduct is “ratified” or “endorsed” by the entity. Such actions suggest the need for an affirmative action on the part of the entity. However, in most cases, there is a failure of the entity to act when it knew or should have known of the improper conduct. If the safeguards put in place by the entity are working there should be no risk of the imputation of conduct to it. Further, one of the factors to be considered in determining the gravity is the internal controls in place. However, FCIC does not know what the commenter meant by “addressing” the alleged bad improper conduct. Once the entity becomes aware of the improper conduct that is subject to sanction, it must be reported to FCIC so it can take the appropriate action against the wrongdoer. Failure to report such improper conduct can make the entity at least appear complicit in the conduct. If the person rejects the improper conduct and any benefit derived therefrom, such as refusal to accept documents that are backdated, etc., then there may not be a basis for the imputation of conduct.

Comment: One commenter stated that clarification concerning imputation of liability to other persons is needed. It must be proven that the third party had actual knowledge or at least a reason to know of the fraudulent statement, act or omission of another.

Response: As stated above, this rule does require knowledge or at least a reason to know before conduct can be imputed. While acceptance of benefits of the conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. However, fraudulent is not the standard. If a person willfully and intentionally provides a false or inaccurate statement, the person is subject to the sanctions contained in this rule.

Comment: One commenter stated that FCIC has the authority to sanction, even debar an insurance provider as a result of the violation of a low level employee.

Response: An insurance provider cannot be disqualified or assessed a civil fine unless it is proven that it had knowledge of or reason to know of the willful and intentional violation by the low level employee. While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. However, there have been instances in the past where the insurance provider has turned a blind eye to misconduct it knew about, such as backdated documents, and in such cases the insurance provider should be held accountable.

Comment: One commenter objects to imputing the conduct of an ‘individual associated with an organization,’ as FCIC has not defined what it means to be ‘associated with an organization.’ The commenter asks whether a contractor is ‘associated with’ an insurance provider or whether that contractor's subcontractor is associated with an insurance provider.

Response: Any person that performs work on behalf of the organization can be found to be associated with the organization. However, that does not necessarily mean that conduct will be imputed to the organization. The organization must know or have reason to know of the improper conduct. While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. No change has been made in response to this comment.

Comment: One commenter stated that a corporation's receipt of a benefit from an individual's violation does not ‘evidence knowledge, approval or acquiescence’ unless the corporation knows or should know of either the violation or that the benefit resulted from the violation.

Response: While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct.

Comment: One commenter stated (1) the imputation appears to be automatic if the ‘conduct occurred in connection with the individual's performance of duties for or on behalf of that organization.’ The commenter stated a reasonable approach would be to make conduct by a ‘principal,’ no presumed imputation should exist with respect to any person who is not a principal. (2) While receipt of a benefit can be ‘evidence of knowledge, approval or acquiescence,’ it only should be rebuttable evidence. (3) The proposed rule gives no recognition of the extent to which the organization's practices attempted to preclude such conduct. USDA elsewhere has recognized the relevance of this factor. See for example, 7 CFR 1.335(b)(11). (4) Imputing knowledge in the severe fashion proposed could chill internal investigative efforts by insurance providers and ultimately cooperation with FCIC in identifying and punishing misconduct. FCIC should not adopt a rule that might chill such efforts.

Response: (1) The commenter's view is too restrictive. There may be cases where an entity will allow a subordinate to commit violations or turn a blind eye to such conduct in order to obtain the benefits. For example, an agency may knowingly allow agents to falsify records in order to increase premiums and their commissions. The agents would not be a principal of the agency, but the agency by allowing the improper conduct would be complicit and should be held accountable. (2) While acceptance of benefits of the improper conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the person can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. (3) As stated above, having internal controls in place is one of the factors to be considered when determining the gravity of the violation. (4) This rule should not chill the investigative efforts of the entity. If the entity discovers improper conduct subject to sanction under this rule, the entity can shield itself from any imputation of such conduct by not accepting the benefits from the conduct and promptly reporting the improper conduct to FCIC. No change has been made as a result of the comment.

Comment: One commenter stated that an insurance provider can be sanctioned based simply upon the fact that the conduct occurred in connection with the individual's performance of duties for or on behalf of that organization. If an insurance provider did not actively participate in the agent's or adjuster's violation, the agent's or adjuster's conduct should not be imputed to the insurance provider and the insurance provider should not be sanctioned under this rule.

Response: An insurance provider that did not actively participate in an agent's or adjuster's violation and it is proven that the insurance provider did not know or have reason to know of the violation, the insurance provider should not be sanctioned. As stated above, the entity can shield itself from any imputation of such conduct by not accepting the benefits from the improper conduct and promptly reporting the conduct to FCIC. No change has been made as a result of this comment.

Comment: One commenter stated that whether a person had reason to know of a particular course of conduct is a very subjective analysis. The commenter asked how FCIC plans to determine whether one person had a reason to know of the conduct of another.

Response: Acceptance of the benefits of the conduct subject to the sanction is evidence of knowledge. However, as stated above, that evidence is rebuttable. There are other ways to establish a reason to know, such as an obligation to review documents that contain the false statements, etc. In all cases, the person will have the opportunity to provide evidence in defense and the issue will be decided by an independent Administrative Law Judge.

Comment: Two commenters, citing 41 AM JUR 2d, Independent Contractors section 2 (2007), stated that liability of an independent contractor may not be imputed to a corporation, but it imposes a virtually impossible standard on large insurance providers. Under the proposed regulations, a corporation with thousands of lower-level employees and independent contractors can be held liable and subject to disqualification for the rogue actions of a single independent contractor [or any other individual ‘associated’ with the insurance provider], even if that individual acts in violation of insurance provider policy unbeknownst to the insurance provider.

Response: As stated above, the corporation can only be subject to sanctions under this rule if it knew of or could reasonably have known of the improper conduct. While acceptance of benefits of the conduct can be considered evidence of knowledge, approval or acquiescence of the improper conduct, a person can still rebut such evidence. If the corporation can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. Therefore, the corporation is not liable for the rogue acts of a single independent contractor that is unknown or could not have been known by the corporation. No change has been made in response to this comment.

Comment: One commenter citing Federal law stated that absent evidence that Congress intended to impose such harsh strict liability standards on corporations, of which there is none, the proposed rule cannot stand.

Response: This rule is not imposing strict liability on corporations. Conduct can only be imputed if the corporation knew or reasonably should have known of the improper conduct. While acceptance of benefits of the conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the corporation can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. No change is made in response to this comment.

Comment: One commenter stated that whether an individual had ‘reason to know’ a specific fact is not equivalent to whether an individual ‘should have known’ of the fact and FCIC should amend the rule to clarify the applicable standard. USDA's civil fraud regulations, under 7 CFR 1.302(o), already define the phrase ‘knows or has reason to know’ in the context of fraud and false statements. Another commenter stated that the language ‘reason to know’ should be defined to make clear that this does not create a ‘should have known’ standard. The commenter stated that the ‘reason to know’ requires that a person draw reasonable inferences from information already ‘known to him’ and does not give rise to the duty of inquiry that is created by a ‘should have known’ standard.

Response: As stated above, FCIC has added a definition “knows or has reason to know” for clarity and used the definition contained in 7 CFR 1.302(o). However, also as stated above, fraud is not a prerequisite to the imposition of sanctions under this rule. Section 515(h) of the Act only requires that a person willfully and intentionally provide a false or inaccurate statement or willfully or intentionally fail to follow a requirement of FCIC.

Comment: The commenter, citing federal law, stated that imputation from an organization to another organization is contrary to existing law. The mere existence of a partnership, joint venture, joint application, association, or similar arrangement does not automatically give rise to shared liability. The commenter stated that the proposed rule must be clarified to include additional prerequisites for imputed liability such as actual knowledge or reason to know of the culpable acts.

Response: The issue is not shared liability. The question is whether a person can be held accountable for the actions on another. As stated above, the rule requires that there be knowledge or reason to know of the improper conduct. While acceptance of benefits of the conduct can be considered evidence of knowledge, approval or acquiescence of the conduct, a person can still rebut such evidence. If the corporation can prove they were uninvolved and had no way of knowing of the conduct, there may be no basis to impute the conduct. No change has been made in response to this comment.

Comment: One commenter stated that the Agricultural Market Transition Act cited in § 400.454(e)(1)(i)(B) was replaced by the Farm Security and Rural Investment Act of 2002.

Response: The reference to the Agricultural Market Transition Act in § 400.454(e)(1)(i)(B) will be deleted and replaced with the Farm Security and Rural Investment Act of 2002 or a successor statute.

Comment: One commenter stated that the prohibition contained in § 400.454(e)(1)(ii) is neither discussed in nor implied by section 515(h), therefore it is an impermissible expansion of the penalties authorized by ARPA.

Response: FCIC does not understand this comment. Section 515(h)(1) of the Act refers to “producer, agent, loss adjuster, approved insurance provider, or any other person.” This means that the sanctions in section 515(h) can apply to any person who willfully and intentionally provides false or inaccurate information or willfully and intentionally fails to comply with a requirement of FCIC. However, section 515(h) provides for different consequences depending on whether the person is a producer or other person. This distinction is carried over into § 400.454(e)(1)(ii). That fact that § 400.454(e)(1)(ii) refers to participant is not an expansion of the available sanction since a participant, as defined in the rule, just delineates a group of persons already included under section 515(h). No change is made in response to this comment.

Comment: One commenter asked if § 400.454(e)(1)(i)(I) (redesignated § 400.454(e)(1)(i)(H)) applied only to federal assistance laws and if so, the rule should be worded to reflect that fact.

Response: Section 515(h) of the Act refers to “any law that provides assistance to the producer of an agricultural commodity affected by a crop loss or decline in the prices of agricultural commodities.” It does not make any distinction between federal or any other laws but as a practical matter, disqualification can only apply to programs under the auspices of the Federal Government. Therefore, redesignated § 400.454(e)(1)(i)(H) will be revised to read: “Any federal law that provides assistance to the producer of an agricultural commodity affected by a crop loss or decline in the prices of agricultural commodities.”

Comment: One commenter stated that the requirements were far too broad and overreaching to be fair and enforceable and that an insurance provider could be subject to sanctions even if it strictly complied with the rule to periodically check the Ineligible Tracking System (ITS) and Excluded Parties List System (EPLS). An insurance provider could be required to check the ITS and EPLS daily for not only prospective business partners, but also for its current employees, adjusters, and agents. In an example given, insurance provider A contracts with an adjuster. Insurance provider A checks ITS and EPLS and the adjuster is cleared. The same adjuster later contracts with insurance provider B. The adjuster is then disqualified for conduct associated with his work for insurance provider B. However, prior to insurance provider A's next periodic check of ITS and EPLS, the adjuster works several claims for insurance provider A.

Response: The burden imposed by this rule is no different than the burden that exists with respect to suspended or debarred persons. The Government wants to preclude such persons from circumventing their disqualification by hiding under the auspices of another person. Participants in the program have the responsibility to periodically review EPLS and ITS to determine whether the persons it does business with are included on such lists. FCIC will examine the reasonableness of the reviews to determine whether it is appropriate to disqualify the participant who does business with a disqualified person. Such disqualification is not automatic. No change is made in response to this comment.

Comment: One commenter stated that the rule's requirement to periodically review the ITS and EPLS to determine persons who are disqualified from participation in the Fed eral crop insurance program directly contravenes the statutory requirement that the relevant sanctions under the proposed rule be confined to ‘willful and intentional’ acts.

Response: There is no contravention of the statute by imposing disqualification on persons who elect to do business with a person that has been disqualified. Without this requirement, disqualified persons will be able to hide their participation by hiding under another person. FCIC has the authority to prevent such circumvention and has elected to adopt the same remedies as is applicable to persons who do business with suspended and debarred persons. Disqualification is not automatic and FCIC will consider the circumstances on a case-by-case basis. No change is made in response to this comment.

Comment: Two commenters stated that insurance providers have greater access than individual agencies to monitor ITS and that agencies don't have the system to do an effective job. Although the insurance providers monitor ITS, the agency may not receive notification of ineligibility until several months have passed or until after an initial application was accepted and was detected only when a loss was submitted.

Response: Persons who are disqualified are also reported to the General Services Administration for inclusion on the EPLS. EPLS is available to everyone. Therefore, all participants have the ability to timely determine whether the persons with whom they are doing business have been disqualified. No change is made in response to this comment.

Comment: One commenter asked if entity ABC is ineligible, and new entity DEF is set up, how will agents discover the new entity, without some elaborate system. It would appear that FCIC could have a system which would automatically detect, in a timely manner before insurance attaches, by cross referencing social security number.

Response: There is no foolproof method to prevent disqualified persons from trying to hide their involvement. The participants' responsibility is to review ITS and EPLS to determine whether it is doing business with a person listed. If a person is not listed because it has changed its name, participants cannot be held accountable for the knowledge. However, if the person is required to provide its social security number or other identification number in connection with its participation in the program or affiliation with the participant, such persons should be identifiable on ITS or EPLS. No change is made in response to this comment.

Comment: One commenter stated that spousal tracking would be tedious to track as there may be multiple entries for a given last name. The commenter asked whether this means that it will have to go through all insureds with that last name. What if a person retains their maiden name and their spouse is ineligible? The commenter asks how this will be tracked.

Response: If the spouse is disqualified under this rule, the spouse should be separately listed in ITS and EPLS. Therefore, there should be no difficulty in tracking such persons.

Comment: One commenter was concerned that an agency could become a victim if an insured were to testify that he knowingly took a false report when, in fact he didn't; it would be the agent's word against the insured's word. The commenter asks where the burden of proof lies.

Response: The burden of proof lies with FCIC, who must establish that the agent willfully and intentionally provided a false or inaccurate statement. Testimony can provide evidence, but the agent will have the opportunity to provide a defense, which will all be considered by a neutral Administrative Law Judge.

Comment: One commenter stated that agents should not be involved in any aspect of production fact finding as it could be interpreted as a conflict of interest. The commenter suggested that this could be remedied by FCIC making production fact finding by agents a conflict of interest.

Response: Agents are precluded from participating in any aspect of the loss adjustment process under the conflict of interest provisions in the SRA. It is the loss adjuster that would be determining production. Further, it is the loss adjuster that should be providing the production information to the insurance provider, not the agent. However, if the agent knows that false information has been provided and does nothing, the agent can be held responsible. No change is made in response to this comment.

Comment: One commenter is concerned that a mistake could be turned into a “willful and intentional” act due to a person's misinterpretation.

Response: It is difficult to see how this could happen. FCIC bears the burden of proving willful and intentional conduct and the person will be provided an opportunity to provide a defense. The evidence will be considered by a neutral Administrative Law Judge, who will determine whether FCIC has met its burden. This due process should protect against misinterpretations. No change is made in response to this comment.

Comment: One commenter is concerned about the imposition of multiple penalties of $100,000 per occurrence for multiple events. The commenter recommends that participants should not be punished for simple errors or misinterpretation of a rule, but participants should be punished for willful and intentional abuses.

Response: Simple errors or misinterpretation of a rule are not the basis for sanctions. There must be willful and intentional conduct, which is defined in the rule. Further, the civil fine is $10,000 per violation, not $100,000. No change is made in response to this comment.

Comment: One commenter suggests if an agent submits an acreage report with false information it appears to be shifting the responsibility of acreage reporting from the insured to the agent. The agent should not be expected to act as a law enforcement official. Agents are not authorized to require hard copy records from the insured unless the records are specifically requested by the insurance provider.

Response: The proposed rule is not shifting the responsibility of acreage reporting from the insured to the agent. The insured is responsible for the accuracy of the provided information. However, agents should not provide any documentation with information it knows or has reason to know is false. At a minimum the agent should ask the insured if the information provided is correct. If an agent does not know nor has no reason to know that the information is false, there is no basis to sanction the agent. No change is made in response to this comment.

Comment: One commenter is concerned about the rule's reference to proving willful and intentional error versus unintentional error. Unintentional errors can occur; the most experienced operator, agent or adjuster with years of training or coverage, can make a mistake on a report. Months or years after the unintentional error, these mistakes may be construed as intentional omissions. Specific and defined consideration of the values and variables used to determine guilt or innocence is needed.

Response: Unintentional errors are not the basis for sanctions. FCIC bears the burden of proving that the error was willful and intentional at the time it was made and the person will have the opportunity to provide evidence in the defense. An independent Administrative Law Judge will decide whether FCIC has met its burden. No change is made in response to this comment.

Comment: One commenter stated that the prohibition contained in § 400.454(e)(3)(ii) is neither discussed in nor implied by section 515(h) and therefore, is an impermissible expansion of the penalties authorized by ARPA.

Response: Section 400.454(e)(3)(ii) precludes participants from conducting business directly related to crop insurance with disqualified persons or conducting any other business if such business would permit the disqualified person from receiving a benefit under a program administered under the Act. Under section 515(h) of the Act, FCIC is expressly authorized to exclude persons from participating in the crop insurance program. Ancillary to this express authority is the authority to take such actions as are necessary to ensure that disqualified persons do not continue to participate in, or receive benefits from, the crop insurance program. FCIC exercised this authority in § 400.454(e)(3)(ii). Without this provision, persons could avoid their disqualification by affiliating with other persons. Further, as learned in the suspension and debarment process, the only meaningful way to prevent persons from doing business with disqualified persons is to make them also subject to disqualification. No change is made in response to this comment.

Comment: One commenter stated that the penalty imposed under § 400.454(e)(3)(iii) is inequitable and overly broad. For example, if a disqualified agent also is a chemical supplier, it is unreasonable for FCIC to prohibit insureds from purchasing chemicals from that individual.

Response: Doing business with a disqualified person does not automatically subject the participant to disqualification. The purpose of § 400.454(e)(3)(iii) is to preclude persons from circumventing their disqualification. FCIC will have to evaluate whether the business is related to the crop insurance program, the disqualified person will be able to receive benefits under the crop insurance program as a result of the business relationship, or the disqualified person is using the business relationship to obtain benefits not otherwise entitled to because of the disqualification. No change is made in response to this comment.

Comment: One commenter asked what occurs in a situation in which a participant is unaware that the person with whom he or she is doing business was disqualified. The commenter asks whether a participant has an obligation to inquire of a prospective business partner as to its status in the crop insurance program.

Response: A participant has an obligation to review ITS and EPLS to discover whether a person with whom they are doing business is disqualified. Therefore, unless there is some subterfuge on the part of the disqualified person, such as using different names, social security numbers, etc., there should not be any situation where the participant is unaware they are doing business with a disqualified person.

Comment: One commenter stated that the phrase in § 400.454(e)(3)(iii), `may be subject to disqualification' seems selective. The commenter asks what criteria FCIC will apply in determining whether to disqualify a participant for doing business with a disqualified person.

Response: The purpose of the provision is to prevent disqualified persons from circumventing their disqualification. There may be situations where the participant does not know and has no reason to know that a person has been disqualified, such as using a slightly different name or social security number. Under these circumstances, it is unlikely disqualification could be imposed on the participant. There may also be situations where the business conducted is in no way related to the crop insurance program. However, there may also be situations where the participant knows the person is disqualified and elects to do business with them anyway. Under such circumstances, disqualification of the participant may be appropriate. Each case will have to be considered on its own merits. This may seem selective, but all cases will ultimately be determined by a neutral Administrative Law Judge who will determine whether FCIC has met its burden.

Comment: One commenter stated that § 400.454 refers to a person as an insurance provider and the disqualification of an insurance provider is also broad and ambiguous. The commenter asks if the entire insurance provider, the individual, or both are penalized if a qualifying error occurs. Clarification is needed to explain the process used when an insurance provider is disqualified because of an error.

Response: Insurance providers cannot be disqualified because of an error unless such error was committed willfully and intentionally. If the person named in the disqualification is the insurance provider, then the insurance provider as a business entity is disqualified. If an individual affiliated with the insurance provider is disqualified, the disqualification applies to the individual, not the insurance provider unless specifically named. The process used for disqualification is the same for all persons, including individuals and insurance providers. A complaint is filed seeking disqualification and the person can mount a defense before a neutral Administrative Law Judge.

Comment: One commenter stated that § 400.454(e)(3)(ii) states that `no participant may conduct business with a disqualified participant or other person * * * if, through the business relationship, the disqualified participant or other person will derive any monetary or non-monetary benefit from a program administered under the Act.' It is not clear what `program administered under the Act' means.

Response: “Program administered under the Act” means any program authorized under the Federal Crop Insurance Act. This would include all crop insurance programs, education programs, research and development programs, expert reviews, etc. It would not include any program not authorized under the Act, such as private hail insurance or other lines of business.

Comment: One commenter stated that the rule is overbroad in that it could be interpreted to apply to contractual, statutory, or other pre-existing legal rights and obligations that an insurance provider might have with ‘other persons,’ i.e., its employees subject to future disqualification. For example, if an employee is disqualified for violating `FCIC requirements' and is terminated for cause, under federal law the insurance provider must continue to honor its existing ERISA obligations to its former employee. As the rule is written, allowing the disqualified participant to continue to derive these monetary benefits, as mandated by ERISA, could subject the insurance provider to disqualification. Another commenter stated that contractual and statutory rights that precede disqualification should not be affected. If an employee is disqualified, the employer is still obligated to honor these pre-existing obligations. The rule should clarify that honoring contractual and statutory obligations that precede the date of disqualification does not subject an entity to potential disqualification because of indirectly providing a `monetary or non-monetary benefit from a program administered under the FCIA.'

Response: As stated above, the purpose of this provision is to prevent disqualified persons from circumventing their disqualification by affiliating with other participants. In the scenario presented, once the participant severs the relationship with the disqualified person, FCIC recognizes that there may be legal obligations that the participant must continue to fulfill, such as ERISA. However, such arrangements may be subject to scrutiny to ensure that they are not a subterfuge to continue to channel benefits to a disqualified person. FCIC has added provisions to clarify that simply fulfilling a previous contractual or statutory obligation after termination of the relationship with a disqualified person is not doing business with such person unless the arrangement is determined to provide a means of circumventing the disqualification, for example, a severance agreement executed at the time of termination that provides payments or benefits similar to what the person was previously receiving.

Comment: One commenter stated that the rule has no limitation with respect to the type of business relationship that a participant or other person has with a `disqualified participant or other person.' Thus, the business activity could be completely unrelated to any business transaction subject to the FCIA or to the receipt of any benefit from the USDA under another Federal program. Second, such a proposed provision creates a serious risk of blacklisting individuals.

Response: There is no limitation with respect to the type of business because FCIC does not want to create loopholes for disqualified persons to be able to create business opportunities to circumvent their disqualification. However, § 400.454(e)(3) expressly states that the business must directly relate to the Federal crop insurance program or allow the person to receive a benefit from a program administered under the Act. As stated above, such programs would include the contracts, cooperative agreements and partnerships for research and development, educations, etc. Therefore, there is no possibility of “blacklisting” individuals. FCIC has the right to elect not to permit disqualified persons to circumvent their disqualification by preventing their ability to obtain benefits related to crop insurance or another program administered under the Act. No change is made in response to this comment.

Comment: One commenter stated that the proposed rule proposes routine review of the ITS and EPLS to ensure FCIC is not doing business with a disqualified person. Each insurance provider handles the flow of information from RMA systems in a different manner. This commenter does not use ITS or EPLS. Agents are notified if an insured is ineligible, however the manner and timing of the notification varies with each insurance provider. The proposed rule would hold agents accountable for review of systems of which they have little or no knowledge. The commenter recommends that RMA systems not accept data for ineligible producers.

Response: The commenter's suggestion presupposes that the disqualified person is an agent or a producer and this may not be the case. Therefore, FCIC would have no means to identify when participants are doing business with disqualified persons. Further, all participants are already under an obligation to check the ITS and ELPS with respect to persons who may be suspended or debarred. That would include agents, loss adjusters, producers, and any other persons. Therefore, this rule does not add a new obligation; it simply reaffirms the existing obligation and places participants on notice to also check for disqualified persons. No change is made in response to this comment.

Comment: One commenter stated that, as the rule is written, an agent and agency could be disqualified from selling crop insurance for an error that was not willful or intentional on their part.

Response: It is difficult to see how continuing to do business with a disqualified person is not willful or intentional unless there is some deceit on the part of the disqualified person. The participant has a duty to check the ITS and ELPS to identify disqualified persons. The participant knows that it is precluded from doing business with such persons. Therefore, the participant's continuance of business with a disqualified person under the circumstances can be considered willful and intentional.

Comment: One commenter stated that the civil fines were too miniscule and suggested that the minimum fine should be $50,000, civil fines should be imposed against all individuals who participated in the entire scheme, and jail time of five years minimum for all offenders involved in the loan process.

Response: FCIC cannot impose a civil fine in any amount greater than that authorized in section 515(h) of the Act. Further, nothing in the Act authorizes the imposition of incarceration. However, to the extent that the conduct that subjects a person to disqualification may violate any criminal statutes, there is no impediment to the prosecution of such persons. Further, any individual who participated in the conduct that is subject to disqualification is also subject to disqualification provided their conduct meets the standards contained in this rule.

Comment: One commenter stated that although § 400.454(c) requires FCIC to consider the “gravity” of an offense when imposing a civil fine, FCIC should amend subsection (f) to recognize the concept of materiality.

Response: As stated above, FCIC has amended the provisions in § 400.454(c) regarding whether to impose a civil fine and the amount to include materiality.

Comment: One commenter stated that the rule improperly fails to recognize any concept of materiality. The absence of a materiality test is contrary to FCIA, which only authorizes sanctions for material violations. Because the proposed rule applies to reinsurance agreements, it clearly sets up a situation where immaterial conduct is punished beyond the levels contemplated in the SRA. The commenter suggested that this section could be improved by including the non-exhaustive list of aggravating and mitigating factors found under 7 CFR 1.335(b).

Response: As stated above, FCIC has amended the provisions in § 400.454(c) regarding whether to impose a civil fine and the amount to include materiality. Further, FCIC has also added the list of aggravating and mitigating factors found in 7 CFR 1.335(b) to § 400.454(c).

Comment: Two commenters stated that § 400.454(f)(1) imposes a separate civil fine for each individual action. It was suggested that FCIC should fully explain what constitutes an `individual action'.

Response: FCIC has revised the provision to refer to “each violation.” FCIC has also revised the definition of “violation” in § 400.452 to specifically refer to the elements for disqualification or civil fines contained in § 400.454.

Comment: One commenter asked what would constitute an individual or multiple violations.

Response: As stated above, each willful and intentional false or inaccurate statement or each act that would be considered a willful and intentional failure to comply with a requirement of FCIC would be considered an individual violation. For example, each document that contains a back-dated date would be an individual violation. If there is more than one such document or there are different false statements on more than one document, there would be multiple violations.

Comment: One commenter stated that FCIC proposes to eliminate current § 400.454(f), which requires the hearings to be governed by the Rules of Practice Governing Formal Adjudicatory Proceedings Instituted by the Secretary. Without this section, it is unclear what rules apply to the hearings. The commenter suggested that FCIC state what rules of practice apply to these proceedings.

Response: The provisions from current § 400.454(f) that provide for the rules of practice have not been eliminated. They were moved to § 400.454(a).

Comment: One commenter suggested that the last sentence of 400.454(f)(3)(i) should end with the period inside the end parenthesis and the preceding sentence should end with a period of its own; `* * * the specified due date. (If * * * signed by FCIC.)' instead of `* * * the specified due date (if * * * signed by FCIC).'

Response: Given that these are independent sentences, FCIC has removed the parenthesis and added periods at the end of each sentence.

Comment: Two commenters stated that the language about insurance providers' assumption of the book of business introduces ambiguity and is absolutely unnecessary. As a matter of both fact and law, policies written by an agent or an agency on behalf of an insurance provider are already the direct liability of the insurance provider, so no assumption would be required. Adding this provision simply introduces confusion to an otherwise clear situation. On the other hand, it is appropriate for this provision to require the insurance provider to assign policies written by a disqualified agent or agency to a different agent or agency.

Response: The commenter is correct that when an agent writes a policy for a particular insurance provider, that insurance provider has already assumed the liability for such policy. Therefore, this provision is removed. The requirement that the insurance provider assign the policies to a different agent or agency will be retained. However, ultimately it is the producer that has the right of selection of which agent will service their business and may move their policy to any agent of their choice that is not disqualified. Therefore, the provision is revised to allow for this election.

Comment: One commenter stated that the proposed rule appears to suggest that an agent rightfully found in violation can have his entire business confiscated, in addition to disqualification and other pecuniary fines. This could lead to constitutional problems.

Response: The agent is precluded from selling or servicing any policies or receiving any benefits from the sale or service of such policies during the period of disqualification. However, as the insurer, the insurance provider has an obligation to ensure that the policies are sold and serviced in accordance with the approved policies and procedures of FCIC. As stated above, it is the producer that has the right to elect which agent will sell and service his or her policy. If the producer fails to make this election, under the rule, the insurance provider must assign the policy to another agent but the assignment of any policy will only last for as long as the period of disqualification. After the disqualification period, subject to the election of the producer, the agent is entitled to get the book of business back. The provision has been revised to clarify that after the period of disqualification, policies that were assigned by the insurance provider revert back to the previously disqualified agent unless the producer elects another agent.

Comment: One commenter stated that it appears if an agent is disqualified, the agency employing the agent would be subject to disqualification as well. The rule also states that the insurance provider would be required to assign the book to another agent or agency. The commenter suggests the inclusion of language that, in the case of one agent in an agency being sanctioned, would leave the book of business within the same agency if that is the agency's choice or if one agency within an organization is sanctioned, would leave the business within the same organization if that is the organization's choice, unless the agency also committed a willful and intentional violation of FCIC requirement.

Response: If an agent is disqualified, the agency employing the agent may only be disqualified if the agency has been named in a disqualification, it continues to do business with the agent or provides any benefits to the agent under the crop insurance program or any other program authorized under the Act during the period of disqualification. As stated above, it is the producer that has the first right to determine who will sell and service his or her policy. If no such election is made, it is the responsibility of the insurance provider to ensure that the policies are properly serviced. There is nothing in this rule that would preclude the insurance provider from electing to keep the policies in the same agency. However, there is nothing in the Act that provides an agency with the right to take over policies sold and serviced by one of its agents. The transfer of policies under such circumstances should be a contractual matter between the agent, agency and insurance provider. No change is made in response to this comment.

Comment: One commenter had great concern that an insurance provider could somehow assign a violating agent's book of business to someone else. The commenter suggested that it may be legally impossible for an insurance provider to seize an agent's book of business.

Response: Once the agent is disqualified, that agent can no longer sell or service the policies in its book of business or receive any benefits from the same or service of such policies. As stated above, the provision has been revised to provide the producer with the right to elect a different agent. However, if no such election is made, as the insurer of these policies, the insurance provider has an obligation to sell and service the policies under the SRA. FCIC is leaving it to the insurance provider and agent to determine how the book of business will be serviced during the period of disqualification. However, FCIC has added a provision clarifying that after the period of disqualification, the policies that were assigned by the insurance provider revert back to the previously disqualified agent unless the producer elects another agent.

Comment: One commenter stated the requirement that the insurance provider assign them to a different agent or agency to service during the period of ineligibility is unfair and is a threat to the rights of the agent and agency. Agents and agencies own their books of business; it is an asset of the agent and the agency just like any other asset. The reassignment of that book of business would be the transferring of an agent's physical assets to another party.

Response: While agents and agencies may consider the book of business to be an asset, it is the producer that controls who sells and services the policy. Therefore, as stated above, the provision was revised to give the producer the election to cancel and rewrite the policy with another agent or agency. If the producer does not transfer the policy, it is the insurance provider that has a contractual obligation to ensure that the policies are serviced. As stated above, FCIC is leaving it to the agent, agency and insurance provider to determine to whom policies are moved once the agent is disqualified. This rule simply reiterates that such an assignment of the policies must occur. Further, as stated above, FCIC has added provisions clarifying that after the period of disqualification, the policies that were assigned by the insurance provider revert back to the previously disqualified agent unless the producer elects another agent.

Comment: One commenter stated that if a disqualification for an insurance provider results in a ‘time out of new sales and renewals, but the ability for continued service of existing policies,' they believe that the same standard should be held to agents and agencies, and not simply a confiscation of an agent's or agency's book of business.

Response: Given the large number of policies in an insurance provider's book of business, it may not be feasible for them to be disqualified in the middle of a crop year without great disruption to the crop insurance program. All of the policies must be cancelled and rewritten with another insurance provider and for some insurance providers it could amount to hundreds of thousands of policies. At the end of the crop year, policies must be cancelled and rewritten with another insurance provider. Therefore, this rule does not allow the insurance provider to continue doing business, it simply provides for the orderly transition of the business. There is not such a large disruption to the program when an agent's or an agency's book of business must be moved. Policies do not have to be cancelled and rewritten because they will remain insured with the same insurance provider. However, as stated above, the agent's or agent's book of business is not confiscated. During the period of disqualification, the producer can elect to move to another agent and only if such election is not made will the insurance providers assign policies to fulfill its contractual obligation under the SRA. The contract between the agent and insurance provider can determine how the business is sold and serviced if the agent is disqualified and such arrangements will not be disturbed by FCIC unless they violate the provisions of this rule by permitting the agent to continue to benefit from the crop insurance program during the period of disqualification. The provisions have also been revised to clarify that after the period of disqualification, the policies that were assigned by the insurance provider revert back to the previously disqualified agent unless the producer elects another agent.

Comment: One commenter stated that 400.454(h) contains the risk of improperly cumulative and excessive penalties.

Response: There is nothing in section 515(h) of the Act that states that the administrative remedies contained therein are the only remedies for the proscribed conduct. There are other civil, criminal and possibly administrative remedies available. If multiple remedies are applied to a person, that person has the right to challenge the application of those remedies as unconstitutional.

Comment: One commenter stated that although the rule does not revise § 400.457(a), the proposed rule renders this section inaccurate. This section is not in accordance with the Program Fraud Civil Remedies Act of 1986, because the standards set forth in 400.454 differ from those set forth in 7 CFR 1.302 and 1.335.

Response: As stated above, FCIC has revised this rule to make it consistent with 7 CFR 1.302 and 1.335 to the maximum extent practicable. In any case, before sanctions can be imposed under both sections 515(h) of the Act and the Program Fraud Civil Remedies Act, all the requirements for the imposition of sanctions under each must be met.

Comment: Several commenters stated that the rule must be clear so that ordinary people can understand what conduct is prohibited and provides sufficient guidance to those who may be subject to the penalties. Several commenters expressed concern with the broad and ambiguous language of the rule. Unintentional errors can occur. Specific and defined consideration of the factors used to determine guilt or innocence is needed to be fair to alleged offenders. One commenter stated that FCIC must clear up any and all ambiguities under the proposed rule so all covered persons receive proper notice of their legal responsibilities. One commenter stated that the rule does not adequately define certain key terms that will provide adequate notice of prohibited conduct in the future. For example, the rule provides sanctions against persons who ‘submit’ or ‘provide’ false information related to the Federal crop insurance program. These terms do not provide adequate notice of prohibited conduct to agents or others who merely forward information or forms supplied or completed by others, but who submit the information and forms to insurance provider.

Response: In response to these and other comments, FCIC has added definitions and revised provisions to increase the clarity of the rule. Responses to these comments will also provide guidance. With respect to the terms “submit” and “provide,” the term submit is not used in the rule. The rule only refers to willfully and intentionally providing false or inaccurate information, consistent with section 515(h) of the Act, which uses the term “provides.” However, FCIC has revised the rule to add a definition of “provides” but without other specific examples, FCIC is unsure of what ambiguities the commenters are referring to.

This supplementary information section is organized as follows:

The H-2A nonimmigrant classification applies to aliens seeking to perform agricultural labor or services of a temporary or seasonal nature in the United States. Immigration and Nationality Act (Act or INA) section 101(a)(15)(H)(ii)(a), 8 U.S.C. 1101(a)(15)(H)(ii)(a); see 8 CFR 214.1(a)(2) (designation for H-2A classification). Despite the availability of the H-2A nonimmigrant classification, a high percentage of the agricultural workforce is comprised of aliens who have no immigration status and are unauthorized to work. In response to members of the public citing what they consider to be unnecessarily burdensome regulatory restrictions placed on the H-2A nonimmigrant classification and resulting limits on the utility of this nonimmigrant category to U.S. agricultural employers, the Department of Homeland Security (DHS) published a notice of proposed rulemaking on February 13, 2008, proposing to amend its regulations regarding the H-2A nonimmigrant classification. 73 FR 8230. On the same date, the Department of Labor (DOL) published a notice of proposed rulemaking to amend its regulations regarding the certification of H-2A employment and the enforcement of the contractual obligations applicable to H-2A employers. 73 FR 8538.

DHS, among other changes, proposed to:

• Relax the limitations on naming beneficiaries on the H-2A petition who are outside of the United States.

• Permit H-2A employers to file only one petition when petitioning for multiple H-2A beneficiaries from multiple countries.

• Deny or revoke any H-2A petition if the alien-beneficiary paid or agreed to pay any prohibited fee or other form of compensation to the petitioner, or, with the petitioner's knowledge, to a facilitator, recruiter, or similar employment service, in connection with the H-2A employment.

• Require H-2A petitioners: (a) To attest that they will not materially change the information provided on the Form I-129 and the temporary labor certification; (b) to attest that they have not received and do not intend to receive, any fee, compensation, or other form of remuneration from prospective H-2A workers; and (c) to identify any facilitator, recruiter, or similar employment service that they used to locate foreign workers.

• Require H-2A petitioners to provide written notification to DHS, or be subject to an imposition of $500 in liquidated damages, within forty-eight hours if: (a) An H-2A worker fails to report to work within five days of the date of the employment start date; (b) the employment terminates more than five days early; or (c) the H-2A worker has not reported for work for a period of five days without the consent of the employer.

• Clarify that DHS will not accord H-2A status to any alien who has violated any condition of H-2A nonimmigrant status within the previous five years.

• Immediately and automatically revoke an H-2A petition upon the revocation of the underlying labor certification by DOL.

• Refuse to approve H-2A petitions filed on behalf of beneficiaries from or to grant admission to aliens from countries determined by DHS to consistently deny or unreasonably delay the prompt return of their citizens, subjects, nationals, or residents who are subject to a final order of removal.

• Extend the H-2A admission period following the expiration of the H-2A petition from not more than 10 days to 30 days.

• Reduce from 3 months to 45 days the minimum period spent outside the United States that would interrupt the accrual of time toward the 3-year maximum period of stay where the accumulated stay is 18 months or less, and to reduce such minimum period from 1/6 of the period of accumulated stay to 2 months if the accumulated stay is longer than 18 months.

• Reduce from 6 months to 3 months the period that an individual who has held H-2A status for a total of 3 years must remain outside of the United States before he or she may be granted H-2A nonimmigrant status again.

• Extend H-2A workers' employment authorization for up to 120 days while they are awaiting an extension of H-2A status based on a petition filed by a new employer, provided that the new employer is a registered user in good standing in DHS's E-Verify program.

• Impose on sheepherders the departure requirement applicable to all H-2A workers.

• Establish a temporary worker exit program on a pilot basis that would require certain H-2A workers to register at the time of departure from the United States.

DHS initially provided a 45-day comment period in the proposed rule, which ended on March 31, 2008. DHS provided an additional 15-day comment period from April 1, 2008 through April 14, 2008. During this 60-day comment period, DHS received 163 comments. DHS received comments from a broad spectrum of individuals and organizations, including various agricultural producers, agricultural trade associations, farm workers' labor unions, civil and human rights advocacy organizations, agricultural producers' financial cooperatives, farm management services companies, voluntary public policy organizations, private attorneys, state government agencies, a Member of Congress, and other interested organizations and individuals. During the public comment period, DHS officials, together with those from DOL, also met with stakeholders to discuss the proposed rule. Meeting participants were encouraged to submit written comments on the rule.

DHS considered the comments received and all other materials contained in the docket in preparing this final rule. The final rule does not address comments seeking changes in United States statutes, changes in regulations or petitions outside the scope of the proposed rule, or changes to the procedures of other DHS components or agencies.

All comments and other docket materials may be viewed at the Federal Docket Management System (FDMS) at http://www.regulations.gov, docket number USCIS-2007-0055.

The final rule adopts many of the regulatory amendments set forth in the proposed rule. The rationale for the proposed rule and the reasoning provided in the preamble to the proposed rule remain valid with respect to these regulatory amendments, and DHS adopts such reasoning in support of the promulgation of this final rule. Based on the public comments received in response to the proposed rule, however, DHS has modified some of the proposed changes for the final rule as follows.

The final rule requires petitioners to notify DHS, within two workdays, beginning on a date and in a manner specified in a notice published in the Federal Register , of the following circumstances: (a) An H-2A worker's failure to report to work within five workdays of the employment start date on the H-2A petition or within five workdays of the start date established by his or her employer, whichever is later; (b) an H-2A worker's completion of agricultural labor or services 30 days or more before the date specified by the petitioner in its H-2A petition; or (c) an H-2A worker's absconding from the worksite or termination prior to the completion of the agricultural labor or services for which he or she was hired. New 8 CFR 214.2(h)(5)(vi)(B)( 1 ). By “workday,” DHS means the period between the time on any particular day when such employee commences his or her principal activity and the time on that day at which he or she ceases such principal activity or activities.

DHS has revisited the proposed increase in liquidated damages from $10 to $500 for an employer's failure to comply with the notification requirement. For the time being, DHS will retain the liquidated damages provision under 8 CFR 214.2(h)(5)(vi)(B)( 3 ), and require an employer who fails to comply with the notification requirements, as revised under this final rule, to pay liquidated damages in the amount of $10.

To minimize the impacts on petitioners, the final rule relaxes the notification requirement in response to commenters' concerns that the proposed timeframes were not workable within current business realities. The final rule allows an employer, in certain circumstances, to use a start date newly established by the employer as the notification trigger date. The final rule also clarifies that the H-2A worker must report to work within five “workdays” of the employment start date, rather than the proposed five days. If the H-2A worker does not timely report to the worksite, the H-2A employer must report this violation to DHS within two workdays, rather than the proposed 48 hours. The final rule adopts the term “workdays” to ensure that H-2A employers are clear on the reporting deadlines. The final rule also requires DHS notification where the work is completed 30 days early rather than the proposed five days. The rule relieves the employer of its obligation to notify DHS when the worker's employment terminates upon completion of the work (unless the work is completed more than 30 days early). The final rule also provides that, if the petitioner demonstrates in the notification itself that good cause exists for an untimely notification to DHS, then DHS, in its discretion, may waive the liquidated damages amount.

While the notification provision furthers DHS's enforcement goals of locating aliens who have not met the terms of their nonimmigrant status, DHS recognizes that the current regulations do not provide a sufficient remedy to petitioners that “lose” H-2A workers before the completion of work in the instances covered in the notification provision. Under the current regulations, petitioners may replace H-2A workers whose employment was terminated before the work has been completed. 8 CFR 214.2(h)(5)(ix). Such petitioners must file a new H-2A petition using a copy of the previously approved temporary labor certification to request replacement workers. However, the current regulations do not cover situations where H-2A workers fail to show up at the worksite or abscond.

To minimize the adverse impact on petitioners who lose workers for these reasons, DHS has determined that petitioners should be permitted to seek substitute H-2A workers in these instances, as well, provided that petitioners comply with the notification requirements in 8 CFR 214.2(h)(5)(vi). Thus, the final rule allows a petitioner to file an H-2A petition using a copy of the previously-approved temporary labor certification to replace an H-2A worker where: (a) An H-2A worker's employment was terminated early (i.e., before the completion of work); (b) a prospective H-2A worker fails to report to work within five workdays of the employment start date on the previous H-2A petition or within five workdays of the date established by his or her employer, whichever is later; or (c) an H-2A worker absconds from the worksite. New 8 CFR 214.2(h)(5)(ix). These three instances parallel the instances that trigger the notification requirement in new 8 CFR 214.2(h)(5)(vi)(B)(1) (except where the work for which the petitioner needed H-2A workers has been completed).

The final rule also adds to the provision requiring the petitioner to retain evidence of its notification to DHS a requirement that the petitioner also retain evidence of a different employment start date for one year if the start date has changed from that stated on the H-2A petition. New 8 CFR 214.2(h)(5)(vi)(B)( 2 ). Since the notification provision allows for the petitioner to use a new start date that the petitioner has established rather than the start date stated in the H-2A petition, DHS believes that it must require the employer to retain evidence of the change in the start date to protect against misrepresentations by the petitioner regarding the employment start date.

The final rule extends from 10 days to 30 days the time period within which a petitioner must reply to a DHS notice of noncompliance with the notification requirement. New 8 CFR 214.2(h)(5)(vi)(C). Based upon comments received, DHS recognizes that small businesses may have difficulty in responding to a DHS notice within 10 days. Many do not have a human resources department to handle administrative tasks and may find it difficult to respond to a notice within 10 days, especially if the notice arrives during the petitioner's busiest season. DHS believes that a 30-day time period for responding to a notice is reasonable.

To address some commenters' concerns about the proposed provisions addressing job placement-related fees paid by beneficiaries to obtain H-2A employment, the final rule makes several clarifications and changes.

First, the final rule specifies that the fees prohibited by the rule do not include the lower of the fair market value or the actual costs of transportation to the United States and any payment of government-specified fees required of persons seeking to travel to the United States ( e.g. , fees required by a foreign government for issuance of passports, fees imposed by the U.S. Department of State for issuance of visas, inspection fees), except where the passing of such costs to the worker is prohibited by statute or the Department of Labor's regulations. See 20 CFR 655.104(h). Prospective H-2A workers may be required to pay such costs, unless the prospective employer has agreed with the alien to pay such fees and/or transportation costs. New 8 CFR 214.2(h)(5)(xi)(A). DHS determined that payment of these costs by the H-2A worker should not be prohibited since they are personal costs related to the alien's travel to the United States, rather than fees charged by a recruiter or employer for finding employment.

Second, to clarify the standard for the petitioner's knowledge of fees being paid by the alien, the final rule modifies the standard to include both knowledge by the petitioner and circumstances in which the petitioner should reasonably know that that worker has paid or has entered an agreement to pay the prohibited fees.

Third, the final rule offers petitioners a means by which to avoid denial or revocation (following notice to the petitioner) of the H-2A petition in cases where USCIS determines that the petitioner knows or reasonably should know that the worker has agreed to pay the prohibited fees as a condition of obtaining H-2A employment. In cases where prohibited fees were collected prior to petition filing, and in cases where prohibited fees were collected by the labor recruiter or agent after petition filing, USCIS will not deny or revoke the petition if the petitioner demonstrates that the beneficiary has been reimbursed in full for fees paid or, if the fees have not yet been paid, that the agreement to pay such fees has been terminated. Additionally, as an alternative to reimbursement in the case where the prohibition is violated by the recruiter or agent after the filing of the petition, the petitioner may avoid denial or revocation of the petition by notifying DHS of the improper payments, or agreement to make such payments, within two workdays of finding out about such payments or agreements. If the H-2A petition is denied or revoked on these grounds, then, as a condition of approval of future H-2A petitions filed within one year of the denial or revocation, the petitioner must demonstrate that the beneficiary has been reimbursed or that the beneficiary cannot be located despite the petitioner's reasonable efforts. New 8 CFR 214.2(h)(5)(xi)(C).

Fourth, the final rule does not include the requirement that the petitioner submit a separate document attesting to: The scope of the H-2A employment and the use of recruiters to locate H-2A workers, and the absence of any payment of prohibited recruitment fees by the beneficiary. Although petitioners will be required to attest to these factors, DHS is instead amending the Form I-129 to include those attestation provisions rather than requiring petitioners to submit a separate attestation document. DHS has determined that a separate attestation would increase petitioners' administrative burdens as well as duplicate much of the same information that petitioner must provide on the H-2A petition to establish eligibility.

The final rule addresses the effect of the revocation of temporary labor certifications by DOL on H-2A petitioners and their beneficiaries. This rule provides for the immediate and automatic revocation of the H-2A petition if the underlying temporary labor certification is revoked by DOL. New 8 CFR 214.2(h)(5)(xii). DHS believes that immediate and automatic revocation of the petition is a necessary consequence of a revocation of the temporary labor certification. The temporary labor certification is the basis for the petition, and DHS does not have the expertise to second-guess DOL's decision to revoke the temporary labor certification.

Because the denial or revocation of a petition based on the revocation of temporary labor certification will have a direct effect on an H-2A worker's status, DHS will authorize the alien beneficiary's period of stay for an additional 30-day period for the purpose of departure or extension of stay based upon a new offer of employment. Id. During this 30-day period, such alien will not be deemed to be unlawfully present in the United States. Id.; see also INA section 212(a)(9)(B), 8 U.S.C. 1182(a)(9)(B) (description of unlawful presence). Although DHS also proposed to require a petitioner to pay for the alien's reasonable transportation costs of return to his or her last place of foreign residence abroad after DHS revokes a petition for improper payment of fees, DHS has removed that requirement from this final rule.

The final rule clarifies that DHS will deny H-2A nonimmigrant status based on a finding that the alien violated any condition of H-2A status within the past 5 years, unless the violation occurred through no fault of the alien. DHS has added this clarification to ensure that this provision will not adversely affect the aliens whose previous violations of status were caused by illegal or inappropriate conduct by their employers. New 8 CFR 214.2(h)(5)(viii)(A).

The final rule modifies the proposal that would have precluded DHS from approving an H-2A petition filed on behalf of aliens from countries that consistently deny or unreasonable delay the prompt return of their citizens, subjects, nationals or residents who are subject to a final order of removal from the United States. DHS will now publish in a notice in the Federal Register a list of countries that the Secretary of Homeland Security has designated, with the concurrence of the Secretary of State, as eligible for its nationals to participate in the H-2A program. In designating countries to allow the participation of their nationals in the H-2A program, DHS, with the concurrence of the Department of State, will take into account factors including, but not limited to, the following: (1) The country's cooperation with respect to the issuance of travel documents for citizens, subjects, nationals and residents of that country who are subject to a final order of removal; (2) the number of final and unexecuted orders of removal against citizens, subjects, nationals, and residents of that country; (3) the number of orders of removal executed against citizens, subjects, nationals, and residents of that country; and (4) such other factors as may serve the U.S. interest. Initially, the list will be composed of countries that are important for the operation of the H-2A program and are cooperative in the repatriation of their nationals. The countries included on the list are the countries whose nationals contributed the vast majority of the total beneficiaries of the H-2A program during the last three fiscal years. Additional details on how this list will be administered are included in the discussion in response to comments received on this proposed provision below.

The final rule makes conforming amendments to 8 CFR 214.2(h)(2)(B) and (C) by providing that the form instructions will contain information regarding appropriate filing locations for the H-1B, H-2A, H-2B, and H-3 classifications. The final rule also makes conforming amendments to 8 CFR 214.2(h)(5)(v)(B) and 8 CFR 214.2(h)(5)(v)(C) to clarify job qualification documentation requirements and the timing for such documents to be filed for named and unnamed beneficiaries. Finally, the final rule includes non-substantive structure or wording changes from the proposed rule for purposes of clarity and readability.

Out of the 163 comments USCIS received on the proposed rule, several comments supported the proposals in the rule as a whole and welcomed DHS's recognition of the need for H-2A workers and for modifications to the current H-2A regulations. Agricultural employers submitted 115 of the total comments received.

Most commenters generally supported the streamlining measures in the proposed rule, such as: Removing the requirement to name the sole beneficiary and beneficiaries who are outside of the United States if the beneficiaries are named in the labor certification; permitting an employer to file only one petition for multiple beneficiaries from multiple countries; extending the admission period to 30 days after the conclusion of the H-2A employment; and reducing the required time abroad once an H-2A worker has reached the maximum period of stay before being able to seek H-2A nonimmigrant status again. However, many commenters were opposed to several changes that they believe will impose additional burdens and costs on farm businesses. They suggested that some of the proposed changes could lead to a decrease in usage of the H-2A program, such as the following proposals: Precluding the current practice of approving H-2A petitions that are filed with denied temporary labor certifications; authorizing USCIS to deny or revoke upon notice any H-2A petition if it determines that the beneficiary paid a fee in connection with or as a condition of obtaining the H-2A employment; modifying the current notification and liquidated damages requirements; providing for the immediate and automatic revocation of the petition upon the revocation of the labor certification; and imposing on sheepherders the same departure requirement applicable to all H-2A workers. Many commenters also were concerned about the proposals to authorize employment of H-2A workers while they are changing employers (if the new employer is a participant in good standing in E-Verify) and to institute a land-border exit system for certain H-2A workers on a pilot basis.

The concerns of the commenters summarized above and additional, more specific comments are organized by subject area and addressed below.

Comment: Several commenters expressed disappointment about what was described as the continued exclusion of the dairy industry from the H-2A program.

Response: DHS notes that most dairy farmer's needs are year-round and, therefore, may not be able to meet the requirements of the H-2A program. Dairy farmers that can demonstrate a temporary need for H-2A workers, however, are able to utilize the program. The applicable statute precludes DHS from extending the program to work that is considered permanent. See INA section 101(a)(15)(H)(ii)(a), 8 U.S.C. 1101(a)(15)(H)(ii)(a).

Comment: DHS received some comments that urged the withdrawal of the proposed rule entirely on the basis that the rule fails to reflect the critical balance between the nonimmigrant labor force and the U.S. workforce and undermines critical labor protections that serve as the foundation of the H-2A program. Some commenters also opined that the proposed rule would result in the exploitation of temporary foreign workers and the undermining of wages and working conditions of U.S. workers.

Response: DHS is aware of its responsibility to help maintain the careful balance between preserving jobs for U.S. workers and administering nonimmigrant programs designed to invite foreign workers to the United States. The final rule contains two major revisions to the regulations designed to protect U.S. workers: (1) Removal of DHS's authority to approve H-2A petitions filed with temporary labor certifications that have been denied by DOL (revised 8 CFR 214.2(h)(5)(i)(A)); and (2) the addition of a provision to provide for the immediate and automatic revocation of an H-2A petition upon the revocation of the temporary labor certification by DOL (new 8 CFR 214.2(h)(5)(xii)). DHS believes that a temporary labor certification process is required to protect U.S. workers.

In order to protect foreign workers from exploitation, the final rule requires petitioners to return any recruiter or finders' fees paid by alien beneficiaries as a condition of the H-2A employment if paid with the knowledge of the petitioner (or if the petitioner reasonably should have known about the payment). See new 8 CFR 214.2(h)(5)(xi)(A). Failure to return the prohibited fees to the beneficiaries will result in the denial or revocation of the H-2A petition.

Comment: A few commenters criticized the lack of a sound method for strong enforcement against employers that obtain and maintain a workforce of unauthorized aliens while the rule proposed to impose stiffer fines, revocations, and increase in costs to those employers who are trying to obtain and maintain a legal workforce through the H-2A program.

Response: U.S. Immigration and Customs Enforcement (ICE) is charged with enforcing the laws against the employment of unauthorized aliens, including the applicable provisions at section 274A of the INA, 8 U.S.C. 1324a. Enforcement of these provisions is outside the scope of this rulemaking. The purpose of this rule is to strengthen the integrity of the H-2A program so that employers will be encouraged to obtain workers through the H-2A program rather than through unlawful means. The added authority to deny or revoke petitions, and any increase in costs to employers included in this rule reflect necessary anti-fraud and worker protection measures. Employers that follow the rules of the program will not be unreasonably affected by these measures.

Comment: Seventeen out of 24 commenters who discussed this issue objected to the removal of regulatory language permitting, in limited circumstances, the approval of H-2A petitions filed with temporary labor certifications that have been denied by DOL.

Response: After considering the commenters' objections, DHS nevertheless retains this proposal in this final rule as discussed in the comments and responses below. See new 8 CFR 214.2(h)(5)(i)(A).

Comment: Some commenters among those who objected to this proposal suggested that the INA vests the authority for making decisions on the H-2A workers' admission solely with DHS, not DOL.

Response: DHS's statutory authority is to determine whether or not to approve a petition for H-2A workers after consultation with DOL. INA section 214(c)(1), 8 U.S.C. 1184(c)(1). By no longer permitting the approval of H-2A petitions in instances where DOL has denied the temporary labor certification, DHS does not believe that it is abrogating its statutory responsibility in adjudicating H-2A petitions. Rather, DHS is recognizing that it does not have the expertise in evaluating the current U.S. labor market to make a determination independent from DOL's determination on the temporary labor certification. It is therefore in the best interests of U.S. workers and the public in general that DHS relinquish its ability to approve H-2A petitions in the absence of the grant of such labor certification by DOL.

Comment: A few commenters pointed out that the language of the INA requires an employer only to apply for, not obtain, a temporary labor certification from the Secretary of Labor. See INA section 218(a)(1), 8 U.S.C. 1188(a)(1).

Response: DHS disagrees with the commenters' interpretation of the statute. While the statutory language only refers to a petitioner's application for a temporary labor certification, DHS believes that its interpretation of this language requiring petitioners also to obtain a temporary labor certification as a condition of H-2A employment is reasonable. A temporary labor certification certifies that there are insufficient U.S. workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services involved in the petition, and that the employment of the alien in such labor or services will not adversely affect the wages and working conditions of U.S. workers who are similarly employed. INA section 218(a)(1), 8 U.S.C. 1188(a)(1). The statute includes the temporary labor certification requirement as a means to protect U.S. workers from losing jobs to foreign laborers. INA section 218(c)(3)(A), 8 U.S.C. 1188(c)(3)(A). Without requiring that the temporary labor certification actually be obtained by the petitioner, the temporary labor certification requirement would fail to offer such protection. Moreover, it is clear that the determinations as to the availability of U.S. workers and the effect on their wages and working conditions are within the expertise of DOL, not DHS. Without certification by the Secretary of Labor, DHS would not be well equipped to make a determination on the petition for an employer to import foreign workers. Additionally, section 214(a)(1) of the INA grants the Secretary of Homeland Security authority to establish by regulation the conditions for nonimmigrant admissions. 8 U.S.C. 1184(a)(1). This rule is establishing a requirement that employers obtain a temporary labor certification as a condition for an alien to be admitted as an H-2A nonimmigrant.

Comment: Many commenters who objected to this proposal suggested that this proposal and the lack of an expeditious process to make a new determination on the denied temporary labor certification will leave employers without recourse if U.S. workers do not report to work on the date of their need. They asserted that filing a petition without a temporary labor certification should be allowed in any circumstance where DOL denies certification or fails to act in a timely manner.

Response: In its final H-2A rule, DOL establishes a process for an employer to request re-determination of need if U.S. workers fail to report on the date of need. DHS believes that this DOL provision addresses these commenters' concerns. Therefore, under this final rule, DHS abrogates the process for approving H-2A petitions, in limited circumstances, that are filed with denied temporary labor certifications.

Comment: Ten commenters addressed and supported the proposal to allow H-2A petitions to include unnamed beneficiaries for those who are outside the United States regardless of the number of beneficiaries on the petition or whether the temporary labor certification named beneficiaries. They agreed that it would provide agricultural employers with more flexibility to recruit foreign workers months ahead of the actual date of stated need.

Response: Based on the support from the commenters, the final rule adopts this proposal with minor changes. The changes discussed below concern beneficiaries from countries that have not been designated as participating countries under the H-2A program as well as minor, nonsubstantive changes to improve the clarity of the text. The final rule revises 8 CFR 214.2(h)(2)(iii) and removes 8 CFR 214.2(h)(5)(i)(C). Also, as noted earlier, the final rule makes conforming amendments to 8 CFR 214.2(h)(5)(v)(B) and 8 CFR 214.2(h)(5)(v)(C) to clarify job qualification documentation requirements and the timing for such documents for named and unnamed beneficiaries. The final rule also maintains the requirement that the petition include the names of those beneficiaries who are present in the United States. It should be noted that, in the case of an alien who is already in the United States, an H-2A petition encompasses both an employer's request to classify its worker as H-2A nonimmigrant and the alien worker's request to change from a different nonimmigrant status to H-2A or to extend his or her H-2A status. If eligible, the approval of the H-2A petition and the related request for extension of stay or change of status will serve either to confer a new immigration status or to extend the status of a particular alien immediately upon approval. Since such an approval, unlike a nonimmigrant admission from outside the country, does not afford the U.S. Government the opportunity to first inspect and/or interview the H-2A beneficiary at a consular office abroad or at a U.S. port of entry, it is essential that DHS have the names of beneficiaries in the country.

Comment: Eleven out of 12 commenters supported the proposal to permit petitioners to file only one petition with DHS when petitioning for multiple H-2A beneficiaries from multiple countries. They stated that this change to the regulations would benefit the employer not only in terms of convenience but also financially.

Response: Based on the positive responses from commenters, the final rule retains the proposal. New 8 CFR 214.2(h)(5)(i)(B).

Comment: One commenter suggested that this change would unnecessarily complicate the visa issuance process.

Response: DHS disagrees with this commenter's concern. DHS proposed the change as a result of the implementation of the Petition Information Management System (PIMS) by the Department of State in 2007. PIMS effectively tracks visa issuance for specific petitions approved for multiple beneficiaries in real time regardless of the consulate location where a beneficiary may apply for a visa. Therefore, DHS does not believe that this proposed change would complicate the visa issuance process. A consular officer would have full and timely access to information regarding the exact number of beneficiaries who have been issued visas based on the approved H-2A petition at the time an alien applies for his or her H-2A visa based on that petition. The Department of State website provides more information about PIMS at http://travel.state.gov/visa/laws/telegrams/telegrams_4201.html.

Comment: The same commenter also stated that the proposal would result in an employer recruiting and hiring workers from different geographical regions of a country and/or from different nations. The commenter further suggested that such hiring process would increase the likelihood of problems for workers who feel isolated, decreasing the workers' ability to unite and communicate among themselves.

Response: DHS does not intend to change employers' recruiting processes as a result of this proposal. Under the current regulations, an employer may bring in H-2A workers from many different countries rather than from a single country or from one region within a country. The change made by this final rule merely would permit petitioners to file only one petition with DHS when petitioning for multiple H-2A beneficiaries from multiple countries instead of requiring multiple petitions.

Comment: Eleven out of 83 commenters supported the proposal to authorize the denial or revocation of an H-2A petition if DHS determines that the alien beneficiary has paid or has agreed to pay any fee or other form of compensation, whether directly or indirectly, to the petitioner or that the petitioner is aware or reasonably should be aware that such payment was made to the petitioner's agent, or to any facilitator, recruiter, or similar employment service, in connection with or as a condition of obtaining the H-2A employment. Seventy-one commenters responded negatively to this proposal and one comment was neutral.

Response: After carefully considering the commenters' support and objections, for the reasons stated in the paragraphs below, the final rule provides DHS with the authority to deny or to revoke (following notice and an opportunity to respond) an H-2A petition if DHS determines that the petitioner has collected, or entered into an agreement to collect a fee or compensation as a condition of obtaining the H-2A employment, or that the petitioner knows or reasonably should know that the beneficiary has paid or agreed to pay any facilitator, recruiter, or similar employment service as a condition of H-2A employment. See new 8 CFR 214(h)(5)(xi)(A). DHS has determined that a prohibition on any payment made by a foreign worker in connection with the H-2A employment is more restrictive than necessary to address the problem of worker exploitation by unscrupulous employers, recruiters, or facilitators imposing costs on workers as a condition of selection for H-2A employment. Accordingly, DHS has not included in the final rule the prohibition on payments made in connection with the H-2A employment, but retains the prohibition on payments made to an employer, recruiter, facilitator, or other employment service by the foreign worker that are a condition of obtaining the H-2A employment.

DHS will not deny or revoke the petition if the petitioner demonstrates that (1) prior to the filing of the petition, the alien beneficiary has been reimbursed for the prohibited fees paid; (2) where the prohibited fees have not yet been paid, that the agreement to pay has been terminated; or (3) where the prohibition on collecting or agreeing to collect a fee is violated by a recruiter or agent after the filing of the petition, the petitioner notifies DHS about the prohibited payments, or agreement to make such payments, within 2 workdays of finding out about such payments or agreements.

Comment: The commenters who supported this proposal welcomed this addition to the regulations as a positive change to recognize worker abuses, such as human trafficking and effective indenture. They suggested that DHS should take further measures to deter future violations by implementing procedures to debar a violator from the program.

Response: DHS does not have the statutory authority to implement procedures to debar petitioners from the H-2A program. The statute provides DHS with the authority to deny petitions filed with respect to an offending employer under section 204 or 214(c)(1) of the INA (8 U.S.C. 1154 or 1184(c)(1)) for 1 to 5 years if it finds a significant failure to meet any of the conditions of an H-2B petition or a willful misrepresentation of a material fact in an H-2B petition. INA section 214(c)(14)(A)(ii), 8 U.S.C. 1184(c)(14)(A)(ii). However, there is no similar provision applicable to the H-2A nonimmigrant classification that provides such authority.

Comment: Most of the commenters supporting worker protections also suggested that DHS should take further measures to provide appropriate remedies to help the foreign workers receive the funds to which they were entitled.

Response: DHS agrees that the proposed rule, while offering some safeguards against the indenture of H-2A workers by providing a direct disincentive to employers and/or their recruiters to collect recruiting and similar fees from prospective and current H-2A workers, does not address fully the basic problem such workers face: They remain “indentured” until such time as they are relieved of this debt burden. While the proposed rule addresses this concern by providing an alien worker who has incurred such debt in connection with obtaining H-2A employment with the opportunity to change employers or return to his or her home country, it does not relieve the alien of his or her improperly imposed H-2A placement-related debt burden. DHS agrees with the commenters' concern in this regard and believes that it is in the interests of both the alien and legitimate H-2A employers to ensure the fair and even-handed administration of the H-2A program by providing a means to make such alien workers whole. Consistent with the expressed intent of the proposed rule to afford adequate protections for alien agricultural workers seeking H-2A nonimmigrant classification and to remove unnecessary administrative burdens on legitimate employers seeking to hire such workers, the final rule, therefore, provides that an H-2A petitioner can avoid denial or revocation of the H-2A petition if the petitioner demonstrates that the petitioner or the employment service reimbursed the alien worker in full for the prohibited fees paid or that any agreement for future payment is terminated. New 8 CFR 214.2(h)(5)(xi)(A)( 1 ), ( 2 ), and ( 4 ). However, the remedy of reimbursement would not apply if the petitioner collected the fees after the filing of the petition. New 8 CFR 214.2(h)(5)(xi)(A)( 3 ). For a petitioner who discovers after the filing of the petition that the alien worker paid or agreed to pay an employment service the prohibited fees, the petitioner can avoid denial or revocation by notifying DHS within 2 workdays of obtaining this knowledge instead of reimbursing the worker or effecting termination of the agreement. New 8 CFR 214.2(h)(5)(xi)(A)( 4 ). DHS will publish a notice in the Federal Register to describe the manner in which the notification must be provided.

DHS does not believe it appropriate to impose on petitioners who discover a post-filing violation by a labor recruiter the same adverse consequence—denial or revocation of the petition—that is imposed on more culpable petitioners who themselves violate the prohibition on collection of fees from H-2A workers after petition filing, nor should petitioners discovering such post-filing violations by a labor recruiter be put in a situation where the only way to avert denial or revocation of the petition might be for the petitioner to pay for the recruiter's violation by reimbursing the alien itself. Petitioners should be encouraged to come forward with information about post-filing wrongdoing by labor recruiters, even if reimbursement is not possible. In this way, DHS can help provide further protections to H-2A workers against unscrupulous recruiter practices.

Further, where the petitioner does not reimburse the beneficiary and USCIS denies or revokes the H-2A petition, the final rule provides that a condition of approval of subsequent H-2A petitions filed within one year of the denial or revocation is reimbursement of the beneficiary of the denied or revoked petition or a demonstration that the petitioner could not locate the beneficiary. New 8 CFR 214.2(h)(5)(xi)(C)( 1 ). This requirement is intended to balance the commenters' concerns that an H-2A alien worker not be required to pay fees as a condition of obtaining his or her H-2A employment with the legitimate concern that petitioners who run afoul of 8 CFR 214.2(h)(5)(xi)(A) but who have reimbursed the alien worker in full or who, despite their reasonable efforts, are unable to locate such workers, continue to have access to participation in the H-2A program. Whether the petitioner will be able to demonstrate to the satisfaction of DHS that it has exercised reasonable efforts to locate the alien worker will depend on the specific facts and circumstances presented. In this regard, DHS would take into consideration the amount of time and effort the petitioner expended in attempting to locate the beneficiary, and would require, at a minimum, that the petitioner has attempted to locate the worker at every known address(es). The final rule also clarifies that the 1-year condition on petition approval will apply anew each time an H-2A petition is denied or revoked on the basis of new 8 CFR 214.2(h)(5)(xi)(A)(1)-(4). New 8 CFR 214.2(h)(5)(xi)(C)( 2 ).

Comment: Many commenters further suggested that employers should be obligated to pay for aliens' subsistence costs while the workers are not permitted to work.

Response: DHS agrees that the revocation of a petition based on the payment of prohibited fees should not penalize H-2A workers. Accordingly, to minimize the adverse impact on workers, DHS will authorize the alien beneficiary's period of stay for an additional 30-day period for the purpose of departure or extension of stay based upon a new offer of employment. Id. During this 30-day period, such alien will not be deemed to be unlawfully present in the United States. Id.; see also INA section 212(a)(9)(B), 8 U.S.C. 1182(a)(9)(B) (description of unlawful presence).

DHS, however, will not be requiring employers to provide financial assistance to aliens adversely affected by the revocation of a petition. While we understand that certain H-2A workers will be adversely affected when DHS revoked H-2A petitions due to actions by the employer, we do not believe that DHS can require employers to cover expenses for workers without further notice and comment. This determination, however, does not impact any other legal remedy or claim that an affected worker may have against his or her employer.

Further, although DHS proposed to also require a petitioner to pay for the alien's reasonable transportation costs of return to his or her last place of foreign residence abroad after DHS revokes a petition for improper payment of fees, DHS has removed that requirement from this final rule. While section 214(c)(5)(A) of the INA (8 U.S.C. 1184(c)(5)(A)), requires petitioners to pay the workers' reasonable transportation expenses to return to their last place of foreign residence following revocation of a petition, that provision pertains solely to H-1B and H-2B nonimmigrant workers. 8 U.S.C. 1184(c)(5)(A). As there is no similar statutory requirement for employers of H-2A temporary workers to cover expenses for beneficiaries even when the petitioner's actions result in the revocation of the petition and thus require the alien to leave the United States, DHS does not believe that it may impose such costs onto the H-2A employer.

Comment: Several commenters suggested that employers should be required to ensure that workers' passports are not confiscated.

Response: Existing laws satisfactorily meet these commenters' concerns and they are not addressed by this final rule. For example, it is unlawful to conceal, remove or confiscate an immigration document in furtherance of peonage or involuntary servitude. See 18 U.S.C. 1592.

Comment: Some commenters suggested that the U.S. government should require H-2A employers to comply with Article 28 of Mexico's Federal Labor Law, which requires that employers recruiting Mexican citizens in Mexico for employment abroad comply with such requirements as registering with the applicable Board of Conciliation and Arbitration, submitting the employment contract to the Board, and posting a bond to ensure a fund to compensate workers for illegal employment practices. They further stated that the North American Agreement on Labor Cooperation (NAALC), which requires each signatory nation to cooperate to ensure compliance with all labor laws and improve conditions for workers, is a treaty that binds the United States.

Response: DHS does not enforce the labor law of a foreign country. As it is DOL's function to administer the U.S. government's responsibilities under the NAALC and to enforce federal labor laws, DHS is not in a position to reply to these comments and no changes were made to the final rule to respond to them.

Comment: One commenter suggested that the proposed rule contains no plan for dealing with unscrupulous, fraudulent recruiters in foreign countries and that this change may result in DHS penalizing the victims rather than the perpetrators as workers lose jobs and employers lose workers. Some commenters made a variety of recommendations to enforce the methods to protect H-2A workers from abuses, such as requiring an H-2A employer to reach written agreements with labor contractors, recruiters, or facilitators to prohibit the imposition of job placement-related fees on prospective workers or limiting the use of recruiters and facilitators for H-2A purposes to those that maintain an office in the United States and are duly licensed to do business in the United States according to Federal and State laws.

Response: While DHS agrees that these precautions would further protect H-2A workers from abuses, including such precautions in this final rule would be outside DHS' authority. DHS cannot specifically regulate the business practices of recruiters in foreign countries or the agreements between private entities under existing authorities.

Comment: Some commenters who objected to this proposal suggested that this proposal would lead to a decrease in the usage of the H-2A program as it will make the program more costly.

Response: While DHS understands that this rule has the effect of requiring employers rather than H-2A workers to bear these costs, the H-2A program was never intended to encourage the importation of indebted workers. The intention of the final rule is to ensure that the actual wages paid to H-2A workers reflect those set forth in the labor certification; passing recruitment-related costs on to the alien worker would have the effect of reducing the alien worker's actual wages. Further, DHS does not believe that this rule would have a chilling effect on the recruitment of H-2A workers; demand for such workers is based on a prospective employer's need for workers. So too, the choice whether to use recruiters and/or facilitators is that of the employer and is presumably based on a determination that it makes economic sense to use such persons to assist in finding alien workers. Assuming that making the employer bear such recruitment costs would make the program more cost prohibitive, the solution is not to pass those costs on to economically disadvantaged alien workers but to leave to the free market the amount an employer is willing to agree to pay the recruiter, facilitator, or employment service.

Comment: A number of commenters who objected to this proposal asserted that there is no statutory authority in the INA for DHS to prohibit prospective workers from paying a recruiter or a facilitator for the services they receive in order to secure employment in the United States. They stated that it is a longstanding practice that foreign agents collect fees from those who wish to find work in the United States and need assistance with their visa applications and/or the admission process and, in fact, such services have become essential with constant changes in the visa application procedure at U.S. consulates abroad.

Response: DHS believes that these comments misinterpret the proposed change. The proposal would neither prohibit the use of such recruiters or facilitators during the recruitment or visa application process nor the collection of fees itself. Instead, the proposal would prohibit imposition of fees on prospective workers as a condition of selection for such employment. It would not preclude the payment of any finder's or similar fee by the prospective employer to a recruiter or similar service, provided that such payment is not assessed directly or indirectly against the alien worker. Under section 214(a) of the INA, 8 U.S.C. 1184(a), DHS has plenary authority to determine the conditions of admission of all nonimmigrants to the United States, including H-2A workers. It is within the authority of DHS to bar the payment by prospective workers of recruitment-related fees as a condition of an alien worker's admission to this country in H-2A classification.

DHS notes that this final rule is consistent with the Department of Labor's bar on the employer passing to prospective alien agricultural workers fees the employer incurs in recruiting U.S. workers in conjunction with obtaining a temporary agricultural worker labor certification. See new 20 CFR 655.105(o).

Comment: Many commenters asked DHS to specify what types of fees are prohibited by the rule. Several commenters argued that obtaining a passport and a visa for arriving H-2A workers should not be the employer's responsibility.

Response: DHS agrees that passport and visa fees should not be included in the types of fees prohibited by the rule, except where the passing of such costs to the worker is prohibited by statute or the Department of Labor's regulations. Generally, the types of fees that would be prohibited include recruitment fees, attorneys' fees, and fees for preparation of visa applications. So that the prohibition against impermissible fees remains general, covering any money paid by the beneficiary to a third party as a condition of the H-2A employment, the final rule does not provide a list of prohibited fees. However, as discussed earlier, the final rule provides that prohibited fees do not include the lesser of the fair market value or actual costs of transportation to the United States, or payment of any government-specified fees required of persons seeking to travel to the United States, such as, fees required by a foreign government for issuance of passports and by the U.S. Department of State for issuance of visas. As these costs would have to be assumed by any alien intending to travel to the United States, DHS believes that each alien should be responsible for them. New 8 CFR 214.2(h)(5)(i)(C)( 5 ) and (h)(5)(xi)(A) and (C).

Comment: Many commenters expressed concerns about petition revocation based on an employer's knowledge of the payment of job placement-related fees by prospective workers. Many commenters requested that DHS clarify the standard by which an employer will be deemed to lack knowledge of the prohibited payment by the prospective worker.

Response: The final rule clarifies that an H-2A petition will be subject to denial or revocation only if DHS determines that the H-2A petitioner knew, or reasonably should have known, that the H-2A worker paid or agreed to pay a prohibited fee. New 8 CFR 214.2(h)(5)(xi)(A). For example, if a recruiter advertises to prospective H-2A petitioners that it can place temporary alien workers with such employers at no or minimal cost to the employers, it is reasonable for prospective petitioners to view these claims as suspect and question whether the recruiter has passed its recruitment costs to the prospective H-2A workers. A determination by DHS that the petitioner failed to make reasonable inquiries to ensure that prospective H-2A workers did not pay the recruiter any fees will subject the petition to denial or revocation. Similarly, if an H-2A petitioner learns, directly or indirectly, that a prospective H-2A worker has been asked to pay a fee or other thing of value as a condition of his or her employment with the U.S. employer, the H-2A petitioner will be deemed to be on notice that the prospective worker has paid a prohibited fee and reasonably can be expected to ascertain whether this is in fact true before petitioning for the worker.

Comment: Another comment stated that this proposal would make petitioners subject to liability by opening additional avenues for lawsuits against the petitioners who may be held responsible for a third party's action.

Response: This provision is not intended to provide any party with the authority to engage in legal proceedings based on this decision by DHS.

Comment: Some commenters suggested that DHS should recognize that some assistance in recruiting and/or in the visa application and admission process could be conducted informally by friends or family members, not as a for-profit activity, and requested DHS to specify facilitators and recruiters that fall under these provisions.

Response: Since assistance in recruiting and in the visa application or admission process that is provided without charge is not precluded by this rule, DHS determined that it is not necessary for the final rule to reference such assistance.

Comment: There were additional suggestions to prevent fraud and to protect laborers' rights, as well as administrative recommendations.

Response: Because these comments exceeded the scope of the proposed rule, they are not addressed in this final rule.

Comment: One out of 8 commenters supported the proposed addition to require H-2A petitioners to attest that they will not materially change the information provided on the Form I-129 and the temporary labor certification; that they have not received, nor intend to receive, any fee, compensation, or other form of remuneration from prospective H-2A workers; and whether they used a facilitator, recruiter, or any other similar employment service, to locate foreign workers, and if so, to name such facilitators, recruiters, or placement services. Seven commenters wrote that the employer attestation would not reduce the amount of paperwork required by an employer nor streamline the process.

Response: DHS has carefully considered the attestation requirement, and has determined that a separate attestation requirement would be a duplicative addition to the regulations. However, an attestation relates to eligibility requirements that the petitioner must demonstrate on the H-2A petition which the petitioner must sign as being true and correct. DHS is instead amending the Form I-129 to include the attestation requirements.

Comment: Many commenters pointed out that there are some minor activities in the overall scope of work on an agricultural operation and the workers' secondary duties change from season to season. They suggested that the narrow and restrictive view of unchanging duties in the proposed rule could result in good-faith employers violating this portion of the rule.

Response: While the final rule does not contain a separate attestation requirement, these comments relate to the requirement that the petitioner notify DHS of any changes in the terms and conditions of employment of a beneficiary which may affect eligibility. 8 CFR 214.2(h)(11)(i)(A). DHS does not agree with these commenters' interpretations and understands that farm laborers generally perform several duties and their secondary duties may vary from season to season. For example, while a worker's main duty may be to harvest the crop, there may be a time when he or she is required to drive a tractor, to transport the crop to a processor, or to repair farm equipment. Incidental duties that are associated with the worker's main duty and are part of routine farm maintenance are not considered material changes and do not require the filing of a new petition. See 8 CFR 214.2(h)(2)(i)(E).

DOL also provides a clarification in its final rule to reflect that work activity of the type typically performed on a farm and incident to the agricultural labor or services for which an H-2A labor certification was approved may be performed by an H-2A worker. DHS is in agreement with DOL's clarification, which will ensure that H-2A workers can engage in minor amounts of other incidental farm work activity during periods when they are not performing the agricultural labor of services that is the subject of their application.

Comment: Commenters suggested that the listing of facilitators, recruiters, or placement services should only be required where workers were actually recruited, and not in the instances where workers were assisted with the visa application process.

Response: While the final rule does not include a separate attestation requirement where the listing of facilitators, recruiters, or placement services would be required, the revised H-2A petition will request the petitioner to include this information. DHS agrees with the commenters' concerns. DHS recognizes that listing all services used potentially may be overly burdensome and of limited utility to DHS. The revised H-2A petition instead will request the petitioner to provide the names of the facilitators, recruiters, or placement services that actually located the H-2A beneficiaries on the petition.

Comment: One commenter suggested that the attestation provision include an agreement by the employer agreeing to unhindered and unannounced inspections by U.S. Immigration and Customs Enforcement (ICE) and DOL.

Response: The final rule does not include the suggested addition. DHS has determined that it is not necessary to include such a provision because such inspections are separately authorized by law. See 8 CFR 214.2(h)(5)(vi)(A). Additionally, DOL authorities are within the jurisdiction of DOL, rather than DHS. As such, it is not necessary that an employer agree to inspections.

Comment: Seventy-three out of 74 commenters objected to the modified notification and liquidated damages provisions in the proposed rule.

Response: After careful consideration, and in response to the commenters' objections, DHS has modified the proposed notification requirements. DHS also has removed the increase in liquidated damages and, instead, will return to the current liquidated damages provision under 8 CFR 214.2(h)(5)(vi)(A).

Comment: Many commenters objected to the proposed requirements to notify DHS if an H-2A worker fails to report for work within 5 days after the employment start date stated on the petition or the worker's employment is terminated more than 5 days before the employment end date stated on the petition. For example, the commenters stated that the majority of late arrivals of H-2A workers to the worksite are caused by slow processing at U.S. government agencies or emergencies beyond the employer's control. In some cases, employers stagger workers' arrival at the consulate and at the worksite to accommodate logistical arrangements, such as transportation. Further, many commenters suggested that, given that work in agriculture is dependent upon weather, it is rare that an employer can accurately predict months in advance of the actual date when the growing season will end, and many agricultural employers use the latest likely ending date on a temporary labor certification.

Response: DHS believes that the notification requirements should be retained, but agrees with the commenters' concerns regarding the practical application of the proposal. Therefore, the final rule modifies the notification requirements to address the commenters' concerns. The final rule requires petitioners to provide notification to DHS in the following instances: Where an H-2A worker fails to report to work within five workdays of the employment start date on the H-2A petition or within five workdays of the start date established by the employer, whichever is later; where the agricultural labor or services for which H-2A workers were hired is completed more than 30 days earlier than the end date stated on the H-2A petition; or where the H-2A worker absconds from the worksite or is terminated prior to the completion of agricultural labor or services for which he or she was hired. New 8 CFR 214.2(h)(5)(vi)(B)( 1 ). DHS believes that the modified notification requirements are more workable for employers and are responsive to the commenters' concerns. Recognizing that there could be various reasons beyond the employer's control causing prospective employees' late arrival at the worksite, the final rule allows the petitioner to use a different employment start date than the start date stated in the H-2A petition to accommodate the employees' late arrival. It also changes the notification timeframes for employment that is terminated earlier than the end date stated on the petition, depending on whether the termination occurs before the work is completed or due to early completion of the work. In addition, the final rule amends 8 CFR 214.2(h)(11)(i)(A) to cross-reference the notification provision.

Where an employer establishes a different start date from that on the H-2A petition, the final rule adds the requirement that the employer retain evidence of the changed employment start date for a 1-year period. A retention period of 1 year was chosen to parallel the 1-year retention period for notifications. Such documentation must also be made available for inspection on request by DHS officers. New 8 CFR 214.2(h)(5)(vi)(B)( 2 ). DHS is adding this requirement to ensure that providing a more flexible timeframe for the notification requirement will not result in misrepresentations regarding the employment start date.

Comment: Many commenters who objected to the modified notification requirements also stated that a notification within 48 hours would be difficult, if not impossible, because, in many circumstances, it may be impossible for the employer to know with certainty that the H-2A worker absconded from the worksite.

Response: DHS disagrees with the commenters concerns that the notification period would be too difficult to meet based on the speed with which an employer will gain knowledge of the worker's abscondment. An absconder is defined as a worker who has not reported to work for 5 workdays without the consent of the employer. The final rule clarifies that the time period is 5 consecutive workdays. New 8 CFR 214.2(h)(5)(vi)(E). The employer's obligation to notify DHS of an abscondment would thus not be triggered by the employer's subjective determination that the worker has indeed absconded, but rather by an objectively measured event: The passage of five consecutive workdays during which the alien has failed to report to work without the consent of the employer.

While DHS does not believe that the proposed notification period would be too onerous on employers, DHS recognizes that imposing a 48-hour time period for filing notifications may be difficult for those employers that do not conduct business 7 days of the week, such as those employers that are closed on weekends and holidays. Therefore, the final rule clarifies that the notification period is 2 workdays rather than the proposed 48 hours. New 8 CFR 214.2(h)(5)(vi)(B)( 1 ).

Comment: Many comments suggested that the requirement to pay $500 in liquidated damages for failing to meet the notification requirement is excessive and will be a potential disincentive to use the H-2A program because the failure to comply with the notification requirement, an event triggering liquidated damages, could be merely a failure to notify within the required timeframe as opposed to failure to notify at all. Most of these comments suggested that DHS not increase the liquidated damages amount from the amount set forth in the current regulations ($10) or, at most, increase them only by a much smaller amount, to a level not exceeding $50 per instance.

Response: In response to public comments, DHS has decided to remove the proposed increase in liquidated damages to $500 and instead will retain the liquidated damages requirement under 8 CFR 214.2(h)(5)(vi)(B)( 3 ). Under the current provision, an employer who fails to comply with the notification requirements, as revised under this final rule, must pay liquidated damages in the amount of $10.

Comment: With respect to the process following the failure to meet the notification requirements, some commenters suggested that the 10-day timeframe within which an employer is required to reply to a notice prior to being assessed liquidated damages would impose an unreasonable hardship on small employers who could be in their busy season when such a notice arrives. They recommended that employers be afforded 30 days to respond.

Response: The final rule adopts this suggestion and provides that the petitioner will be given written notice and 30 days to reply to such notice if DHS has determined that the petitioner has violated the notification requirements and it has not received the notification. New 8 CFR 214.2(h)(5)(vi)(C).

Comment: One comment suggested that the imposition of liquidated damages must include a provision for due process with such “hefty” amounts at stake.

Response: By including a notice requirement, as stated above, and an opportunity to reply within 30 days, DHS believes that new 8 CFR 214.2(h)(5)(vi)(C) provides sufficient due process.

Comment: Several commenters were concerned about the cost that employers will have to incur to send the notification to DHS by certified mail or similar means in order to comply with the notification requirements within 48 hours.

Response: In reply to these comments, DHS is not including in the final rule the requirement that the notification be in writing. See new 8 CFR 214.2(h)(5)(vi)(B)(1), (h)(5)(vi)(C), and (h)(11)(i)(A). A notice outlining the manner in which the notification may be made will be published in the Federal Register . DHS will provide a designated e-mail address for employers to send notifications. DHS believes that designating a dedicated e-mail address for employers' notification purpose will reduce the burden on employers. DHS will also provide a designated mailing address for employers without ready access to email.

Comment: A question was raised during a stakeholder meeting held during the comment period of the proposed rule as to what an H-2A employer needs to do in order to replace an H-2A worker whose employment is terminated or who has left the country.

Response: Upon further consideration, DHS agrees that an accommodation should be made for employers who lose H-2A workers before the work is completed. Under the current provision at 8 CFR 214.2(h)(5)(ix), an employer may file an H-2A petition to replace an H-2A worker whose employment was terminated early. However, the provision does not address the two additional situations covered by the notification provisions: When workers fail to show up at the worksite or abscond and leave the employer without a sufficient workforce to complete the work. Therefore, the final rule amends 8 CFR 214.2(h)(5)(ix) to allow an employer to file an H-2A petition to replace H-2A workers in the following three instances: (a) Where an H-2A worker's employment was terminated prior to the completion of work and earlier than the date stated in the H-2A petition; (b) where a prospective H-2A worker has failed to report to work within five workdays of the employment start date on the temporary labor certification or within five workdays of the date established by their employer, whichever is later; or (c) where an H-2A worker absconds from the worksite. Under this revised provision, a petitioner would be able to file an H-2A petition using a copy of the previously approved temporary labor certification to replace the absent H-2A worker.

Comment: Some commenters suggested that the employer, who did not know of job placement-related fee payments made by prospective workers, should not be penalized and therefore should be able to quickly replace the worker with another H-2A worker.

Response: As discussed above, an H-2A petition will be denied or revoked if DHS determines that the employer knew or has reason to know that the H-2A worker paid or agreed to pay a job placement-related fee. If the employer did not know or have reason to know of such payment, the provision will not apply and the petition cannot be denied or revoked on this basis. Therefore, it is not necessary for the final rule to cover this possibility.

Comment: Ten commenters objected to the proposal to revise 8 CFR 214.2(h)(5)(viii)(A) to provide that any violation of a condition of H-2A status within the 5 years prior to adjudication of a new H-2A petition would result in a denial of H-2A status. DHS did not receive any other comments on this proposal.

Response: Based on the objections of the commenters, DHS will modify the proposed rule as discussed below.

Comment: Most of the ten commenters suggested that some aliens may have unwittingly violated their previous H-2A status by absconding from their jobs as a result of their employer's illegal or inappropriate conduct, thereby causing them to engage in a protest leading to their termination or being forced to quit.

Response: DHS agrees that this situation should not trigger the consequences of 8 CFR 214.2(h)(5)(viii)(A). The final rule clarifies that an alien will be precluded from being granted H-2A status where he or she violated the conditions of H-2A status within the 5 years prior to adjudication of a new H-2A petition by DHS, except where the violation occurred through no fault of his or her own, such as where the alien absconded from the worksite as a result of the employer's illegal or inappropriate conduct. The prospective employer would have the opportunity to explain the circumstances surrounding the alien's previous status violation in its petition, as would the alien in conjunction with his or her application for H-2A status and/or an H-2A visa.

Comment: One comment arguing against the revision stated that DHS lacks the authority to impose additional or more restrictive grounds of inadmissibility than those provided in the INA.

Response: DHS does not find that this revision is an imposition of an additional ground of inadmissibility. This revision simplifies the current provision to apply to all violations of the H-2A status rather than to the two currently identified in the regulations, namely, remaining beyond the specific period of authorized stay and engaging in unauthorized employment. Further, section 214(a)(1) of the INA (8 U.S.C. 1184(a)(1)) provides authority for this requirement as a condition for H-2A admission. Under that section, the Secretary of Homeland Security is granted the authority to establish the conditions of nonimmigrant admission by regulation.

Comment: Twenty out of 21 commenters objected to the proposed revision to 8 CFR 214.2(h)(5)(11)(ii) providing for the immediate and automatic revocation of an H-2A petition upon the revocation of the temporary labor certification by DOL.

Response: After carefully considering the commenters' objections and discussing with DOL, the final rule adopts the proposal for the following reasons.

Comment: Many of these commenters objected to this change because a petition revocation will terminate the employment authorization of the workers and make it impossible for the employer to legally continue in business. They were concerned that DOL would make revocation of a labor certification immediate during the pendency of an employer's appeal of the revocation.

Response: In its final H-2A rule, DOL provides for a stay of revocation until the conclusion of any DOL administrative appeal. DHS believes that this DOL provision addresses these commenters' concerns. Therefore, under this final rule, DHS will revoke an H-2A petition as soon as DOL has adjudicated any administrative appeal that may have been filed and informs DHS of their decision to revoke the temporary labor certification.

Comment: A few commenters wrote that this proposed change will provide no relief for affected workers who stand to lose their jobs and their ability to earn sufficient wages that they had expected by taking H-2A employment. These commenters suggested that the former employer (whose petition was revoked) should be obligated to pay for subsistence costs for the aliens during the 30-day period.

Response: In response to these comments, the final rule provides a 30-day grace period for H-2A workers who are in the United States based on an approved petition that is later revoked because of DOL's revocation of the temporary labor certification. New 8 CFR 214.2(h)(5)(xii). During this 30-day period, such workers will be in an authorized period of stay. They may choose to find new employment and apply for an extension of stay or depart the United States. As discussed above, however, at this time, DHS does not believe that it may require employers to pay wages for workers who remain in the United States nor transportation expenses for those who chose to return to their country of origin.

Comment: Five comments addressed the proposed rule to include a new provision at 8 CFR 214.2(h)(5)(i)(F) (and complementary provision at 8 CFR 214.2(h)(5)(viii)(D)) precluding DHS from approving an H-2A petition filed on behalf of one or more aliens from countries determined by the Secretary of Homeland Security to consistently deny or unreasonably delay the prompt return of their citizens, subjects, nationals, or residents who are subject to a final order of removal from the United States. One commenter supported this proposed change. Two commenters sought modification to the provision, while another sought additional time to comment on the provision. A final commenter disagreed that the proposal would improve the H-2A process generally.

Response: After reviewing all comments, DHS has modified this proposal in the final rule for the reasons and in the manner as discussed below.

Instead of publishing a list of countries that consistently deny or unreasonably delay the prompt return of their citizens, subjects, nationals or residents who are subject to a final removal order, DHS at this time will be publishing in a notice in the Federal Register a list of countries that the Secretary of Homeland Security has designated, with the concurrence of the Secretary of State, as eligible for its nationals to participate in the H-2A temporary worker program. DHS is making this modification to the rule in consideration of public comments received recommending DHS rework the proposal in order to make the process more positive and to encourage countries to improve cooperation in the repatriation of their nationals.

In designating countries to allow the participation of their nationals in the H-2A program, DHS, with the concurrence of the Department of State, will take into account factors including, but not limited to, the following: (1) The country's cooperation with respect to the issuance of travel documents for citizens, subjects, nationals, and residents of that country who are subject to a final order of removal; (2) the number of final and unexecuted orders of removal against citizens, subjects, nationals, and residents of that country; (3) the number of orders of removal executed against citizens, subjects, nationals, and residents of that country; and (4) such other factors as may serve the U.S. interest.

Designation of countries on the list of eligible countries will be valid for one year from publication. The designation shall be without effect at the end of that one-year period. The Secretary, with the concurrence of the Secretary of State, expects to publish a new list prior to the expiration of the previous designation by publication of a notice in the Federal Register , considering a variety of factors including, but not limited to the four factors for the designation of a participating country described above.

Initially, the list will be composed of countries that are important for the operation of the H-2A program and are cooperative in the repatriation of their nationals. The countries included on the list are the countries whose nationals contributed the vast majority of the total beneficiaries of the H-2A and H-2B programs during the last three fiscal years.

The Secretary of Homeland Security may allow a national from a country not on the list to be named as a beneficiary on an H-2A petition and to participate in the H-2A program based on a determination that such participation is in the U.S. interest. The Secretary's determination of such a U.S. interest will take into account a variety of factors, including but not limited to consideration of: (1) Evidence from the petitioner demonstrating that a worker with the required skills is not available from among workers from a country currently on the list of eligible countries for participation in the program; (2) evidence that the beneficiary has been admitted to the United States previously in H-2A status and has complied with the terms of that status; (3) the potential for abuse, fraud, or other harm to the integrity of the H-2A visa program through the potential admission of a beneficiary from a country not currently on the list of eligible countries for participation in the program; and (4) such other factors as may serve the U.S. interest. Therefore, DHS is requiring petitioners for beneficiaries who are nationals of countries not designated as participating countries to name each beneficiary. Additionally, petitions for beneficiaries from designated countries and undesignated countries are to be filed separately. These changes will permit DHS to more easily adjudicate H-2A petitions involving nationals of countries not named on the list by permitting DHS to properly evaluate the factors used to make a determination of U.S. interest, discussed above, without slowing the adjudication of petitions for nationals of designated countries.

As discussed in the proposed rule, DHS expects that the provisions in this rule intended to increase the flexibility of the H-2A visa program, complemented by the streamlining proposals the Department of Labor is making in its H-2A rule, will increase the appeal of the H-2A program to U.S. agricultural employers. See 73 FR 8230, 8234-5 (Feb. 13, 2008). While a more efficient H-2A program is anticipated to reduce the number of aliens entering the country illegally to seek work, it also could lead to an increase in the number of H-2A workers that abscond from their workplace or overstay their immigration status. Therefore, the success of the program will depend significantly upon countries accepting the return of their nationals.

Petitions may only be filed and approved on behalf of beneficiaries who are citizens, subjects, nationals or residents of a country that is included in the list of participating countries published by notice in the Federal Register or, in the case of an individual beneficiary, an alien whose participation in the H-2A program has been determined by the Secretary of Homeland Security to be in the U.S. interest. See new 8 CFR 214.2(h)(5)(i)(F). Likewise, in order to be admitted as an H-2A, aliens must be nationals of countries included on the list of participating countries or, in the case of an individual beneficiary, an alien whose participation in the H-2A program has been determined by the Secretary of Homeland Security to be in the U.S. interest. See new 8 CFR 214.2(h)(5)(viii)(D). To ensure program integrity, such petitioners must state the nationality of all beneficiaries on the petition, even if there are beneficiaries from more than one country. See new 8 CFR 214.2(h)(2)(iii).

Comment: Sixteen out of 18 commenters supported the proposal to revise 8 CFR 214.2(h)(5)(viii)(B) by extending the H-2A admission period following the expiration of the H-2A petition from 10 to 30 days. These commenters believed that it would make the H-2A program a more cost efficient program.

Response: Based on the support of these commenters, the final rule adopts this proposal. New 8 CFR 214.2(h)(5)(viii)(B).

Comment: Several commenters who supported this proposed change also suggested that employers should be obligated to pay for their former employees' subsistence costs during the 30-day period, as the aliens would not be permitted to work during that time.

Response: Because H-2A workers are not required to remain in the United States during the additional 30-day period, DHS does not think that employers should be responsible for subsistence costs during that period. In addition, as discussed above, DHS does not think that it may impose such costs at this time.

Comment: Two commenters opposed the proposal. One commenter did not provide a reason for the opposition. The other commenter stated that this change would create a period of too much downtime where the worker is not accounted for and does not seem to have any significant benefits.

Response: DHS disagrees with these concerns. DHS believes that the benefit of extending the H-2A admission period following the expiration of the H-2A petition to 30 days would be to provide the H-2A worker enough time to prepare for departure or apply for an extension of stay based on a subsequent offer of employment if the worker chooses to do so. Having a 30-day extension would facilitate the new benefit that the final rule provides for a worker to continue to be employment authorized while awaiting for an extension of H-2A status based on a petition filed by a new employer who is a registered user in good standing of USCIS' E-Verify program.

Comment: Nine out of 12 commenters supported the proposed rule reducing the length of time that interrupts an H-2A worker's accrual of time in H-2A status for purposes of calculating when the worker has reached the 3-year maximum period of stay. They supported this change because it would allow a worker to engage in a longer employment period, which would benefit both employers and employees.

Response: DHS agrees that this proposal would benefit both employers and H-2A workers. Accordingly, the final rule adopts the proposed revision, reducing the minimum period spent outside the United States that would be considered interruptive of accrual of time towards the 3-year limit, where the accumulated stay is 18 months or less, to 45 days. If the accumulated stay is longer than 18 months, the required interruptive period will be 2 months. See new 8 CFR 214.2(h)(5)(viii)(C).

Comment: One comment suggested that the existing exception for the H-1B, H-2B, and H-3 commuters under 8 CFR 214.2(h)(13)(v) be extended to the H-2A classification.

Response: The current regulation at 8 CFR 214.2(h)(13)(v) provides that the limitations on admission in H-1B, H-2B, and H-3 status do not apply to H-1B, H-2B, and H-3 individuals (1) who did not reside continually in the United States and whose employment was seasonal, intermittent, or for less than 6 months per year, and (2) who reside abroad and regularly commute to the United States. DHS does not believe that it is appropriate to extend this provision to H-2A commuters; therefore, the final rule does not include the suggested revision to 8 CFR 214.2(h)(13)(v). The H-2A classification is unique in that H-2A employment sites change from season to season. While some employment sites may be within reasonable commuting distance from the border, it cannot be anticipated that all of the alien's worksites will also be, particularly given the variabilities of growing seasons and work hours inherent in the agricultural industry. What may be reasonable commuting distance based on an 8-hour day may not be if the alien worker is required to work longer hours during the height of the growing season.

It is reasonable to assume that most aliens do not have ready access to transportation to and from their home country and the particular worksite where they are employed. As such, few H-2A workers will actually be able to commute from their homes abroad to the United States on a regular basis. Further, by statute, employers must guarantee many employee benefits such as housing, meals, tools, workers' compensation insurance, and return transportation. Section 218(c)(4) of the INA requires employers to provide housing to all H-2A workers in accordance with specific regulations. 8 U.S.C. 1188(c)(4). Employer-provided housing must meet the standards set forth under 29 CFR 1910.142 or 20 CFR 654.404-654.417. Since the statute does not contain any provision to release employers from their responsibility to provide housing to their employees, DHS does not think it appropriate to apply the commuter exception to the H-2A classification given the special nature and variabilities of H-2A agricultural work.

Comment: One commenter objected to this proposal stating that it would encourage more illegal aliens to come into the country and lead to illegal aliens who are already in the country to stay longer.

Response: DHS does not believe that reducing the time spent outside the United States to be interruptive of accrual of time towards the 3-year limit in H-2A status would encourage more illegal aliens to come to the U.S. or stay in the U.S. longer. This provision is meant to cause less disruptive breaks in the H-2A employment, benefiting both H-2A workers and their employers, and does not apply to those who attempt to enter the U.S. illegally or to those who are already here illegally.

Comment: One commenter stated that it would like to employ H-2A workers for 3 consecutive years.

Response: The current regulations provide that an alien worker's total period of stay in H-2A nonimmigrant status may last up to 3 years. A temporary need by a single employer for H-2A workers in excess of one year is possible where an H-2A employer satisfies DHS and DOL that such longer-term need is generated by “extraordinary circumstances.” See 8 CFR 214.2(h)(5)(iv)(A).

DHS believes that the reduction of the time to be spent outside the United States to be considered interruptive of accrual of time towards the 3-year limit in H-2A status provided in this final rule would benefit employers by reducing the amount of time that they are required to be without the services of needed workers. At the same time, this will not violate the temporary and seasonal nature of employment requirements under the H-2A program.

Comment: Twelve out of 15 commenters supported the proposed rule suggesting the reduction of the waiting period from 6 months to 3 months for an H-2A worker who has reached the 3-year ceiling on H-2A nonimmigrant status prior to seeking H-2A nonimmigrant status again (or any other nonimmigrant status based on agricultural activities). These commenters supported this proposal, stating that it will enhance the workability of the H-2A program for employers while not offending the fundamental temporary nature of employment under the H-2A program.

Response: DHS agrees with the comments in support of this proposal. Accordingly, the final rule adopts the proposed reduction in waiting time without change. New 8 CFR 214.2(h)(5)(viii)(C).

Comment: One commenter argued that this provision may lead to the displacement of U.S. workers and make some desirable year-round agricultural work unavailable to the domestic workforce. The commenter suggested that employers, including farm labor contractors, may string together several short-term job opportunities to offer job stability for a longer term, which would be desirable for many U.S. farm workers.

Response: DHS disagrees that a reduction in the waiting period will result in the displacement of U.S. farm workers. In order to protect U.S. workers, the law requires H-2A employers to obtain a temporary labor certification certifying that there are insufficient U.S. workers who are able, willing, qualified, and available to perform agricultural temporary labor or services, and that the H-2A employment will not adversely affect the wages and working conditions of similarly employed U.S. workers. If an employer is able to find U.S. workers by offering job stability for a longer period, it will not be allowed to or have no need to utilize the H-2A program. DHS believes that this streamlining measure will encourage employers who are unable to secure their workforce among U.S. workers to use the H-2A program instead of hiring individuals who have no legal immigration status and are unauthorized to work.

Comment: One commenter objected to this proposal, stating that it would encourage more illegal aliens to come into the country and lead illegal aliens who are already in the country to stay longer. Another commenter objected to the proposal but did not provide a reason.

Response: DHS adopts this proposal because it believes that a shorter waiting period would better meet the needs of employers in the time-sensitive agricultural industry. The H-2A program is for agricultural employers, who experience labor shortage among U.S. workers, to rely on alien workers to perform agricultural labor or services of a temporary or seasonal nature. DHS does not agree that this provision would increase the presence of illegal aliens in the United States.

Comment: Two commenters supported the proposal to provide for employment authorization to H-2A workers awaiting an extension of H-2A status based on a petition filed by a new employer. Twelve out of 15 comments opposed conditioning employment authorization on the new employer's participation in the E-Verify program, but supported the proposal to provide for employment authorization to H-2A workers awaiting an extension of H-2A status based on a petition filed by a new employer.

Response: After considering the commenters' objections and concerns, the final rule adopts this proposal at new 8 CFR 274a.12(b)(21), as discussed below. Note that new 8 CFR 274a.12(b)(21) does not include a cross reference to 8 CFR 214.6. This cross reference relates to TN nonimmigrants and was erroneously included in the proposed rule.

Comment: Many commenters questioned the reliability of the E-Verify program. Some commenters suggested that E-Verify has high error rates that disproportionately affect foreign-born U.S. workers.

Response: DHS believes that these concerns are misplaced and factually inaccurate. The “Findings of the Web Basic Pilot Evaluation” reported that currently 99.5 percent of all work-authorized employees queried through E-Verify were verified without receiving a Tentative Non-Confirmation (TNC) or having to take any type of corrective action. 1 Over the past year, E-Verify has automated its registration process, instituted a system change to reduce the incidence of typographical errors, incorporated a photo screening tool to combat identity fraud, added Monitoring and Compliance staff to maintain system integrity, added new databases that are automatically checked by the system, and established a new process for employees to call DHS' toll-free number to address citizenship mismatches as an alternative to visiting the Social Security Administration (SSA). These changes have been implemented in an effort to establish efficient and effective verification. A series of enhancements that E-Verify has implemented reduces mismatch rates among newly naturalized citizens and newly arriving workers. Under DHS management and in partnership with SSA, the program is continuously improving its processes to decrease mismatch rates and ensure that E-Verify is fast, easy to use, and protects employees' rights.

Comment: Some commenters stated that some employers have little or no occasion to use the E-Verify program and probably little facility with it and argued that the provision is not fair to such employers.

Response: E-Verify is a free and voluntary program. This provision is not a requirement for employers to obtain H-2 employees, but rather is a condition for the alien obtaining an extension of status and employment authorization pending adjudication of a new H-2A petition filed by another employer. DHS continues to believe that the provision will provide a valuable incentive for employers to participate in the E-Verify program, thereby reducing opportunities for aliens without employment authorization to work in the agricultural sector.

Comment: One comment suggested that, assuming DHS has the authority to provide for portability without statutory authorization, DHS should fully use the H-1B portability provisions as the model to allow portability for the period the petition is pending.

Response: DHS has general authority to grant employment authorization. See INA section 274A(h), 8 U.S.C. 1324a(h). In an industry in which an estimated half of the 1.1 million workers in the United States are illegal aliens, DHS has determined that it is appropriate to restrict the benefit of portability during petition pendency to only those employers that have demonstrated good business/corporate citizenship through enrollment in E-Verify.

Comment: One commenter who objected to the proposal suggested that the provision to extend employment authorization would act as an inducement for a worker to breach his work contract and to change employers prior to fulfillment of the contractual obligations, which would be a violation of INA section 218(c)(3)(B), 8 U.S.C. 1188(c)(3)(B).

Response: DHS disagrees that this provision would act as such an inducement. While it is true that this provision would enable an alien to work for a new employer prior to approval of the new H-2A petition, the purpose of this provision is to enable agricultural workers to change worksites and employers as soon as they complete one agricultural job. Even if this provision acted as an inducement for some aliens to change employers before completion of the first job (e.g., to get a higher paying job), DHS believes that the overall benefit to the agricultural industry, the alien worker, and the U.S. public in allowing the alien worker to change job locations at the end of each job assignment without having to wait for the successor employer's petition to be approved outweighs the possibility of abuse of this privilege by the alien worker or the new petitioning employer.

Comment: This same commenter also suggested that the proposed change to 8 CFR 214.2(h)(2)(i)(D) would create the possibility that an extension for an H-2A employee within the three-year period of stay may not be granted for employment with the same employer.

Response: DHS disagrees with the commenter's interpretation of the proposed provision. The cited provision is specifically for change of employers. The provision for extensions of stay is governed by 8 CFR 214.2(h)(15); the rule does not amend this provision.

Comment: One commenter stated that this proposal conditioning employment authorization on the new employer's participation in the E-Verify program seems to be a waste of time because the state workforce agency (SWA) is required to verify workers' eligibility under the DOL's rule.

Response: The E-Verify program supplements the employer's obligation under section 274A(a) of the INA, 8 U.S.C. 1324a(a), to complete Forms I-9 (Employment Eligibility Verification) at the time of each new hire. The SWA's responsibility is to verify the employment authorization of applicants seeking referral under a job order. SWAs are encouraged, but not required, to enroll in E-Verify. Additionally, under INA Section 274A(a)(5), employers can rely on the SWA's verification of employment authorization only where the documentation complies with all statutory and regulatory requirements, including 8 CFR 274a.6. Incentivizing E-Verify enrollment by agricultural employers will thus reduce opportunities for unauthorized agricultural workers, not just in the situations where employers are not able to rely on a SWA's verification, but in other situations outside the SWA referral process where workers apply for employment.

Comment: Two comments suggested changes to the proposal that would allow, in emergent circumstances, an application for an extension of stay for an H-2A nonimmigrant worker to not contain an approved temporary labor certification, under certain conditions.

Response: The final rule retains the provision as stated in the proposed rule. New 8 CFR 214.2(h)(5)(x).

Comment: One comment recommended that this provision continue to be automatically available upon request and that petitioners not be required to make a case for emergent circumstances.

Response: The proposed rule revised the provision at 8 CFR 214.2(h)(5)(x) to improve its readability, making no substantive changes to the provision. This provision originally was meant to allow H-2A employers to obtain a necessary workforce in case of emergencies over which employers have no control ( e.g. , changed weather conditions), for up to two weeks. DHS does not believe that the provision should be extended beyond situations involving emergent circumstances. Many agricultural employers stated in their comments to other proposals that, due to the uncertainty as to when the growing season would end, they normally use the latest likely ending date when they apply for a temporary labor certification. Many employers further indicated that most work is completed before the date on the temporary labor certification. DHS believes that it is reasonable to provide an opportunity for an employer to file an H-2A petition without obtaining a new temporary labor certification only in emergent circumstances.

Comment: The other comment asked DHS to have the parameters of emergent circumstances include any instance that the employer could not have reasonably foreseen at the time that the petition was filed.

Response: DHS has determined that it will not include additional parameters to the provision. To do so would unnecessarily reduce the flexibility that the provision currently provides.

Comment: Commenters were supportive of the proposed modifications to the general filing provision at 8 CFR 214.2(h)(2)(i)(A) applicable to H-1B, H-2A, H-2B, and H-3 classifications by removing specific reference to filing locations announced in the Federal Register and providing that the form instructions will contain information regarding appropriate filing locations for these nonimmigrant visa petitions.

Response: In the absence of negative comments on these revisions, and to maintain flexibility in the regulations to accommodate changing case management needs, the final rule adopts these modifications without change. New 8 CFR 214.2(h)(2)(i)(A). The final rule also makes conforming amendments to 8 CFR 214.2(h)(2)(i)(B) and 214.2(h)(2)(i)(C), replacing references to filing locations based on where the petitioner is located, will perform services, or receive training, or based on an established agent, with reference to the form instructions. In addition, revised 8 CFR 214.2(h)(2)(i)(B) replaces the reference to “Service office,” referring to the Immigration and Naturalization Service, with “USCIS.”

Comment: DHS received one comment with respect to filing locations specific to logging employers who will need to begin using the H-2A classification once DOL's final rule making changes to the H-2A classification takes effect. Currently, such employers use the H-2B classification. 20 CFR part 655, subpart C. Under the DOL final rule, they instead would need to use the H-2A classification. The comment concerned the current filing location for H-2A petitions at USCIS' California Service Center, as announced in a notice published in the Federal Register on November 9, 2007. See 72 FR 63621. The comment requested that logging employers be allowed to continue to file their petitions at USCIS' Portland, Maine field office, the current filing location for H-2B petitions for loggers, because the Portland office is familiar with the unique characteristics and needs of the industry.

Response: At present, DHS has no plan to change its central filing location for H-2A petitions at the California Service Center. This central filing location ensures timely processing and consistent adjudication of H-2A petitions. Once DOL's final rule takes effect and requires logging employers to use the H-2A classification, and beginning on the effective date of this rule, logging employers will be required to file petitions on behalf of their prospective workers in accordance with the H-2A regulations and form instructions for H-2A petitions. As DHS monitors the processing of these petitions, if DHS determines that it is more prudent to change the filing location for logging employers to the Portland, Maine field office or any other DHS office, DHS may change the filing location via the form instructions for the H-2A petition. Note that within 30 days from the effective date of this rule (and the DOL rule), logging employers will be required to file change of status petitions for their workers who are present in the United States in H-2B status to ensure that logging workers will be classified as H-2A workers.

Comment: Ten out of 12 commenters objected to the proposal to impose on H-2A sheepherders the same departure requirement applicable to all H-2A workers.

Response: After carefully considering the commenters' objections, DHS has determined that it will change its policy regarding H-2A sheepherders as proposed for the reasons discussed below.

Comment: Many commenters who objected to this proposal suggested that the existing policy was developed based on the understanding that tending and caring for sheep over extensive expanses of open range for long periods of time is a skilled and exacting occupation that requires considerable training and experience.

Response: Although DHS recognizes the special nature of this unique type of agricultural work, it does not change the nonimmigrant nature of the H-2A classification. See INA section 101(a)(15)(H)(ii)(a), 8 U.S.C. 1101(a)(15)(H)(ii)(a). The statute provides that an H-2A worker is a nonimmigrant who has a residence in a foreign country that he has no intention of abandoning and who is coming temporarily to the United States to perform agricultural labor or services. Without a departure from the United States after reaching the 3-year maximum period of stay, an H-2A worker cannot be considered a nonimmigrant, and his or her stay cannot be considered temporary. All other H-2A workers must depart the United States after reaching the 3-year maximum period of stay, regardless of the employer's need or the degree of skill or experience required of those workers; the same rule should apply to H-2A sheepherders.

Comment: A few commenters also argued that the history of the sheep industry shows that its existing practice is in keeping with Congressional intent.

Response: DHS is aware that foreign workers skilled in sheepherding were admitted during the early 1950s for permanent employment under special laws enacted by Congress. However, Congress permitted the special laws to expire after the issuance of “Spanish Sheepherders, Report of Subcommittee No. 1 of the Committee on the Judiciary, House of Representatives,” a report by the House Judiciary Committee on February 14, 1957, which undertook an investigation during 1955 and 1956 to examine allegations that a number of foreign sheepherders admitted under the special laws were leaving sheepherding shortly after arrival in the U.S. and were employed in other industries. 2 The report by the House Judiciary Committee substantiated many of these allegations. In the report, the Committee recommended “that the practice of admitting alien sheepherders under special legislation should be discontinued and that the problem of supplying legitimate needs of the American sheep-raising and wool-growing industry, should be met administratively under existing general law, specifically under section 101(a)(15)(H)(ii), of the Immigration and Nationality Act.” The report also states the following:

It was the Committee's opinion that no additional special legislation should be enacted to admit foreign sheepherders and the importation of foreign sheepherders should be governed by the H-2 temporary worker provision. DHS acknowledges that the aforementioned legislative history predates the policy established by the Immigration and Naturalization Service (INS) and now DHS to refrain from applying the three-year maximum period of stay to H-2A aliens who work as sheepherders. However, DHS has concluded that this policy is inconsistent with the temporary nature required by the statutory provisions governing H-2A program.

Comment: One commenter asked why such special procedures are available only for sheepherders. Another commenter suggested that DHS should adapt the special procedures for sheepherders to all occupations engaged in the range production of other livestock such as cattle and horses.

Response: It is believed that the policy regarding sheepherders was grandfathered from a series of bills enacted by Congress in the early 1950s to provide relief for the sheep-raising industry by making available special nonquota immigrant visas to skilled alien sheepherders. DHS disagrees that the special procedures should be extended to all occupations engaged in the range production of other livestock. DHS has determined that all H-2A occupations should be subject to the same statutory standard and that the special procedures should be curtailed rather than extended to other H-2A occupations. With the effective date of this final rule, DHS will begin to enforce on H-2A sheepherders the same departure requirement applicable to all other H-2A workers. However, DHS will not revoke any currently valid H-2A petitions that have been approved for sheepherders.

Comment: One commenter recommended that the time period required outside the country between periods of stay be reduced to two weeks for sheepherders.

Response: For the reasons stated above, DHS believes that the same statutory and regulatory standards for all other H-2A occupations should be applied to sheepherders.

On August 10, 2007, the Administration announced that it would establish a new land-border exit system for guest workers, starting on a pilot basis. The proposed rule included an exit system pilot program applicable to H-2A nonimmigrants. Under the proposed program, an alien admitted on an H-2A visa at a port of entry participating in the program must also depart through a port of entry participating in the program and present designated biographic and/or biometric information upon departure. Details of the program, such as designated ports of entry, would be announced in a notice published in the Federal Register .

Comments: A few comments generally supported the proposal or encouraged more strict measures to ensure foreign workers' departure within their authorized periods of stay. However, many commenters criticized this proposal for singling out the H-2A population and unfairly seeking to punish them by imposing an undue burden on them. They suggested that workers should be permitted to use all ports to enter the United States and should not be required to depart through the same ports of entry through which they entered because the original port of entry through which they entered may not be the most convenient if workers transfer to another employer. Some commenters pointed out that it would be difficult to effectively educate H-2A workers about the required method for exit, which will likely cause them to violate the requirement inadvertently. Many commenters expressed concerns about the unknown factors of the program such as the number and location of ports through which a worker can enter and return, timeliness of the process, and overall convenience or inconvenience for a worker. Others suggested that DHS should provide sufficient time and opportunities to answer stakeholders' concerns or questions.

Response: DHS has determined that it will adopt, with due consideration of commenters' concerns, the Temporary Worker Visa Exit Program Pilot for H-2A workers in this final rule. See new 8 CFR 215.9. DHS will inform H-2A workers of their obligations through an educational effort among the workers, foreign governments, agricultural industry, association leaders, and U.S. employers. Before implementation of the program, DHS will implement a comprehensive communications program that engages stakeholders and reaches travelers. This communications program may include giving walk-away materials to H-2A workers when they enter the country and utilizing outreach methods such as creating customer-focused products and proactive/reactive media relations program.

Under the H-2A land exit pilot program, DHS will explore ways that participating workers can register their final departure from the United States at select ports of entry. Only those workers who enter through these designated ports will be required to register their final departure for purposes of this pilot.

This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Act of 1996. This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

This rule has been designated as significant under Executive Order 12866. Thus, under section 6(a)(3)(C) of the Executive Order, DHS is required to prepare an assessment of the benefits and costs anticipated to occur as a result of this regulatory action and provide the assessment to the Executive Office of the President, Office of Management and Budget, Office of Information and Regulatory Affairs.

DHS invited the public to comment on the extent of any potential economic impact of this rule on small entities, the scope of these costs, or more accurate means for defining these costs. As a result, DHS received one comment directly related to the regulatory cost benefit analysis performed for the proposed rule which indicated that woolgrowers would have to hire double the number of employees as they currently do and that expenses would increase by at least 25 to 50 percent for each sheepherder employer. The comment provided no supporting data or calculations to explain exactly how this result would occur, and USCIS was unable to determine how the outcome of a requirement for an employee to go home for 3 months every 3 years would result in a doubling of the number of annual employees. Therefore, no changes were made as a result of the comment.

In summary, this rule makes several changes to the H-2A visa program that DHS believes are necessary to encourage and facilitate the lawful employment of foreign temporary and seasonal agricultural workers. A complete analysis has been performed in accordance with the Executive Order and is available for review in the rulemaking docket for this rule at http://www.regulations.gov . The results of the cost benefit analysis are summarized as follows:

The exit pilot program provided for in this rule will cost the Federal Government at least $2 million in labor costs per year to implement.

A total cost of between $16.5 million and $55 million will be imposed on all H-2A petitioning firms for all H-2A workers each year as a result of this rule banning placement fee payments by employees. Those costs may range from an average of around $1,700 to almost $6,000 per employer, based on the average number of H-2A workers requested per employer petition. The total annual costs of the time for H-2A employees to comply with the exit requirements of this rule are estimated to be around $184,332, based on the opportunity cost of the time lost to the employer while registering.

The annual information collection costs imposed by the employer notification requirements in this rule are estimated to be $13,713.

The volume of applications is expected to increase from an average of 6,300 per year to around 9,900 per year. The burden of compliance both in time and fees per application will not increase above that currently imposed as a result of this rule.

This rule will benefit applicants by:

• Reducing delays caused by Interagency Border Inspection System (IBIS) checks holding up the petition application process.

• Reducing disruption of the life and affairs of H-2A workers in the United States.

• Protecting laborers' rights by precluding payment of some fees by the alien.

• Prevent the filing of requests for more workers than needed, visa selling, coercion of alien workers and their family members, or other practices that exploit workers and stigmatize the H-2A program.

• Encouraging employers who currently hire seasonal agricultural workers who are not properly authorized to work in the United States to replace those workers with legal workers.

• Minimizing immigration fraud and human trafficking.

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. Therefore, in accordance with section 6 of Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DHS has completed the required review and determined that, to the extent permitted by law, this final rule meets the relevant standards of Executive Order 12988.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), requires Federal agencies to conduct a regulatory flexibility analysis which describes the impact of a rule on small entities whenever an agency is publishing a notice of proposed rulemaking. In accordance with the RFA, DHS certifies that this rule will not have a significant economic impact on a substantial number of small entities.

The H-2A program is used mainly by farms engaged in the production of livestock, livestock products, field crops, row crops, tree crops, and various other enterprises. The affected industries do not include support activities for agriculture. Therefore, in accordance with the RFA, USCIS has identified the industry affected by this rule as described in the North American Industry Classification System (NAICS) as encompassing NAICS subsectors 111, Crop Production, and 112, Animal Production. 3

In fiscal year 2007, USCIS received 6,212 Form I-129 petitions for H-2A employees, approved petitions for 78,089 H-2A workers, and 71,000 new workers were hired. In fiscal year 2006, USCIS received 5,667 Form I-129 petitions and approved 5,448 of them for 56,183 workers. Also, in fiscal year 2006, 6,717 employers requested certification from the Department of Labor (DOL) for 64,146 H-2A workers, and for those workers, the Department of State (DOS) issued 37,149 H-2A visas. In fiscal year 2005, USCIS approved Form I-129 petitions for 49,229 workers, 6,725 employers requested certification from DOL for 50,721 employees, and 31,892 visas were issued by DOS. Thus, in recent years, USCIS has received approximately 6,300 petitions per year for an average of 70,000 total H-2A workers per year. This rule is projected to result in an approximately 40,000 additional H-2A workers and 3,600 new Form I-129 petitions per year, for a total of 9,900 petitions for a total of 110,000 workers. In 2006, there were 2,089,790 farms in the United States and about 752,000 workers employed in agricultural jobs. Thus, approximately 0.47 percent of all farmers are expected to use the H-2A program and 14.6 percent of all farm workers will be aliens employed under the H-2A program.

The U.S. Small Business Administration (SBA) Small Business Size Regulations at 13 CFR part 121 provide that farms with average annual receipts of less than $750,000 qualify as a small business for Federal Government programs. According to the United States Department of Agriculture National Agricultural Statistics Service (NASS), 44,348, or 2.1 percent, of the 2,128,982 farms in 2002 in the U.S. had gross cash receipts of more than $500,000 and 97.9 percent of farms have sales of less than $500,000. 4 Based on these numbers, USCIS concludes that the majority of entities affected by this rule are categorized as small entities according to the SBA size standards.

The average of 11 foreign workers per year would require an expenditure of about $141,000 in annual labor expenses just for the farm's foreign workers, not including benefits. In the 2002 Census of Agriculture, 50,311 farms, or only 2.4 percent of all “farms” reported having any hired employees at all, and only 31,210 farms, or 1.5 percent of all farms, reported hired labor expenses in excess of $100,000 per year. Also, the 9,900 annual petitions that DHS projects it will receive after this rule takes effect represent only one-half of one percent of the 2,128,982 farms in 2002, and the 110,000 annual H-2A nonimmigrant workers account for only 14.6 percent of the 824,030 total hired farm workers reported in the 2002 Agricultural Census. Further, the 2002 Census reported that 53.3 percent of all farms reported a net loss, and only 329,490 farms reported annual net income of more than $25,000. 5 Taken together, these data indicate that for the farms that use the H-2A program to be viable, they are likely to be on the upper bounds of the small business size standard of $750,000 in gross cash receipts.

A number of firms with headquarters or a significant presence in the United States recruit employees in the employees' home countries to come to the United States for temporary employment. Also, many farms hire an agent in the U.S. to help them locate workers and complete applications and petitions. Some agents collect an initial retainer from an employer and then charge additional fees based on the number of workers, the application fees, the advertising costs required, and other expenses. The total charges an employer pays the agent per H-2A employee ranges from around $500 to $4,000, including travel expenses and all application and petition fees. The actual cost depends on the home country, the skills needed for the position, and the general complexity of the worker's and employer's respective situations. This rule will not affect the ability of the recruiter or agent to collect a fee from the employer. This rule does not affect the fee agents may charge per employee to process the employer's DOL, DOS, and DHS certification, application, and petition. This rule would only affect recruiting firms to the extent that it would render the employee ineligible for H-2A employment by collecting a fee, as soon as the potential employer becomes aware that the recruiter or agent has charged the employee a fee.

DHS has determined that this rule will require affected employers to pay between $150 and $500 per employee because recruiter fees that are now being paid by employees will be shifted by recruiters from employees to employers. This rule will also add $13,713 in information collection costs for absconder reporting for an average cost per employee of $0.13. Based on an average of 11 employees hired by each H-2A petitioner, average costs added by this rule will be between $1,651 and $5,501 per affected entity. For the purpose of determining the significance of the impacts of this rule, this analysis uses the costs at the high end of the range of possible impacts, or $5,501 per employer, in order that any errors in determining the impacts on small entities be on the side of an over-estimation. Again, most of the affected entities are classified as small.

Guidelines suggested by the SBA Office of Advocacy provide that, to illustrate the impact could be significant, the cost of the proposed regulation may exceed 1 percent of the gross revenues of the entities in a particular sector or 5 percent of the labor costs of the entities in the sector.

The average duration of H-2A employment based on the difference between employment start and end dates for workers granted H-2A status in fiscal years 2007 and 2008 was 236 days. Thus, a new H-2A employee in 2008 worked an average of 33.7 weeks. Assuming that the typical employee worked an 8 hour workday and took two days per week off from work, the employee would have worked 169 days and accrued 1,352 hours. Using the U.S. Department of Labor hourly wage rate for the H-2A worker of $9.49, plus a multiplier of 1.4 to account for fringe benefits, DHS calculated the average hourly wage at approximately $13.29. 6 Multiplying the hourly compensation costs by the hours worked provides an average compensation cost for an H-2A employee for the period he or she is in the United States of about $17,968. If the employer is required to pay a recruiter or reimburse the employee $500 for a recruiting fee, and if that employee absconds requiring the employer to file a report, the added cost of $501 is only 2.78 percent of the $17,968 annual salary for only one H-2A worker. Since the cost increase per H-2A employee is less than 5 percent of the costs associated with hiring only an H-2A worker, it would not be possible for the average cost increase imposed by this rule to exceed 5 percent of the average labor costs of the sector, because, among other reasons, H-2A workers are not expected to make up the entire workforce of all petitioners.

Also, as stated above, guidelines provided by the SBA Office of Advocacy suggest that an added cost of more than one percent of the gross revenues of the affected entities in a particular sector may be a significant impact. USCIS believes that it is unlikely that an employer will incur costs of $5,501 due to this rulemaking, as it is the high end of the range of possible costs. Again, if each firm affected by this rule hires the average of 11 workers and all 11 are recruited by a firm that charges or causes the employer to reimburse all 11 employees $500, the additional cost of this rule could reach as high as $5,500 per employer.

The actual revenue of the typical H-2A employer is unknown. However, according to the SBA table of size standards in the Small Business Size Regulations (13 CFR part 121), the annual gross revenue threshold for farms is $750,000. USCIS believes that the farms that use the H-2A program are likely to be on the upper bounds of the small business size standard of $750,000 in gross cash receipts. If an employer hires 11 employees and incurs recruiting costs of $500 for every one of them, the $5,500 added cost represents only 0.73 percent of $750,000. To further illustrate, for $5,500 to exceed one percent of annual revenues, sales would have to be $550,000 per year or less. While 97.9 percent of all farms have annual sales of less than $500,000, only 36 percent of all farms hire any employees. USCIS believes that farms below annual sales of $500,000 would be very unlikely to hire 11 temporary seasonal employees and incur the $5,500 in added costs. Therefore, USCIS believes that the costs of this rulemaking to small entities will not exceed one percent of annual revenues.

Therefore, using both average annual labor costs and the percentage of the affected entities' annual revenue stream as guidelines, USCIS concludes that this rule will not have a significant economic impact on a substantial number of small entities.

As outlined above, recruiting firms' activities may be affected tangentially by this rule's provisions. Nonetheless, the effect of the fee prohibition on recruiting companies, staffing firms, or employment agents is not a new compliance requirement on regulated entities. Establishment of a non-immigrant temporary worker program was intended to alleviate seasonal labor shortages. The formation of firms that recruit workers in foreign countries is an unintended consequence of these programs since those firms are not the intended recipients of the benefits that are supposed to inure to participants in those programs. In any event, DHS does not believe the prohibition on charging aliens for H-2A job referrals will cause a significant economic impact on the affected placement, recruiting, or staffing firms because they may, and are expected to, transfer those costs to the employers, as analyzed above.

For these reasons, DHS certifies that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

Under the Paperwork Reduction Act of 1995, Public Law 104-13, 109 Stat. 163 (1995) (PRA), all Departments are required to submit to the Office of Management and Budget (OMB), for review and approval, any reporting or record-keeping requirements inherent in a rule. It is estimated that this rule will require employers to file 3,600 more petitions using Form I-129 (OMB Control No. 1615-0009) for H-2A workers. In addition, this rule will require revisions to the Form I-129 (H Classification Supplement to the Form I-129).

This is a final rule and the revision to this information collection was not previously submitted and approved by OMB. USCIS is now requesting comments under the emergency review and clearance procedures of the PRA on this revision no later than February 17, 2009. When submitting comments on the information collection, your comments should address one or more of the following four points:

1. Evaluate whether the collection of information is necessary for the proper performance 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 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 the information on those who are to respond, including through the use of any and all appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

Overview of Information Collection for Form I-129 .

a. Type of information collection: Revision of currently approved collection.

b. Title of Form/Collection: Petition for Nonimmigrant Worker.

c. Agency form number, if any, and the applicable component of the Department of Homeland Security sponsoring the collection: Form I-129 (H Classification Supplement to the Form I-129), and U.S. Citizenship and Immigration Services.

d. Affected public who will be asked or required to respond, as well as a brief abstract: Individuals or Households. This form is used by an employer to petition for aliens to come to the U.S. temporarily to perform services, labor, and training or to request extensions of stay or changes in nonimmigrant status for nonimmigrant workers.

e. An estimate of the total number of respondents and the amount of time estimated for an average respondent to respond: 368,548 respondents at 2.75 hours per response.

f. An estimate of the total of public burden (in hours) associated with the collection: Approximately 1,013,507 burden hours.

All comments and suggestions or questions regarding additional information should be directed to the Department of Homeland Security, U.S. Citizenship and Immigration Services, Regulatory Management Division, 111 Massachusetts Avenue, NW., 3rd Floor, Washington, DC 20529, Attention: Chief, 202-272-8377.

In addition, this rule will allow employers of H-2A employees to employ H-2A workers for up to 120 days while they are awaiting an extension of status based on a new employer if the employer registers for E-Verify. It is estimated that 9,801 more firms will have to enroll in E-Verify so they may hire an employee under the 120-day extended authorization. Accordingly, USCIS will submit an OMB correction worksheet (OMB 83-C) to OMB increasing the number of respondents, burden hours and annual costs.

On July 30, 2008, the Attorney General published a proposed rule in the Federal Register (73 FR 44178). The comment period ended September 29, 2008. Comments were received from four commenters, including a local bar association, a national immigration lawyer association, and two attorneys. Because some comments overlap, and three of the commenters covered multiple topics, the comments are addressed by topic, rather than by reference to each specific comment and commenter. The provisions of the proposed rule on which the public did not comment are adopted without change in this final rule. Additional technical changes and changes made in response to public comments are discussed below.

This rule amends 8 CFR parts 1001, 1003, and 1292 by changing the present definitions and procedures concerning professional conduct for practitioners, which term includes attorneys and representatives, who practice before the Executive Office for Immigration Review (EOIR). This rule implements measures in response to the Attorney General's assessment of EOIR with respect to EOIR's authority to discipline and deter professional misconduct. The rule also aims to improve EOIR's ability to effectively regulate practitioner conduct by implementing technical changes with respect to the definition of attorney and clarifying who is authorized to represent and appear on behalf of individuals in proceedings before the Board of Immigration Appeals (Board) and the immigration judges. The regulations concerning representation and appearances were last promulgated on May 1, 1997 (62 FR 23634) (final rule). The regulations for the rules and procedures concerning professional conduct were last promulgated as a final rule on June 27, 2000 (65 FR 39513).

When it was part of the Department of Justice, the former Immigration and Naturalization Service (INS) incorporated by reference in its regulations EOIR's grounds for discipline and procedures for disciplinary proceedings. Since then, the functions of the former INS were transferred from the Department of Justice (Department) to the Department of Homeland Security (DHS). DHS's immigration regulations are contained in chapter I in 8 CFR, while 8 CFR chapter V now contains the regulations governing EOIR. The rules and procedures concerning professional conduct for representation and appearances before the immigration judges and the Board are now codified in 8 CFR part 1003, subpart G. The rules for representation and appearances before the immigration judges and the Board are codified in 8 CFR part 1292. The rules for representation and appearances and for professional conduct before DHS and its components remain codified in 8 CFR parts 103 and 292.

Both sets of rules provide a unified process for disciplinary hearings as provided in 8 CFR 1003.106, regardless whether the hearing is instituted by EOIR or by DHS. See generally Matter of Shah, 24 I&N Dec. 282 (BIA 2007) (imposing discipline on attorney who knowingly and willfully misled USCIS by presenting an improperly obtained certified Labor Condition Application in support of a nonimmigrant worker petition). Finally, both sets of rules provide for cross-discipline, which allows EOIR to request that discipline imposed against a practitioner for misconduct before DHS also be imposed with respect to that practitioner's ability to represent clients before the immigration judges and the Board, and vice versa. See 8 CFR 292.3(e)(2) (DHS) and 1003.105(b) (EOIR). Additional background information regarding professional conduct rules for immigration proceedings can be found in the proposed rule, 73 FR at 44178-180.

This rule amends only the EOIR regulations governing representation and appearances, and professional conduct under chapter V in 8 CFR. This rule does not make any changes to the DHS regulations governing representation and appearances or professional conduct.

Currently, the disciplinary regulations allow EOIR to sanction practitioners, including attorneys and certain non-attorneys who are permitted to represent individuals in immigration proceedings (“representatives”), when discipline is in the public interest; namely, when a practitioner has engaged in criminal, unethical, or unprofessional conduct or frivolous behavior. Sanctions may include expulsion or suspension from practice before EOIR and DHS, and public or private censure. EOIR frequently suspends or expels practitioners who are subject to a final or interim order of disbarment or suspension by their state bar regulatory authorities—this is known as “reciprocal” discipline.

The Attorney General completed a comprehensive review of EOIR's responsibilities and programs, and determined that, among other things, the immigration judges should have the tools necessary to control their courtrooms and protect the adjudicatory system from fraud and abuse. Accordingly, the Attorney General determined that the existing regulations, including those at 8 CFR 1003.101-109, should be amended to provide for additional sanction authority for false statements, frivolous behavior, and other gross misconduct. Additionally, the Attorney General found that the Board should have the ability to effectively sanction litigants and practitioners for defined categories of gross misconduct.

As a result, this rule seeks to preserve the fairness and integrity of immigration proceedings, and increase the level of protection afforded to aliens in those proceedings by defining additional categories of behavior that constitute misconduct.

In part, the rule responds to the Attorney General's findings and conclusions by adding substantive grounds of misconduct modeled on the American Bar Association Model Rules of Professional Conduct (2006) (ABA Model Rules) that will subject practitioners to sanctions if they violate such standards and fail to provide adequate professional representation for their clients. Specifically, the grounds for sanctionable misconduct have been revised to include language that is similar, and sometimes identical, to the language found in the ABA Model Rules, as such disciplinary standards are widely known and accepted within the legal profession. Although EOIR does not seek to supplant the disciplinary functions of the various state bars, this rule aims to strengthen the existing rules in light of the apparent gaps in the current regulation. See Matter of Rivera-Claros , 21 I&N Dec. 599, 604 (BIA 1996). In addition, these revisions will make the EOIR professional conduct requirements more consistent with the ethical standards applicable in most states.

This rule will also enhance the existing regulation by amending the current procedures and definitions through technical modifications that are more consistent with EOIR's authority to regulate practitioner misconduct. See Koden v. U.S. Dep't of Justice , 564 F.2d 228, 233 (7th Cir. 1977); 8 U.S.C. 1103, 1362. For example, the rule amends the definition of “attorney” at 8 CFR 1001.1(f) by adding language stating that an attorney is one who is eligible to practice law in a U.S. state or territory. Additionally, this rule amends the language at 8 CFR 1292.1(a)(2) to clarify that law students and law graduates must be students and graduates of accredited law schools in the United States. Accordingly, the rule will allow EOIR to investigate and prosecute instances of misconduct more effectively and efficiently while ensuring the due process rights of both the client and the practitioner.

Comment . One commenter raised concern about the ability of immigration judges to use these rules “to commence retaliatory disciplinary proceedings against attorneys who complain of their * * * practices.”

Response . The comment misunderstands EOIR's disciplinary procedural structure. In 2000, the Department addressed the issue as to whether immigration judges had the authority to initiate disciplinary proceedings or impose disciplinary sanctions. See Professional Conduct for Practitioners—Rules and Procedures, 65 FR 39513, 39520-39521 (June 27, 2000). Under the current regulations, which have been in place since then, immigration judges have no authority to initiate disciplinary proceedings against a particular attorney. Immigration judges can file complaints about attorneys with EOIR's disciplinary counsel, just as aliens, attorneys, or others involved in an immigration proceeding may file such complaints. These complaints are independently reviewed by EOIR's disciplinary counsel, who then determines, after an independent investigation, whether to close the complaint, informally resolve it, or initiate formal disciplinary proceedings. If an attorney believes that an immigration judge improperly filed a complaint as a retaliatory action, the attorney may file a complaint against the immigration judge with the Office of the Chief Immigration Judge. See www.usdoj.gov/eoir/sibpages/IJConduct.htm .

Comment . One organization commented that EOIR should adjust the practitioner disciplinary procedures because EOIR is greatly expanding the scope of its grounds for discipline. The commenter stated that up until the proposed rule, EOIR mainly imposed discipline due to criminal convictions or reciprocally based on discipline imposed by other jurisdictions. The commenter was concerned that the current disciplinary structure is not adequate for the new independent disciplinary scheme that the proposed rule contemplated establishing.

Response . EOIR regularly cooperates with attorney disciplinary agencies at the state and federal levels to impose reciprocal discipline with regard to practitioners who have been suspended or disbarred in other jurisdictions. EOIR also takes prompt action to prohibit practitioners who have been convicted of serious crimes from practicing before EOIR. However, EOIR's practitioner disciplinary procedures were never intended to adjudicate matters involving only reciprocal discipline or criminal convictions. At its inception 50 years ago, the practitioner disciplinary regulations provided ten grounds for discipline that were original in nature. See 23 FR 2670, 2672-2673 (April 23, 1958). These regulations contemplated the possibility that practitioners would be charged with misconduct arising from practice before the Department, and that Department officials would need to adjudicate these charges without reference to another tribunal's findings as to misconduct, whether ethical or criminal in nature. As reflected in several published cases, these practitioner disciplinary procedures have been used to adjudicate original charges of professional misconduct. See Matter of Sparrow, 20 I&N Dec. 920 (BIA 1994) (case involving both reciprocal and original charges); Matter of De Anda, 17 I&N Dec. 54 (BIA, A.G. 1979); Matter of Solomon, 16 I&N Dec. 388 (BIA, A.G. 1977); Matter of Koden, 15 I&N Dec. 739 (BIA 1974, A.G. 1976). None of these cases reveals a deficiency in the procedures, and these procedures were upheld by a federal court of appeals. See Koden U.S. Dep't of Justice , 564 F.2d 228, 233-235 (7th Cir. 1977).

In 2000, the Department completely reviewed, revised, and expanded the practitioner disciplinary procedures. 65 FR at 39523. These regulations expressly created summary disciplinary procedures for cases based on reciprocal discipline and criminal convictions, which are not used in proceedings involving original charges of misconduct. See 8 CFR 1003.103-106. When the Department published these new procedures, it also consolidated and added additional grounds for discipline. The Department's major renovations in 2000 to the hearings and appeals procedures for original charges of misconduct were intended to be sufficient to adjudicate the eleven original grounds for discipline in the current regulations. The addition of several more grounds for discipline established in this final rule does not change the sufficiency or adequacy of these existing procedures.

Comment . One commenter stated that EOIR should define “accredited representative” and should issue identification cards to accredited representatives so that immigration judges will be able to verify that an individual appearing in court is accredited to practice before EOIR.

Response . The regulations at 8 CFR 1292.1 presently state that a person entitled to representation before EOIR may be represented by, among others, an accredited representative. This section cross-references 8 CFR 1292.2, which provides detailed information concerning accredited representatives. Because accredited representatives must go through a special process to receive accreditation, the regulations already provide more information about accredited representatives than they do about attorneys or any other type of representative. Further, 8 CFR 1003.102(a)(2) specifies the compensation that accredited representatives may receive for their services. Therefore, it is unnecessary to further define the term “accredited representative.” The Department also declines, at this time, to issue identification cards to accredited representatives. The regulations at 8 CFR 1292.2(d) require EOIR to maintain a roster of accredited representatives. This roster is available online at http://www.usdoj.gov/eoir/statspub/accreditedreproster.pdf . Immigration judges may easily refer to the roster to determine if an individual is an accredited representative. Thus, contrary to the commenter's concern, immigration judges are not “forced to accept assertions of accredited representatives that they are, in fact, accredited.”

Comment . All of the commenters proposed that the Department apply the professional conduct regulations to government attorneys involved in immigration proceedings. Three commenters asserted that the practitioner disciplinary regulations should apply to both private practitioners and DHS attorneys who practice before EOIR. Further, two commenters indicated that immigration judge misconduct is a problem and one of those commenters argued that rules governing the conduct of immigration judges should be published contemporaneously with these final rules.

Response . As an initial matter, the Department would note for clarity that the “rule” of professional conduct for immigration judges referenced by the commenter was not a proposed rule, but a notice published in the Federal Register seeking comment on draft “Codes of Conduct for the Immigration Judges and Board Members.” 72 FR 35510 (June 28, 2007). This notice did not include a process by which to discipline immigration judges or Board Members. Rather, this notice recognized certain “canons” of professional conduct. Id . at 35510-12. Attorneys concerned with an immigration judge's conduct may follow the procedures for filing a complaint regarding the conduct of an immigration judge. See http://www.usdoj.gov/eoir/sibpages/IJConduct.htm .

In 2000, the Department addressed the reasons why government attorneys, including immigration judges, are not subject to the same process used for disciplining practitioners. See 65 FR at 39522. The reasons stated in 2000 with respect to the current practitioner disciplinary process remain valid, notwithstanding the fact that the government is now represented in removal proceedings by attorneys working for DHS rather than the former INS.

Like the former INS attorneys who were subject to investigation by the Department's Inspector General and Office of Professional Responsibility, DHS's Office of the Inspector General and the Office of Professional Responsibility for Immigration and Customs Enforcement investigate DHS attorneys. Further, DHS attorneys are also required to comply with the Standards of Ethical Conduct for Employees of the Executive Branch, found at 5 CFR part 2635, and other standards applicable to government employees. In fact, DHS has adopted a formal disciplinary process for its employees that provides similar hearing and appeal rights as EOIR's practitioner disciplinary process, including removal or suspension from employment. See 5 CFR 9701.601-710. Moreover, applying this rule to DHS attorneys was not included in the proposed rule, and cannot be adopted in this final rule in the absence of prior notice and comment. Accordingly, the Department declines to adopt the comments requesting contemporaneous publication of the Code of Conduct for Immigration Judges and Board Members and a rule addressing professional conduct of government attorneys.

Comment . Two commenters indicated that there is a perception that an inherent conflict of interest exists when immigration judges adjudicate practitioner disciplinary cases. One of the commenters expressed the view that immigration judges do not have training in attorney discipline matters, private practice experience, or sufficient time to spare from their immigration case workload. The commenter argued that EOIR should constitute disciplinary hearing panels composed of private practice attorneys and members of the public to hear and decide practitioner discipline cases.

Response . The use of immigration judges as adjudicators in practitioner disciplinary cases was codified over twenty years ago, in 1987. See Executive Office for Immigration Review; Representation and Appearances, 52 FR 24980 (July 2, 1987). In 2000, the Department amended the practitioner disciplinary regulations to provide that both immigration judges and administrative law judges could be assigned to adjudicate practitioner disciplinary cases. When that final rule was published, the Department gave a detailed explanation concerning the use of immigration judges as adjudicating officials in practitioner disciplinary cases. See 65 FR at 39515-16. That explanation remains valid.

However, in recognition that these final rules significantly increase the regulation of practitioner conduct, EOIR has chosen to create a corps of adjudicating officials made up of immigration judges and administrative law judges who will receive specialized training in professional responsibility law, and who will hear and decide practitioner disciplinary cases as part of their normal caseload. Further, EOIR acknowledges the concern raised by the commenters and notes that the current regulations require that an immigration judge appointed to hear disciplinary cases is not the complainant and not one whom the practitioner regularly appears before. 8 CFR 1003.106(a)(1)(i).

This rule sought to amend the existing rules that only allow the imposition of discipline where a practitioner resigns “with an admission of misconduct” to allow “the imposition of discipline on an attorney who resigns while a disciplinary investigation or proceeding is pending.” 73 FR at 44180. No comments were received regarding this part of the proposed rule. Accordingly, this rule will be adopted without change.

Comment . Two organizations commented on the proposed amendment to 8 CFR 1003.102(k), which would expand the existing rule to sanction practitioners based on a finding of ineffective assistance of counsel by a federal court. One commenter questioned whether it was appropriate for a finding of ineffective assistance of counsel to serve as a ground for discipline. The commenter asserted that ineffective assistance of counsel is normally raised by aliens when seeking reopening of unfavorable decisions in their cases, and that because of this, allegations of ineffective assistance of counsel are “rampant.” The commenter thought that the circumstances under which ineffective assistance of counsel is raised can put well-intentioned and competent attorneys at risk of discipline. The other commenter appreciated that the proposed rule would expand consideration of ineffective assistance of counsel findings “outside the parameters of the immigration courtroom.” This commenter also suggested that the rule be revised to make clear that the ground of discipline must be based on a “final order” finding ineffective assistance of counsel, either by an immigration judge, the Board, or a federal court.

Response . The purpose of amending this rule is to permit EOIR to impose disciplinary sanctions on practitioners who have been found to have provided ineffective assistance of counsel in immigration proceedings before EOIR, regardless of whether that finding of ineffective assistance of counsel was made by an immigration judge, the Board, or a federal court. Although one of the commenters thought that practitioners would be placed at risk for discipline based on allegations of ineffective assistance of counsel that are made by aliens only seeking reopening of their immigration cases, EOIR has been administering this ground for discipline since 2000 without inappropriately disciplining a practitioner. As stated in the supplemental information for the rule that proposed ineffective assistance of counsel as a ground for discipline, an adjudicating official may determine not to impose disciplinary sanctions notwithstanding a finding of ineffective assistance of counsel in an immigration proceeding. See Executive Office for Immigration Review; Professional Conduct for Practitioners—Rules and Procedures, 63 FR 2901, 2902 (January 20, 1998) (proposed rule). Moreover, the EOIR disciplinary counsel does not automatically initiate disciplinary proceedings based on a finding of ineffective assistance of counsel. Rather, proceedings are initiated based on EOIR disciplinary counsel's independent review of the matter. Finally, if proceedings are initiated, practitioners receive a full and fair opportunity to dispute the underlying finding of ineffective assistance of counsel before being disciplined.

Another commenter agreed with the proposed amendment to this ground for discipline; however, the commenter misunderstood the scope of this amendment. The EOIR disciplinary process remains focused on disciplining practitioners based on a finding of ineffective assistance of counsel that occurred before EOIR in immigration proceedings (or before DHS in the case of charges brought by the DHS disciplinary counsel).

One commenter also suggested that EOIR limit discipline to matters in which the finding of ineffective assistance of counsel was made in a final order. We will not adopt this recommendation because the finding of ineffective assistance of counsel is usually not located in a final order by an immigration judge or the Board. This is because aliens most commonly assert ineffective assistance of counsel as a basis for getting their cases reopened. If an alien prevails in the ineffective assistance of counsel claim, the adjudicator who issues this determination will do so in an order that reopens the proceeding, and such an order granting reopening is itself not a final order because further proceedings will be held after the case is reopened. Therefore, for all of the reasons stated above, the Department adopts the proposed amendment to this ground for discipline as originally proposed.

One commenter provided a comment agreeing with this change. No other comments were received. Accordingly, this rule is adopted without change.

Comment. Two comments were received regarding section 1003.102(m). One comment stated that this is “one of the most valuable rules proposed.” The other commenter did not take a position on the rule, but suggested revising the rule to include a “knowingly” mens rea requirement to this ground of discipline that prohibits practitioners from assisting in the unauthorized practice of law.

Response. The Department did not propose a modification to this ground for discipline. This ground was only re-printed in the proposed rule to delete the period at the end of this provision and add a semi-colon. Accordingly, the Department declines to make any substantive amendments to this rule, such as including the word “knowingly.” Such a change is not necessary because practitioners should make certain that any other practitioner they work with is authorized to practice before EOIR. However, the Department believes that additional clarification of what constitutes the practice of law would be helpful to practitioners. Therefore, a clarifying statement will be added to this ground for discipline that will state that the practice of law before EOIR means engaging in practice or preparation as those terms are defined in 8 CFR 1001.1(i) and (k).

Comment. Two commenters were concerned with the language used in this proposed provision. One commenter believed it was too vague. The other commenter, while acknowledging that this proposed provision is based on ABA Model Rule 8.4(d), stated that this rule was extremely broad and suggested that the Department narrow this ground by adding text from the supplemental information in the proposed rule or from the ABA's comments to Rule 8.4(d).

Response. This ground for discipline is based on ABA Model Rule 8.4(d). As such, it is a well-known ethical rule with which most attorneys must comply whenever representing parties before a tribunal. Therefore, we do not believe that additional language needs to be added to the proposed rule. The Attorney General expects that EOIR's disciplinary counsel, adjudicating officials, and the Board will consider the ABA's comments to ABA Model Rule 8.4(d), and how this rule has been applied in interpreting and applying this regulatory provision, so that this new ground for discipline would not be applied in a manner that is inconsistent with the prevailing interpretations with which attorneys are already familiar. Therefore, we are adopting the proposed rule without change.

Comment. One commenter commended the addition of this provision, which is based on ABA Model Rule 1.1. The commenter suggested that the Department add additional text to the provision from the ABA's comments 1, 3, and 5 to Rule 1.1.

Response. As indicated in the proposed rule, this ground for discipline uses text that is nearly identical to ABA Model Rule 1.1. The proposed rule also included one sentence from the ABA's comment 5 to Rule 1.1. The Department has considered adding additional text to this ground for discipline from the ABA's comments 1, 3, and 5 to Rule 1.1. However, the Department believes that the proposed rule, as originally proposed, provides sufficient information for practitioners to be on notice of their duty to represent their clients competently. The Department's decision not to add additional text does not mean that the ABA's comments 1, 3, and 5 are not relevant to interpreting this provision. Because this ground for discipline is based on ABA Model Rule 1.1, relevant ABA comments concerning Rule 1.1, and relevant judicial interpretations, can be considered as an important aid in interpreting this ground for discipline.

Comment. One commenter was concerned by this provision because the commenter believed that the provision would interfere with retainer agreements between attorneys and their clients, which are traditionally governed by state law. The commenter agreed that immigration judges should have a role in determining whether a practitioner can withdraw from a case; however, the commenter thought that this provision would require practitioners to continue to represent a client even when there is a conflict of interest. The commenter urged the Department to adopt standards governing whether immigration judges should permit the withdrawal of practitioners from cases. Finally, the commenter suggested that the Department permit limited appearances and allow practitioners to withdraw from cases in which clients have failed to pay fees. Another commenter views this change as “an excellent proposal” but suggests that the rule require clear contracts between attorneys and clients.

Response. Upon review, the Department has decided to remove the text from the proposed provision that is not based on ABA Model Rule 1.2(a) and add additional text from ABA Model Rule 1.2(a) concerning a practitioner's ability to “take such action on behalf of the client as is impliedly authorized to carry out the representation.” The Department is making this change because this provision, which involves the scope of representation, should not include text discussing the withdrawal or the termination of employment of practitioners. The commenter's suggestion that the Department adopt standards governing whether immigration judges should permit the withdrawal of practitioners is outside the scope of this rule. This rule only involves practitioner disciplinary matters and does not include proposed amendments to procedures in immigration proceedings, such as 8 CFR 1003.17. Likewise, the suggestion that the Department permit limited appearances is an issue involving immigration proceedings that is not appropriately addressed in this final rule.

Comment. One commenter noted appreciation for this proposal but suggested that the Department add a good cause exception to the requirement that practitioners act with diligence and promptness. The commenter stated that there may always be unforeseen emergencies that occur. The commenter also suggested that the Department permit nunc pro tunc filings in immigration cases for good cause shown.

Response. The inclusion in this provision of a good cause exception is unnecessary. This provision requires “reasonable” diligence and promptness. Therefore, practitioners will not be expected to anticipate every possible contingency, such as a truly unforeseen emergency, in order to avoid discipline under this rule. However, practitioners should make an effort to prepare for foreseeable exigencies. As stated in response to a previous comment, this rule only involves practitioner disciplinary matters and does not include proposed amendments to procedures in immigration proceedings. Therefore, the Department will not adopt, as part of this final rule, a provision that permits late filings if there is good cause.

Comment. Two commenters stated that this provision's requirement that practitioners communicate with aliens in their native language would be unduly burdensome. One commenter believes that the rule would transfer the expense of translation services from aliens to practitioners. Another commenter believes that the requirements in this provision would make it difficult for aliens who speak unusual foreign languages to obtain representation. The commenter asserted that aliens often rely on friends and family to translate for them, and practitioners should not be required to ensure that those translations are accurate. One commenter suggested that this provision should only require practitioners to make a diligent and reasonable effort to communicate in the alien's language. Finally, one commenter was concerned that the provision would require practitioners to locate their clients to communicate with them; the commenter suggested that the rule only require communication using the contact information provided to the practitioner from the client.

Response. The Department accepts the suggestions from the commenters and the final version of this provision has been modified to ensure that practitioners are not required to provide all translation services for their clients. However, practitioners must make reasonable efforts to communicate with clients in a language that the client understands. Further, the Department agrees that practitioners should not have to locate their clients and should be able to rely on the contact information provided by their clients. However, if a practitioner cannot locate his or her client, the practitioner is responsible for informing EOIR that the practitioner is unable to contact his or her client.

Comment. One commenter took issue with the explanation for this rule in the supplemental information and requested that the rule make clear that “the duty of the lawyer is only to make reasonable disclosure of contrary authority known to him,” not to assist DHS in preparing its brief against the lawyer's client.

Response. This provision is extremely narrow and will not require practitioners to seek out legal authority that is contrary to their client's cases just to disclose this information to EOIR. This provision only applies to controlling legal authority that is directly contrary to the client's position when this controlling legal authority is already known to the practitioner and the other party did not provide it to EOIR. In this regard, the commenter is correct that this rule does not view an alien's attorney as having a duty to also conduct research for the opposing party.

Comment. One commenter thought that the proposed provision was too broad because it subjects practitioners who provide pro bono services to discipline if they do not sign pleadings or submit a Form EOIR-27 or EOIR-28. The commenter suggested that disciplinary sanctions only be imposed when filings demonstrate a lack of competence or preparation, or the practitioner has undertaken “full client services.” Another commenter approved of this change, but suggested that pro se aliens be provided notice of this requirement in their own language and that immigration judges inform all who appear before the court of the requirement.

Response. The Department believes that all practitioners should submit Forms EOIR-27 and EOIR-28, and sign all filings made with EOIR, in cases where practitioners engage in “practice” or “preparation” as those words are defined in 8 CFR 1001.1(i) and (k). It is appropriate to require practitioners who engage in “practice” or “preparation,” whether it is for a fee or on a pro bono basis, to enter a notice of appearance and sign any filings submitted to EOIR. As stated in the supplemental information to the proposed rule, this provision is meant to advance the level of professional conduct in immigration matters and foster increased transparency in the client-practitioner relationship. Any practitioner who accepts responsibility for rendering immigration-related services to a client should be held accountable for his or her own actions, including the loss of the privilege of practice before EOIR, when such conduct fails to meet the minimum standards of professional conduct in 8 CFR 1003.102. It is difficult for EOIR to enforce those standards when practitioners fail to enter a notice of appearance or sign filings made with EOIR. However, in an effort to ensure clarity of this ground for discipline, a sentence will be added to this provision that makes it clear that a notice of appearance must be submitted and filings signed in all cases where practitioners engage in “practice” or “preparation.” If a practitioner provides pro bono services that do not meet these definitions, then a notice of appearance is not necessary.

As for the suggestions made by the second commenter, the Department declines to codify in the regulations a rule that requires notice to pro se aliens or anyone appearing before an immigration judge of an attorney's obligation to enter a Notice of Appearance. The scope of this rule is to provide notice to attorneys of their responsibilities when engaging in practice and preparation before EOIR and to provide grounds for discipline when an attorney fails to carry through on his or her responsibilities.

Comment. One commenter stated that the proposed rule fails to acknowledge that boilerplate language is sometimes appropriate where used in briefs where cases present common issues of law, analysis, and argument. The commenter was concerned that the proposed rule would punish the repeated use of briefing materials regardless of the material's relevance to the case at hand. The commenter proposed limiting the proposed rule's effect to filings that reflect incorporation of incorrect or irrelevant material. Another commenter agrees with this change, but questions how the “repeated filings” will be tracked such that the rule will be enforceable.

Response. The rule, as written, is sufficient to meet the concerns of the first commenter and is therefore adopted as the final rule. The rule makes it clear that conduct that will lead to sanctions only includes filings that use boilerplate language that reflect little or no attention to the specific factual or legal issues in a case and thereby show a lack of competence or diligence by the practitioner. As stated in the supplemental information to the proposed rule, EOIR seeks to deter practitioners from filing briefs that provide no recitation of the specific facts in the case and fail to explain how the cited law in the brief applies to the facts of the case. Therefore, this rule is sufficiently circumscribed to ensure that a practitioner's use of a legal argument in one case, which is copied from the practitioner's brief in another case, will not subject the practitioner to sanctions unless the argument fails to connect the legal issues raised in the brief with the specific facts in the case in a manner that shows a lack of competence and diligence.

As for the enforceability of the rule, the proposed rule explained that the Board has already experienced these situations. 73 FR at 44183. In light of this experience, the Board has already developed the means to identify cases where the same attorney is filing boilerplate briefs. Immigration judges, on the other hand, may be able to identify instances of concern based on their ongoing interaction with the practitioners who appear before them.

Comment. One commenter stated that a petition to immediately suspend a practitioner should not be filed until a final order is issued suspending, disbarring, or criminally convicting the practitioner in another jurisdiction.

Response. The regulations currently permit the imposition of an immediate suspension of a practitioner who has been suspended or disbarred on an interim basis. The proposed rule sought to clarify this authority; however, the proposed rule did not seek to broaden or change it. It is appropriate to immediately suspend a practitioner based on an interim suspension from a state licensing authority or a Federal court pending the issuance of a final order because any practitioner who is under a suspension from another jurisdiction does not meet the definition of an “attorney” under 8 CFR 1001.1(f). Such a practitioner is not qualified to practice before EOIR under 8 CFR 1292.1(a)(1). Further, it is beyond argument that it is appropriate to immediately suspend practitioners who have been convicted of serious crimes. The regulations protect practitioners because they require that all criminal appeals be completed before EOIR will issue a final order imposing a suspension or expulsion on a criminally convicted practitioner. See 8 CFR 1003.103(b).

Comment. One commenter was concerned that EOIR did not have a provision that would permit it to vacate an immediate suspension order imposed on a practitioner who later has an underlying state bar suspension vacated.

Response. The regulations expressly provide that upon a showing of good cause, the Board may set aside an immediate suspension if it is in the interests of justice to do so. 8 CFR 1003.103(a)(2). If an immediate suspension was solely predicated upon a state bar suspension that was vacated, it would be in the interests of justice for the Board to set aside its immediate suspension order.

Comment. One organization disagreed with the proposed change in the standard of proof in practitioner disciplinary proceedings from “clear, unequivocal, and convincing evidence” to “clear and convincing evidence.” The commenter stated that removing “unequivocal” makes lawyers more vulnerable to discipline without providing a corresponding benefit to the justice system and indicated that the standard of proof in practitioner disciplinary cases should not mirror those in removal proceedings.

Response. The proposed rule indicated the Department's intention to change the standard of proof in practitioner disciplinary cases to clear and convincing evidence because this is now the standard of proof used in removal proceedings adjudicated by the Board and immigration judges. This is appropriate given the reason why “unequivocal” was first adopted as part of the standard of proof in practitioner disciplinary proceedings. See Matter of Koden , 15 I&N Dec. 739, 748 (BIA 1974, A.G. 1976). In Koden , the Board decided that the standard of proof should be clear, convincing, and unequivocal evidence, rather than clear and convincing evidence as argued by the respondent, because many other jurisdictions used “unequivocal” as part of their disciplinary standard, and also because the Board and other immigration adjudicators were already familiar with applying the clear, convincing, and unequivocal evidence standard as that was the standard applicable in deportation proceedings. See id. It is appropriate for the standard of proof in practitioner disciplinary cases to be adjusted to the clear and convincing standard because that is now the standard that the ABA recommends for all jurisdictions to adopt in disciplinary cases, see Model Rules for Lawyer Disciplinary Enforcement R. 18 (2002), and also because that is the standard the Board and immigration judges now apply in removal proceedings. The latter reason is supported by both Koden and the regulations at 8 CFR 1003.106(a)(1)(v), which state: “[d]isciplinary proceedings shall be conducted in the same manner as Immigration Court proceedings as is appropriate . * * *” Further, while the concerns raised by the commenter were presumably directed at a reduction of the burden the government will bear in proving charges of misconduct, it is important to note that practitioners also receive a benefit to the change in the standard of proof. Practitioners have a reduced burden of proving affirmative defenses and proving that they are morally and professionally fit to be reinstated after being disciplined. See 8 CFR 1003.103(b)(2); 1003.105(a)(2); 1003.107(a)(1).

Comment. One commenter suggested that the regulations concerning reciprocal discipline be revised so that reciprocal discipline imposed by the Board will run concurrently with the discipline imposed by the practitioner's state bar. The commenter believed that the proposed revisions to 8 CFR 1003.103 would cause practitioners to be suspended or disbarred for periods of time that are different than that imposed by the state bar without any basis or finding as to why that result is appropriate.

Response. EOIR attempts to ensure in reciprocal disciplinary cases that a suspension or expulsion before EOIR will be as contemporaneous as possible with discipline imposed by state bars. The regulations at 8 CFR 1003.103(a) permit the Board to impose an immediate suspension on a practitioner who has been suspended or disbarred, and the time served during the immediate suspension can be credited toward the term of suspension or expulsion in the final order. Id. However, the Board cannot issue an immediate suspension order against a practitioner contemporaneously with a state bar order of suspension or disbarment unless the practitioner complies with 8 CFR 1003.103(c) and informs EOIR of the suspension or disbarment in a timely fashion. In cases where practitioners fail to inform EOIR of state bar discipline, EOIR will have no alternative but to impose discipline at a later date after learning of the discipline. Even though Board precedent establishes that identical or comparable discipline is generally to be imposed in reciprocal disciplinary matters, see Matter of Truong, 24 I&N Dec. 52, 55 (BIA 2006); Matter of Ramos, 23 I&N Dec. 843, 848 (BIA 2005); Matter of Gadda , 23 I&N Dec. 645, 649 (BIA 2003), EOIR will not reward a practitioner's failure to comply with his or her duty to timely inform EOIR of state bar discipline by shortening the length of the reciprocal discipline imposed.

Further, while the Board generally subscribes to the concept of identical or comparable reciprocal discipline, there have been circumstances where the Board has imposed non-identical reciprocal discipline or denied reinstatement to a practitioner who has since been reinstated to practice before his state bar. See Matter of Krivonos , 24 I&N Dec. 292, 293 (BIA 2007) (denying reinstatement to practitioner who had been convicted of immigration-related fraud even though practitioner was reinstated by the state bar); Matter of Jean-Joseph , 24 I&N Dec. 295 (BIA 2007) (suspending practitioner for double the length of state bar suspension because practitioner violated the Board's immediate suspension order). Therefore, while identical or comparable reciprocal discipline is generally employed by the Board, the Board must have the flexibility to respond to the facts and circumstances presented in each case.

Comment. One commenter suggested that the rule allowing for public postings of immediate suspensions require that such postings be placed in the waiting rooms of the immigration courts.

Response. The regulatory language specifically states that “the Board may require that notice of such suspension be posted at the Board, the Immigration Courts, or the DHS.” In all immediate suspension orders issued by the Board to date, the Board has included a requirement that the immediate suspension be posted in a public area. In addition, such information is accessible to the public online at http://www.usdoj.gov/eoir/profcond/chart.htm.

Comment. One commenter suggested that a Notice of Intent to Discipline should only be issued when there is a preliminary finding that the charges of misconduct could be sustained on clear and convincing evidence.

Response. This comment involves an existing regulation that was not subject to amendment in the proposed rule and, therefore, is outside the scope of the proposed rule. In 2000, the practitioner disciplinary regulations were amended to provide that a Notice of Intent to Discipline would only be issued when there is sufficient prima facie evidence to warrant charging a practitioner with misconduct. 8 CFR 1003.105(a). However, those charges would have to be proven by clear and convincing evidence. 8 CFR 1003.106(a)(1)(iv). Therefore, implicit in the filing of all charges is the belief by the EOIR disciplinary counsel that the charges can be proven by clear and convincing evidence.

Comment. One commenter took issue with the proposal to limit the circumstances under which a preliminary inquiry report will be served with a Notice of Intent to Discipline. The commenter understood the proposal to mean that the practitioner will no longer be informed of the basis for the charge of disciplinary action.

Response. The supplemental information and language of the proposed rule clearly state that this limitation applies only in summary proceedings because those proceedings will always be brought as a result of a disciplinary decision issued by a state licensing authority or a federal court, or a criminal conviction which will be set forth in the Notice of Intent to Discipline itself. Thus, a preliminary inquiry report would do nothing but repeat the basis of the charges already contained in the Notice. Accordingly, this final rule adopts this proposed rule without change.

Comment. One commenter disagreed with the proposed language for limiting a practitioner's eligibility for a hearing where the practitioner is subject to summary disciplinary proceedings.

Response. In light of the comment and upon further consideration of the proposed change to 8 CFR 1003.105 concerning the availability of in-person hearings in summary disciplinary proceedings, the Department has decided not to adopt the proposed language. Rather, the Department will codify in the regulations the prevailing standard in Board precedent concerning evidentiary hearings in summary discipline cases. In Matter of Ramos, 23 I&N Dec. 843, 848 (BIA 2005), the Board held that in summary disciplinary proceedings, a practitioner must show that there is a material issue of fact in dispute that necessitates an evidentiary hearing. Id. Therefore, the final regulations reflect this standard. The Department has also decided that this provision should appear in 8 CFR § 1003.106 because it relates to a practitioner's right to a hearing. 8 CFR § 1003.105 involves filing Notices of Intent to Discipline and answers to those notices. Therefore, it is more appropriate for this provision to be located in the section related to disciplinary hearings.

This final rule also includes technical changes to 8 CFR 1003.101-108 that were not included in the proposed rule. In 8 CFR 1003.101, 1003.103, 1003.104-105, and 1003.107, the words “Immigration and Naturalization Service,” “the Service” and “the Office of the General Counsel of the Service” are being replaced with the term “DHS,” which is defined at 8 CFR 1001.1(w). As discussed above, since the promulgation of the final rule concerning the practitioner disciplinary process in June of 2000, the functions of the former Immigration and Naturalization Service (INS) were transferred from the Department to DHS. These changes reflect the creation of DHS and the transfer of the former INS's functions.

The definition of the term “practice” in 8 CFR 1001.101(i) is being updated to reflect the fact that immigration judges, and not “officers of the Service,” are the adjudicators at the hearing level in immigration proceedings before EOIR. The definition has been unchanged since its adoption nearly forty years ago. See 34 FR 12213 (July 24, 1969). At that time, INS officers held hearings in immigration cases and the Board decided appeals from INS's decisions. However, those INS officers eventually became immigration judges employed by EOIR. Therefore, the Department is updating the definition to remove reference to the “Service” and “officer of the Service,” and is replacing them with the terms “DHS” and “immigration judge.”

In 8 CFR 1003.103-108, the term “Office of the General Counsel of EOIR” is being replaced with the term “EOIR disciplinary counsel” as it is used in 8 CFR 1003.0(e)(2)(iii). This change is made to more accurately reflect EOIR's practice of assigning an attorney within the Office of the General Counsel to serve as the chief prosecutor for practitioner disciplinary matters. The EOIR disciplinary counsel is responsible for the day-to-day management of the disciplinary program for attorneys and accredited representatives, and investigates allegations of misconduct against practitioners, including referrals from EOIR's anti-fraud officer concerning “instances of fraud, misrepresentation, or abuse pertaining to an attorney or accredited representative.” 8 CFR 1003.0(e)(1), (2)(iii). The EOIR disciplinary counsel determines when to dismiss complaints against practitioners, informally resolve those complaints, or initiate disciplinary proceedings.

The Department has also made technical changes to 8 CFR 1003.105-106 to replace the terms “Office of the General Counsel for EOIR” and “Office of the General Counsel of the Service” with “counsel for the government.” These changes are made to the provisions that relate directly to the litigation of practitioner disciplinary cases. Finally, 8 CFR 1003.106(a)(1)(iii) is being amended to clarify that both parties to a practitioner disciplinary case, and not just the practitioner, have the right to examine and object to evidence presented by the other party, to present evidence, and to cross-examine witnesses presented by the other party. Further, an additional sentence is being added to this provision to indicate that if a practitioner files an answer to the Notice of Intent to Discipline but does not request a hearing, the parties have the right to submit briefs and evidence to support or refute any of the charges or affirmative defenses.

The Attorney General, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and, by approving it, certifies that this rule will not have a significant economic impact on a substantial number of small entities. This rule affects only those practitioners who practice immigration law before EOIR. This rule will not affect small entities, as that term is defined in 5 U.S.C. 601(6), because the rule is similar in substance to the existing regulatory process.

This rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by section 251 of the Small Business Regulatory Enforcement Act of 1996 (5 U.S.C. 804). This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

The Attorney General has determined that this rule is a “significant regulatory action” under Executive Order 12866, section 3(f), Regulatory Planning and Review, and, accordingly, this rule has been submitted to the Office of Management and Budget for review.

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. Therefore, in accordance with section 6 of Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

This rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988.

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

The Attorney General published a proposed rule in the Federal Register on November 30, 2007 (72 FR 67674). The comment period ended on January 29, 2008. Comments were received from nine commenters, including public interest law and advocacy groups, a law firm, three non-attorneys, and one immigration bond agency. Since some comments overlap, and other commenters covered multiple topics, the comments are addressed by topic in sections III-VIII of this preamble, rather than by reference to each specific comment and commenter.

The Immigration and Nationality Act (INA or Act) provides that, as an alternative to formal removal proceedings and entry of a formal removal order, “[t]he Attorney General may permit an alien voluntarily to depart the United States at the alien's own expense.” INA 240B(a)(1), (b)(1) (8 U.S.C. 1229c(a)(1), (b)(1)). Voluntary departure “is a privilege granted to an alien in lieu of deportation.” Iouri v. Aschroft, 487 F.3d 76, 85 (2d Cir. 2007), cert. denied, 128 S.Ct. 2986 (2008) (citing Ballenilla-Gonzalez v. INS, 546 F.2d 515, 521 (2d Cir. 1976)). It is “an agreed upon exchange of benefits between the alien and the government.” Banda-Ortiz v. Gonzales, 445 F.3d 387, 389 (5th Cir. 2006), cert. denied, 127 S.Ct. 1874 (2007). This quid pro quo offers an alien “a specific benefit—exemption from the ordinary bars to relief—in return for a quick departure at no cost to the government.” Id. at 390 (quoting Ngarurih v. Ashcroft, 371 F.3d 182, 194 (4th Cir. 2004)). When choosing to seek voluntary departure, the alien agrees to take the benefits and burdens of the statute together. Ngarurih, 371 F.3d at 194. In order to obtain voluntary departure at the conclusion of removal proceedings, an alien must establish to the immigration judge by clear and convincing evidence that he or she is both willing and able to depart voluntarily. 72 FR at 67674-75.

Section 240B of the Act provides that an alien who is granted voluntary departure at the conclusion of removal proceedings is allowed a period of no more than 60 days after the issuance of a final order in which the alien may voluntarily depart from the United States, and certain penalties apply to aliens who do not voluntarily depart within the time allowed. See INA 240B(b)(2), (d) (8 U.S.C. 1229c(b)(2), (d)). Another section of the Act provides that an alien has up to 90 days to file a motion to reopen or 30 days to file a motion to reconsider after entry of a final administrative order issued in removal proceedings. INA 240(c)(6), (7) (8 U.S.C. 1229a(c)(6), (7)). Under longstanding regulation, however, an alien's departure from the United States, including under a grant of voluntary departure, has the effect of withdrawing the motion. 8 CFR 1003.2(d), Matter of Armendarez, 24 I&N Dec. 646, 686 (BIA 2008) (noting that the current regulation bears a strong resemblance to the regulation first introduced in 1952).

The proposed rule explained that the amendments set forth therein were “intended to allow an opportunity for aliens who have been granted voluntary departure to be able to pursue administrative motions and judicial review without risking the imposition of the voluntary departure penalties, to promote uniformity, and also to bring the voluntary departure process back to its statutory premises.” 72 FR at 67679, 67682. The proposed rule provided an in-depth background discussion of voluntary departure and motions to reopen and reconsider. Id. at 67674-77. This final rule adopts, without change, the sections of the proposed rule providing that an alien's grant of voluntary departure will automatically terminate if the alien files a motion to reopen or reconsider with an immigration judge or the Board within the time period the alien was granted to depart voluntarily.

The proposed rule also sought to address divergent motions practice among the courts of appeals concerning the impact on the voluntary departure period when filing a petition for review. See 72 FR at 67681. This final rule adopts, without change, the sections of the proposed rule providing that an alien's grant of voluntary departure automatically terminates upon the filing of a petition for review.

The proposed rule provided for additional notice to aliens regarding the consequences of filing a motion to reopen or reconsider, or a petition for review after a grant of voluntary departure. This final rule adopts those amendments, without change, and includes additional notice requirements in light of public comments.

The rule also specified that an immigration judge shall set a specific dollar amount of less than $3,000 as a civil monetary penalty in the event that the alien fails to depart voluntarily within the time allowed. This final rule adopts modified language providing that an immigration judge will set a presumptive civil monetary penalty of $3,000 unless the immigration judge sets a higher or lower amount at the time of granting voluntary departure.

Further, the proposed rule revised the applicable bond provisions to clarify that an alien's failure to post a voluntary departure bond as required did not have the effect of exempting the alien from the penalties for failure to depart under the grant of voluntary departure. This was a reversal of the Board's decision in Matter of Diaz-Ruacho, 24 I&N Dec. 47 (BIA 2006). The final rule adopts without change the proposed rule regarding reversal of Matter of Diaz-Ruacho.

Finally, the proposed rule provided that the alien remained liable for the amount of the voluntary departure bond if he or she did not depart as agreed, and that failure to post the bond could be considered as a negative discretionary factor in determining whether the alien is a flight risk and in determining whether to grant a discretionary application for relief. Under certain circumstances, however, the proposed rule provided that an alien could get a refund of the bond amount upon proof that he or she was physically outside the United States or if the final administrative order was later overturned, reopened, or remanded. This final rule does not include the language of the proposed rule that an alien forfeits his or her bond upon automatic termination of voluntary departure due to the filing of a motion to reopen or reconsider or petition for review. That issue raises a question about the scope of the authority of the immigration judges and the Board, on the one hand, and the authority of the Department of Homeland Security (DHS) with respect to bond issues. Accordingly, the final rule takes no position at this time with respect to the forfeiture of bond, and language providing for forfeiture of the voluntary departure bond upon the filing of a motion to reopen or reconsider or the filing of a petition for review has been deleted. Because this final rule is not adopting the changes regarding forfeiture of the bond, there is no need to adopt the provisions for a refund upon proof of being physically outside the country. However, this final rule adopts, in part, the proposed rule regarding the circumstances under which an alien can obtain a refund of the bond amount where the final administrative order is overturned or remanded, and the rule that failure to post the bond could be considered as a negative discretionary factor in determining whether the alien is a flight risk or whether to grant a discretionary application for relief.

While four courts of appeals had held that the alien's filing of a motion to reopen with the Executive Office for Immigration Review (EOIR) within the time allowed for voluntary departure automatically “tolled” the voluntary departure period, thereby allowing the alien to remain in the United States under the grant of voluntary departure until after the immigration judge or the Board had adjudicated the motion, 1 three other courts of appeals have held that the filing of a motion to reopen did not toll the period allowed for voluntary departure. 2

The proposed rule sought to address this circuit split by amending the voluntary departure regulations to provide that an alien's timely filing of a motion to reopen or reconsider prior to the expiration of the voluntary departure period automatically terminates the grant of voluntary departure. Because the grant of voluntary departure would be terminated upon the filing of such a motion, there would be no remaining voluntary departure period and thus no tolling of the period allowed for voluntary departure upon the filing of the motion. In the Department's view, this course of action would protect aliens who file administrative motions within the voluntary departure period from facing the consequences of failing to depart pursuant to a voluntary departure order, such as the loss of eligibility for certain forms of relief.

On June 16, 2008, the Supreme Court decision in Dada v. Mukasey, __ U.S. __ , 128 S.Ct. 2307 (2008), resolved the split among the courts of appeals concerning how the filing of a motion to reopen impacts a grant of voluntary departure. The alien in Dada had requested that an immigration judge continue his removal proceedings pending the adjudication of a second visa petition filed on his behalf by his United States citizen spouse. The immigration judge denied the request, and granted the alien a period of voluntary departure pursuant to section 240B(b) of the Act. The Board dismissed the alien's appeal and reinstated the grant of voluntary departure for a 30-day period. Two days before the end of the period allowed for voluntary departure, the alien filed a motion to reopen with the Board, asserting that he had new evidence to support the bona fides of his marriage, and requesting a continuance until his visa petition was adjudicated by DHS. The alien also sought to withdraw his request for voluntary departure. Several months later, the Board denied reopening and cited section 240B(d) of the Act, which bars an alien from adjustment of status and other relief when he or she fails to depart voluntarily within the permitted period. The Board did not address the respondent's request to withdraw his voluntary departure request.

The respondent subsequently filed a petition for review with the United States Court of Appeals for the Fifth Circuit, which affirmed the Board's decision, concluding that there was no automatic tolling of the voluntary departure period.

On certiorari, the Supreme Court considered the situation faced by an alien who abides by a voluntary departure grant and departs within the time allowed. If the alien had filed a timely motion before he or she departed under the grant of voluntary departure, the alien's departure, pursuant to regulation, would have the effect of withdrawing the motion to reopen. Alternatively, if the alien chose to remain in the United States to await a decision on the motion, he or she could then become ineligible for the relief sought in the motion because in most instances the motion would not be adjudicated until after the voluntary departure period had expired, exposing the alien to the bars under section 240B(d) of the Act. The Court framed the issue as “whether Congress intended the statutory right to reopen to be qualified by the voluntary departure process.” Dada, 128 S.Ct. at 2311. The Court concluded that, under the current regulations, an alien does not knowingly give up the right to file a motion to reopen once he or she accepts voluntary departure.

The Court rejected the alien's contention that there should be “automatic tolling” of the period of voluntary departure upon the filing of a motion to reopen or a motion to reconsider removal proceedings before the immigration judge or the Board. The Court concluded that such an interpretation “would reconfigure the voluntary departure scheme in a manner inconsistent with the statutory design,” and it found no “statutory authority for this result.” Dada, 128 S.Ct. at 2311, 2319.

In its decision, the Court held that “[a]lthough a statute or regulation might be adopted to resolve the dilemma in a different manner, as matters now stand the appropriate way to reconcile the voluntary departure and motion to reopen provisions is to allow an alien to withdraw the request for voluntary departure before expiration of the departure period.” Id. at 2311.

The Department has considered whether to adopt the Court's approach in Dada in this final rule, rather than the automatic termination approach set forth in the proposed rule. The Department has also considered whether to incorporate the Court's suggestion that “[a] more expeditious solution to the untenable conflict between the voluntary departure scheme and the motion to reopen might be to permit an alien who has departed the United States to pursue a motion to reopen postdeparture.” Id. at 2320. For the reasons explained below, the Department is adopting the automatic termination approach set forth in the proposed rule, and thereby is “resolv[ing] the dilemma in a different manner.” Id. at 2311.

The proposed rule provided that the filing of a motion to reopen or reconsider would have the effect of automatically terminating the grant of voluntary departure. Because voluntary departure is “an agreed upon exchange of benefits between the alien and the Government [that] offers an alien ‘a specific benefit—exemption from the ordinary bars to relief—in return for a quick departure at no cost to the government,’ ” 72 FR at 67675 (internal citations omitted), the proposed rule took the position that an alien's decision to challenge a final administrative order through a post-decision motion or petition for review demonstrates that “the alien is no longer willing to abide by the initial quid pro quo. ” Id. at 67679. Instead, an automatic termination of an alien's grant of voluntary departure upon the filing of a motion to reopen or reconsider would allow the alien to remain in the United States to pursue the motion or petition without becoming subject to the penalties for failure to voluntarily depart. Id. at 67680.

Several commenters challenge the Department's characterization of the quid pro quo aspect of voluntary departure in the proposed regulation and the proposal to automatically terminate voluntary departure upon the filing of a post-decision motion to reopen or reconsider. In addition, several of these commenters suggest, as an alternative to the proposed automatic termination rule, that the regulations be amended to provide for the tolling or administrative stay of voluntary departure during the filing of a motion to reopen or reconsider, or that the immigration judges and the Board be given the discretion to waive the automatic termination procedure and stay or reinstate voluntary departure when appropriate. 3 One commenter suggests that the voluntary departure time could be improved by changing the expiration date on the voluntary departure order to a suitable time, taking into account when the case can be reopened and when it will most likely be completed.

As the Supreme Court recognized in Dada , there is no statutory authority for tolling. Id. at 2311, 2319; see also section 240B(b)(2) of the Act (providing for no more than 60 days to voluntarily depart). To the extent the commenters were relying on previous appellate decisions to the contrary, those holdings have now been overruled. Further, as the proposed rule explained, tolling the period of voluntary departure deprives the government of an important element of the voluntary departure agreement—“a quick departure without the considerable expense of protracted litigation.” 72 FR at 676814. 4 Thus, after the issuance of a final order, immigration judges and the Board cannot stay the voluntary departure period, or extend the expiration of the voluntary departure period, beyond the amount of time provided by statute.

The Court's decision also discusses the quid pro quo benefits to the government and the alien in much the same way as the proposed rule. Dada , 128 S.Ct. at 2314. The Court found that allowing an alien to elect to withdraw voluntary departure before the expiration of the voluntary departure period “preserve[d] the alien's right to pursue reopening while respecting the government's interest in the quid pro quo of the voluntary departure arrangement.” Dada at 2319. Accordingly, this final rule retains the quid pro quo analysis of the proposed rule as a basis for these regulatory amendments. See 72 FR at 67675-76, 67679-80.

This final rule also retains the proposal that an alien's grant of voluntary departure will automatically terminate upon the filing of a motion to reopen or motion to reconsider. In Dada , the Court provided the alien with a different option: a unilateral right to withdraw from the voluntary departure agreement in connection with the filing of a motion to reopen or reconsider. Dada , 128 S.Ct. at 2319. The Department does not believe that this is the best approach to adopt by rule for the future, for several reasons.

First, the Department finds it preferable to adopt the proposed rule that was subject to a comment period, rather than delay finalizing this new rule for further consideration of the Dada approach. Second, allowing the option of withdrawal would seem to require an immigration judge to provide additional advisals to an alien regarding another aspect of the bargain to which the alien is agreeing. The Department is concerned that the growing number of advisals surrounding voluntary departure creates the potential for confusion and unnecessary complexity; this would be especially true for the many pro se aliens who appear before immigration judges. The Department is considering the use of an application form to request voluntary departure, which can then set forth all of the necessary advisals for voluntary departure. However, we do not want to delay publication of this final rule for development and implementation of a form. Further, even with a form that includes advisals, the option to withdraw might continue to be difficult to navigate.

Finally, allowing an alien the option to withdraw from voluntary departure carries the potential for confusion, inadvertent omissions of withdrawal requests, and collateral challenges over whether the alien actually intended, or should have sought, to withdraw voluntary departure in filing a motion. For instance, an alien filing a motion to reopen to seek adjustment of status might either intend to request withdrawal but fail to include the request, or not know to make the request. The alien might later argue that the motion should have been construed as a request for withdrawal since he or she would not otherwise be eligible for the relief sought if the voluntary departure bar applies. The automatic termination rule is more clear-cut and saves the Department from having to dedicate additional resources to a second round of collateral litigation.

This rule will apply to motions filed before immigration judges and the Board. For instance, some aliens file motions to reopen with immigration judges before seeking appeal with the Board. In this case, the alien's voluntary departure would be terminated upon the filing of the motion with the immigration judge. If, while the alien's motion is pending with the immigration judge, the alien subsequently files a Notice of Appeal with the Board, the Board assumes jurisdiction over the case, and the motion becomes nugatory. In this instance, the Board may reinstate the alien's voluntary departure, if the alien demonstrates, as set forth in the rule, that he or she properly posted the voluntary departure bond within the required time period. See Section VI, infra , for further discussion regarding notice to the immigration judge or the Board that the bond was posted.

Several commenters took issue with this automatic termination rule and asserted that if an alien is forced to give up voluntary departure to pursue a motion, the alien would be improperly discouraged from filing a motion to reopen. These comments note examples of applicants for asylum who benefit from voluntary departure by being able to choose the country to which they will depart, or by returning to their home countries without the “high profile that accompanies deportation.”

The Department is cognizant of the various ways in which aliens benefit from voluntary departure. However, the Department must balance these considerations against the overriding responsibility to implement the voluntary departure process in accordance with its statutory premises. There is no statutory authority for tolling. See Dada , 128 S.Ct. at 2311, 2319; see also INA 240B(b)(2) (providing for no more than 60 days voluntary departure when granted at the conclusion of proceedings). Therefore, expiration of the voluntary departure period cannot be changed beyond the amount of time provided by statute.

Even the approach taken by the Supreme Court in Dada requires the alien to make a choice: “As a result, the alien has the option either to abide by the terms, and receive the agreed-upon benefits of voluntary departure, or, alternatively, to forgo those benefits and remain in the United States to pursue an administrative motion.” Dada , 128 S.Ct. at 2319. As the proposed rule recognized, “it is often the case that an immigration judge or the Board cannot reasonably be expected to adjudicate a motion to reopen or reconsider during the voluntary departure period.” 72 FR at 67677. Thus, even if the filing of a motion did not result in automatic termination of voluntary departure, an alien who was granted voluntary departure and later files a motion to reopen to apply for asylum is going to be faced with a choice because it is unlikely that the alien's motion would be adjudicated in enough time to allow the alien to depart within the limited time period permitted for voluntary departure if the motion is denied. See Dada , 128 S.Ct. at 2317 (“It is foreseeable, and quite likely, that the time allowed for voluntary departure will expire long before the BIA issues a decision on a timely filed motion to reopen.”) (citing the proposed rule). In any event, an applicant for asylum is not an appropriate example to use to illustrate the choice faced by aliens granted voluntary departure but seeking discretionary relief through a post-order motion because the consequences for overstaying the period of voluntary departure do not preclude an alien from receiving asylum. Section 240B(d) bars an alien from obtaining future voluntary departure grants, adjustment of status under INA section 245, cancellation of removal, change of nonimmigrant status, and registry. Section 240B(d) does not make an alien ineligible for asylum, withholding of removal under section 241(b)(3), protection under Article 3 of the Convention Against Torture, or adjustment of status for asylees and refugees under INA section 209.

The only other means by which aliens facing a choice between voluntary departure and filing a post-order motion might continue to benefit from voluntary departure and pursue a motion to reopen would be the Supreme Court's suggestion that “[a] more expeditious solution to the untenable conflict between the voluntary departure scheme and the motion to reopen might be to permit an alien who has departed the United States to pursue a motion to reopen postdeparture.” Dada , 128 S.Ct. at 2320. The Board recently discussed many of these issues in Matter of Armendarez, supra. As the Board stated, “the physical removal of an alien from the United States is a transformative event that fundamentally alters the alien's posture under the law.” 24 I&N Dec. at 656. While aliens who voluntarily depart may not be considered “physically removed” through execution of a removal order, the controlling regulatory provisions and the force of the Board's statement apply equally in both situations. An alien's departure from the United States, even under a grant of voluntary departure, may trigger a new ground of inadmissibility under section 212(a)(9)(B) or (C) of the Act (8 U.S.C. 1182(a)(9)(B), (C)). Under section 212(a)(9)(B)(i)(II), an alien is inadmissible for ten years from the date of departure (whether voluntary or removed) if he or she was unlawfully present in the United States for one year or more after April 1, 1997. Though this provision is inapplicable to several categories of aliens including, for example, minors and aliens who have filed a bona fide asylum application, many aliens will be subject to this ground of inadmissibility because of the period of unlawful presence they have already accrued. On the other hand, in order to be eligible for voluntary departure at the conclusion of proceedings, aliens must demonstrate that they have been “physically present in the United States for a period of at least one year immediately preceding the alien's application for voluntary departure.” INA 240B(b)(1) (8 U.S.C. 1229c(b)(1)). While some aliens may be able to satisfy this physical presence requirement through the time within which an alien may have been lawfully in the United States, in many other cases the period of physical presence includes the amount of time an alien was not lawfully present. Many aliens who depart the United States due to being subject to a removal proceeding have accrued one year or more of unlawful presence and would be inadmissible under section 212(a)(9)(B)(i)(II) of the Act if they depart and then seek admission to the United States. Similarly, under section 212(a)(9)(C)(i)(I), an alien who was unlawfully present in the United States for an aggregate period of more than 1 year, departs, and thereafter enters or attempts to enter the United States without being admitted is inadmissible.

Further, waivers of inadmissibility under section 212(a)(9)(B) of the Act are limited to “an immigrant” who is the spouse, son, or daughter of a United States citizen or legal permanent resident and can show that this qualifying relative would suffer “extreme hardship” if his or her admission were denied. For aliens inadmissible under section 212(a)(9)(C) of the Act, the alien must wait for ten years after the date of the alien's last departure before the alien may request that the Secretary of Homeland Security consent to an alien's reapplying for admission (with a narrow exception for aliens who have been battered or subjected to extreme cruelty).

In addition, there are issues with respect to aliens who voluntarily departed, if the immigration judge or the Board thereafter grants the motion to reopen or reconsider after the alien has departed from the United States. One possibility is that the alien might seek to be paroled back into the United States to pursue the benefits of reopening, but the granting of parole is not within the authority of the immigration judges or the Board. Matter of Armendarez, supra at 656-57, FN8 (recognizing that “the Immigration Judges and the Board have been given no authority to compel the DHS to admit or parole such aliens into the United States”); Matter of Conceiro, 14 I&N Dec. 278 (BIA 1973), aff'd, Conceiro v. Marks , 360 F.Supp 454 (S.D.N.Y. 1973). Instead, DHS determines whether to grant parole for “urgent humanitarian reasons or significant public benefit” pursuant to section 212(d)(5) of the Act, 8 U.S.C 1182(d)(5).

With respect to aliens seeking adjustment of status, the same inadmissibility impediments discussed herein may exist since in general, in order to be eligible for adjustment, an alien must be “admissible to the United States.” INA 245(a) (8 U.S.C. 1255(a)). Moreover, allowing an alien to pursue a motion to reopen from outside the United States in order to obtain adjustment of status is in clear tension with the purpose of adjustment of status, which is to provide a means for aliens to obtain lawful permanent resident status from within the United States without the need to depart in order to obtain an immigrant visa from a consular officer abroad. For aliens outside the United States, Congress has designed the immigration system such that aliens seeking admission as immigrants are to obtain an immigrant visa from a consular officer abroad.

Further complicating matters is the fact that the alien would have departed voluntarily. This is significantly different than the situation where an alien is ordered removed, the removal order is executed, and a federal court of appeals later vacates the removal order. In the latter circumstance, if the court finds that the alien's removal was improper, the government may be required to return the alien to the United States. In the context of voluntary departure, there would be no improper voluntary departure that the government must rectify, since the alien departed after the issuance of the grant of voluntary departure as he or she had promised to do. In addition, unlike a federal court of appeals, EOIR does not have the authority to order the return of an alien upon the granting of a motion.

The foregoing demonstrates the complex issues raised by allowing an alien granted voluntary departure, or any alien, the ability to pursue an administrative motion after departing the United States. While the Department is not foreclosing the idea of adopting such an approach in the future, it has concluded that the present rulemaking does not provide an adequate basis for addressing and resolving these issues and concerns at this time, particularly in the absence of an opportunity for public comment on such a proposal and how it might be implemented.

This final rule does not adopt the proposed rule regarding forfeiture of the voluntary departure bond where an alien's voluntary departure is terminated upon the filing of a motion to reopen or reconsider. See section VI, infra , for further discussion.

Finally, no comments were received regarding the separate provision in the proposed rule providing “that the granting of a motion to reopen or reconsider that was filed after the penalties under section 240B(d) of the Act had already taken effect does not have the effect of vitiating or vacating those penalties, except as provided in section 240B(d)(2) of the Act.” 72 FR at 67680. This rule explicitly declines to follow an interpretation that may have been reflected in prior court decisions to the effect that the Board's grant of reopening would have the effect of vacating the underlying voluntary departure order and the penalties attributable to the alien's voluntary failure to depart during the time allowed. This rule will be adopted in this final rule, without change.

Several commenters criticize the proposal to terminate voluntary departure upon the filing of a petition for review in a federal court of appeals, arguing that it is overreaching, beyond the scope of the Attorney General's authority, and would restrict access to judicial review. One of the commenters states that “there is no role for EOIR to play in maintaining the uniformity of the courts of appeals' own procedures and practices,” and the proposed rule “takes discretion away from federal judges.”

The proposed rule clearly sets forth the Attorney General's authority to “implement the voluntary departure provisions of the Act and to limit eligibility for voluntary departure for specified classes or categories of aliens, as provided in section 240B(e) of the Act.” 72 FR at 67678. In this context, the Attorney General is not “maintaining the uniformity of the courts of appeals' procedures and practices,” or taking discretion away from federal judges. Rather, pursuant to section 240B(e) of the Act, the Attorney General is exercising his authority to limit eligibility for voluntary departure to ensure uniform application of the immigration laws.

The Supreme Court's decision did not resolve the separate issue of whether the courts of appeals have the authority to grant a motion to stay the period allowed for voluntary departure pending a petition for judicial review with the court of appeals. See Dada , 128 S.Ct. at 2314; compare Thapa v. Gonzales , 460 F.3d 323, 329-32 (2d Cir. 2006) (holding that the court may stay voluntary departure pending consideration of a petition for review on the merits), and Obale v. Attorney General of United States, 453 F.3d 151, 155-57 (3d Cir. 2006) (same), with Ngarurih v. Ashcroft , 371 F.3d 182, 194 (4th Cir. 2004) (holding that the court may not stay voluntary departure period pending consideration of a petition for review).

The divergent practice among the federal courts of appeals undermines the sound public policy reasons to “promote a greater measure of uniformity and expedition in the administration of the immigration laws.” See 72 FR at 67678. As the Supreme Court stated in Dada , the voluntary departure statute “contains no ambiguity: The period within which the alien may depart voluntarily ‘shall not be valid for a period exceeding 60 days.’ ” Dada , 128 S.Ct. at 2316. Yet, an alien's ability to obtain a judicial stay in some circuits, but not others, provides certain aliens with a different rule than that recognized by the Supreme Court, that is, the ability to extend their voluntary departure periods well beyond 60 days. The grant of a stay of voluntary departure by a circuit court essentially tolls the voluntary departure period. Although not addressing voluntary departure in the circuit court context, the Supreme Court made clear that there is no statutory authority for tolling. Dada , at 2311, 2319; see also section 240B(b)(2) of the Act (providing for no more than 60 days to voluntarily depart). A stay deprives the government of the same principal considerations of the voluntary departure period—“a quick departure without the considerable expense of protracted litigation.” 72 FR at 67681.

The concern expressed by the Department in the proposed rule regarding the granting of judicial stays continues to be significant. 72 FR at 67681-82. In practice, we have seen that those who seek judicial review do not adhere to the terms of the agreement and depart, despite the clear statutory authority for such aliens to continue to pursue judicial review even after they have departed from the United States. See Mendez-Alcaraz v. Gonzales , 464 F.3d 842, 844 n.8-13 (9th Cir. 2006) (holding that permanent rules under the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, Public Law 104-208, Div. C, 110 Stat. 3009 (Sept. 30, 1996), effective April 1, 1997, “do not include the old jurisdiction-stripping provision for excluded, deported, or removed aliens” under former 8 U.S.C. 1105a(c); that the court retains jurisdiction over a petition for review after an alien has departed; and that a petitioner's removal does not render a case moot). Rather, aliens have sought to remain in the United States, which has resulted in this “non-uniform, patchwork system of motions practice in the courts of appeals.” 72 FR at 67681. Aliens granted stays are effectively allowed to remain in the United States for months and years after the statutorily required time to depart.

While the Supreme Court did not consider the effect of judicial stays of voluntary departure in Dada because the issue was not presented for decision in that case, the Court's analysis regarding the time allowed to voluntarily depart supports the Department's position that the time for an alien to voluntarily depart should be limited to that allowed by statute. Dada , 128 S.Ct. at 2319 (recognizing that there is no statutory authority for tolling, and finding that “the alien when selecting voluntary departure is [under] the obligation to arrange for departure, and actually depart, within the 60-day period”); 72 FR at 67682 (“This [automatic termination rule for petitions for review] is consistent with the congressional intent, as expressed in the 1996 changes to the Act, that aliens may no longer remain in a period of voluntary departure for years, but instead are strictly limited to a discrete period of time for voluntary departure.”).

Because few aliens choose to use the authority granted by Congress to pursue judicial review after departing from the United States, and because the practice of granting stays has resulted in non-uniform application of the immigration laws, the Attorney General is exercising his statutory authority to limit eligibility for voluntary departure to those aliens who do not seek judicial review. Accordingly, this final rule adopts the automatic termination rule for an alien granted voluntary departure who files a petition for review in order to result in “a uniform application of the effect of the voluntary departure period in all the circuit courts of appeals.” 72 FR at 67682.

However, in an effort to provide an incentive for aliens to depart during their voluntary departure periods and pursue judicial review from their home countries, the proposed rule sought comment on “whether or not it might be advisable (and the possible means for accomplishing such a result) to consider adopting a rule that those aliens who do depart the United States during the period of time specified in the grant of voluntary departure, after filing a petition for review, would not be deemed to have departed under an order of removal for purposes of section 212(a)(9)(A) of the Act.” 72 FR at 67682.

One comment was submitted in response to this request. This comment suggests that the recommendation in the proposed rule regarding section 212(a)(9)(A) of the Act be adopted. Based on this favorable comment, and further consideration by the Department, this final rule adopts new 8 CFR 1240.26(i) to provide that if an alien who was granted voluntary departure files a petition for review any grant of voluntary departure shall terminate automatically upon the filing of the petition and the alternate order of removal shall immediately take effect, except that the alien will not be deemed to have departed under an order of removal if the alien (i) departs the United States no later than 30 days following the filing of a petition for review; (ii) provides to DHS such evidence of his or her departure as the ICE Field Office Director may require; and (iii) provides evidence DHS deems sufficient that he or she remains outside of the United States.

The voluntary departure statutory provision states that an order granting voluntary departure is entered “in lieu of removal.” INA 240B(b)(1). It is by regulation, however, that the Attorney General requires immigration judges and the Board to enter an alternate order of removal upon granting voluntary departure. 8 CFR 1240.26(d). It is also by regulation that the Attorney General dictates when this alternate order of removal becomes effective. See e.g. , 8 CFR 1240.26(c)(3) (“If the bond is not posted within 5 business days, the voluntary departure order shall vacate automatically and the alternate order of removal will take effect on the following day”). In addition, immigration judge and Board orders state that “if the respondent fails * * * to depart when and as required, the privilege of voluntary departure shall be withdrawn without further notice or proceedings and the following orders shall thereupon become immediately effective.” In the proposed rule, the Attorney General further proposed that if an alien's voluntary departure terminates due to the filing of a post-order motion or petition for review, “the alternate order of removal will take effect immediately.” 72 FR at 67686. This final rule adopts an exception to the proposed rule. If an alien does depart and meets the conditions described above, the alien will not have departed under a removal order.

In order for an alien to take advantage of this opportunity to avoid the stigma of departing under an order of removal, it will be necessary for the alien to establish a contemporaneous record documenting the alien's departure from the United States by notice to DHS documenting his or her departure and to establish that he or she remains outside of the United States. Evidence sufficient to meet these requirements may include proof of the alien's intended departure and itinerary, and prompt presentation by the alien along with such evidence necessary to prove his or her timely departure to a United States consulate. DHS may determine other acceptable proof documenting the alien's time of departure or define the timely period as meeting the definition of prompt presentation.

A statement setting forth this rule will be added to the advisals regarding voluntary departure that are already included with Board decisions.

Finally, this final rule does not adopt the provisions of the proposed rule regarding forfeiture of the voluntary departure bond where an alien's voluntary departure is automatically terminated upon the filing of a petition for review. See Section VI, infra for further discussion.

Several commenters state that the notice provisions set forth in the proposed rule are insufficient because they only provide notice of the consequences of accepting voluntary departure after an alien actually does accept voluntary departure. One commenter posits that the large majority of aliens who are unrepresented in immigration proceedings base their limited knowledge of penalties and obligations on the explanations given by immigration judges. In addition, this commenter suggests that the Board notify aliens when dismissing their appeals of aliens' right to file a petition for review in a federal court of appeals within 30 days. Another commenter states that the rule fails to include a requirement that the immigration judge notify aliens of their obligation to submit proof to the Board that the bond has been posted in order for the Board to reinstate their voluntary departure. This same commenter argues that the timeframe to submit this proof to the Board—“in connection with the filing of an appeal with the Board”—is “unnecessarily restrictive.”

The Department agrees that timely notice to aliens regarding their rights, responsibilities, and the consequences associated with voluntary departure is an important issue. This final rule retains the proposed changes to 8 CFR 1240.11 to provide that the immigration judge will advise an alien that voluntary departure will be automatically terminated if the alien files a motion to reopen or reconsider during the pendency of the period in which to depart; and for the Board to inform aliens that voluntary departure will be automatically terminated if the alien files a motion to reopen or petition for review during the pendency of the period in which to depart. In addition, this final rule also amends 8 CFR 1240.26 to require immigration judges to inform aliens of the bond amount that will be set before allowing the alien to accept voluntary departure, as well as any other conditions the immigration judge may set in granting voluntary departure. The alien will then have an opportunity to accept the grant of voluntary departure, upon the conditions set forth, or in the alternative the alien may decline the voluntary departure if he or she is unwilling to accept the amount of the bond or other conditions.

Regarding the requirement to submit proof to the Board that the bond has been posted in order for the Board to reinstate voluntary departure, section 1240.26 is revised to require notice regarding the need to file proof of posting a bond with the Board in the immigration judge's decision, and the effect of failing to timely post the bond. Further, this rule revises the timeframe to submit this proof to the Board to “within 30 days of filing of an appeal with the Board.” After an immigration judge issues his or her decision, an alien has five business days to post the bond and thirty days to file an appeal with the Board. From the date the appeal is filed with the Board, the alien will have thirty days to submit proof to the Board that the bond was posted. Evidence that the bond was posted may include a copy of Form I-352, the Immigration Bond worksheet that will be provided to the obligor when the bond is posted with DHS Immigration and Customs Enforcement (ICE) Detention and Removal Office (DRO), or Form I-305, which is the fee receipt provided by DRO.

The Department has also considered the suggestion that the Board notify aliens of their right to file a petition for review within 30 days of the Board's dismissal of the alien's appeal. This advisal is beyond the scope of this rule, as it would require the Board to include such an advisal in every decision, not just those involving voluntary departure. However, such an advisal can be implemented administratively without the need for a regulation. The Board historically has not given such a notice, but the Department will give further consideration to the matter administratively.

Four commenters provided comments regarding the voluntary bond provisions included in the proposed rule. The proposed rule provided for the following unless the alien departs within the time permitted to depart, or is successful in reopening or overturning the final administrative order: (1) Aliens who are granted voluntary departure but fail to post the bond within the required five business days remain liable for the bond amount regardless of whether voluntary departure is later terminated due to the filing of a motion or petition for review; (2) aliens who are granted voluntary departure and post bond will forfeit the bond if voluntary departure is later terminated due to the filing of a motion or petition; (3) an alien's failure to post bond does not relieve the alien of the obligation to depart and the alien will be subject to the consequences for failure to depart if the alien does not depart within the permitted period (reversing the Board's decision in Matter of Diaz-Ruacho, 24 I&N Dec. 47 (BIA 2006)); (4) an alien's failure to post bond within the required five business days may be considered in determining whether the alien is a flight risk and as a negative discretionary factor with respect to discretionary forms of relief; (5) aliens who waive their administrative appeal at the conclusion of proceedings and fail to post bond within the required five business days will become subject to the final order of removal after the fifth business day; and (6) in order to have voluntary departure reinstated by the Board on appeal, the alien must provide proof to the Board at the time of the appeal that the bond was posted.

None of the comments took issue with the proposed rule that aliens who are granted voluntary departure and fail to post their bond remain liable for the bond. However, based on further discussion below, this final rule does not adopt the part of the proposed rule that imposed continuing liability for the bond “regardless of whether voluntary departure is later terminated due to the filing of a motion or petition for review.” Because issues relating to forfeiture of bond can be complex, and also implicate the authority of DHS as well as that of the immigration judge and the Board, the final rule does not include the provision that the alien will forfeit the bond if the alien's voluntary departure is later terminated upon the filing of a post-order motion or a petition for judicial review.

Three of the commenters describe the proposed rules as unduly burdensome, unfair, and punitive. Two of them state that these rules should not be adopted because notice to the alien of these rules is insufficient. As discussed in section IV, part C, this final rule requires that notice of the consequences of failing to depart voluntarily, the consequences of filing a post-decision motion, the amount of bond and any other conditions the immigration judge intends to impose, all be provided to aliens at the time they request voluntary departure.

One commenter posits that the rules appear to regulate enforcement related issues that are within the purview of DHS, not EOIR, because they involve bond and monetary penalties. This commenter, as well as one other, objects to the rules proposing forfeiture of the bond where voluntary departure is later terminated and the alien is no longer under an obligation to voluntarily depart. This commenter describes this rule as a due process violation precisely because the alien is no longer under an obligation to depart, and because in some cases the alien may be prevented from departing because he or she is detained pending execution of the removal order.

Pursuant to section 103(g)(2) of the Act, the Attorney General has the authority to “establish such regulations, prescribe such forms of bond * * * and perform such other acts as the Attorney General determines to be necessary for carrying out this section.” Further, section 240B(b)(3) of the Act states that the bond amount will “be surrendered upon proof that the alien has departed the United States within the time specified,” and does not, by its terms, provide exceptions for the circumstances of an alien who later decides that he or she does not wish to depart within the time specified. As explained in the proposed rule, “the purpose of the bond [is] to ensure that the alien does depart during the time allowed, as the alien had promised to do at the time of the immigration judge's order granting voluntary departure.” 72 FR 67683. The Department considers the bond akin to earnest money provided by the alien at the time the voluntary departure contract is entered. By posting the bond, the alien is manifesting the intent to follow through with the bargain under which he or she intends to depart the United States within the specific time period allotted at no cost to the government. While the alien may later change his or her mind, this does not extinguish the initial promise and the government's reliance on that promise.

On the other hand, the Department recognizes that issues relating to forfeiture of bond also implicate the authority of DHS. Public comments stated that aliens should not be penalized for filing a post-order motion or a petition for review. The Department has also considered the language of the Supreme Court's decision in Dada (“the alien who withdraws from a voluntary departure arrangement is in the same position as an alien who was not granted voluntary departure in the first instance”), Id. at 2320 (emphasis added), though it is worth noting that the Court's observation there was in the context of the option for withdrawal of a request for voluntary departure, an option that the Department has chosen not to follow in this final rule.

In light of the foregoing considerations, this final rule does not include the bond forfeiture rule previously proposed. Because this final rule is not adopting the changes regarding forfeiture of the bond, there is no need to adopt the provisions for a refund of the bond upon proof of being physically outside the country. These are issues that DHS will be able to address in carrying out its responsibilities relating to the posting and surrender of bonds.

However, this final rule adopts, in part, the proposed rule regarding the circumstances under which an alien can obtain a refund of the bond amount where the final administrative order is overturned or remanded. This rule allows for refund of the bond where an alien is granted voluntary departure by an immigration judge, posts the voluntary departure bond within the time required, appeals the immigration judge's decision to the Board, and obtains reversal or remand of the immigration judge's decision regarding the order of removal. If, pursuant to the Board's decision, the alien is no longer removable then the alien should obtain a refund of his or her bond. In that situation, the grant of voluntary departure did not take effect since the immigration judge's decision is stayed upon the filing of an appeal to the Board, and the Board's decision overturning or remanding the immigration judge's decision on the merits thereby renders issues relating to voluntary departure moot. Likewise, if, pursuant to a remand by the Board, the alien is not currently subject to an order of removal, the alien should obtain a refund of the bond amount.

Lastly, this commenter states that DHS should provide the Board with information regarding whether the alien actually posted bond, and that 30 days to provide this information to the Board is a restrictive amount of time. The commenter provides the example of a detained alien whose family member may have posted the bond. In this case, the commenter argues, the 30 days may not be enough time for the alien to gather the information needed regarding bond and provide it to the Board.

In light of the comments, the Department is revising this rule to allow an alien to provide proof to the Board of having posted the bond within 30 days of the filing of the Notice of Appeal. As for requiring DHS to provide the information, such a process would assume that every alien granted voluntary departure by the immigration judge would request reinstatement by the Board. Further, it is the alien's burden to demonstrate to the Board continuing eligibility for voluntary departure. See 8 CFR 1240.11(d); 72 FR 67685 (“the burden of proof is on the alien to establish eligibility for a discretionary form of relief”) (internal citations omitted). Thus, it would be inappropriate to require DHS to be responsible for providing this information relating to the posting of the bond by the alien, as the alien had agreed to do.

Another commenter opposes the flight risk and negative discretion factors. This commenter argues that this categorical approach ignores individual circumstances and creates penalties for the small fraction of aliens who only qualify for voluntary departure due to their strong equities and characteristics in the first place. This rule does not mandate that aliens who do not post their voluntary departure bonds are flight risks or that they should be denied relief in the exercise of discretion. Rather, this rule provides guidance to adjudicators regarding particular factors they may consider in exercising discretion.

For instance, an alien's failure to post the bond “may be considered” a negative discretionary factor with regard to relief. 72 FR 67684, 67686. Specific inclusion of these potentially adverse factors in the voluntary departure regulations is appropriate to encourage aliens to adhere to the bond requirement within the required five business days, as they had specifically promised to do. If a rule carries no consequence for failure to comply, then the rule may be rendered effectively meaningless. The proposed rule that an alien's voluntary departure is terminated upon failure to post bond where the alien waived administrative appeal serves the same purpose. 72 FR 67684 (stating that “this proposal ensures that aliens who waive appeal before the immigration judge still have an incentive to post bond as they agreed to do.”). Accordingly, the Department adopts without change the provisions of the proposed rule regarding the adverse factors for failure to post bond and termination of voluntary departure for failure to post bond by an alien who waives administrative appeal.

One commenter objects to the proposed rule changing the result in Matter of Diaz-Ruacho, 24 I&N Dec. 47 (BIA 2006). As noted in the proposed rule, the result in Diaz-Ruacho is not a sound policy approach because the alien's default should not exempt the alien from the penalties for failure to depart. 72 FR 67684. Moreover, the commenter does not state how the practical concerns of retaining Diaz-Ruacho might be avoided if Diaz-Ruacho were retained. See Id. (“using the failure to post a bond as the trigger that vitiates the grant of voluntary departure does not make practical sense because it is not an open, discrete, affirmative step and there is no ready process for highlighting the absence of a bond”).

The approach set forth in this final rule recognizes that aliens who request voluntary departure and enter into this agreement with the government may not simply back out of the agreement because they later realize that they actually have to depart or be subject to the consequences of failing to voluntarily depart. This rule is designed to address the conflict recognized in Dada for aliens whose circumstances have changed and want to pursue a motion to reopen, or who believe error exists in the administrative decision and want to pursue a motion to reconsider but cannot do so if they comply with the voluntary departure order. As for those aliens who file petitions for review, this rule is also designed to prevent the voluntary departure period from being extended beyond the statutorily permitted amount of time by the issuance of a judicial stay. Neither of these intended purposes of the rule allows for an alien unilaterally to change his or her mind after having been granted voluntary departure; which is what would occur if an alien's failure to post bond merely resulted in vitiating the original grant of voluntary departure.

None of the comments specifically object to the rule that an alien who waives appeal at the conclusion of proceedings and fails to post bond within the required five business days will immediately become subject to the final order of removal. The proposed rule also stated, however, that “if the alien thereafter does depart within the voluntary departure period, the alien will not be subject to the penalties under 240B(d) of the Act (8 U.S.C. 1229a(c)(4)(B)) or inadmissibility under 212(a)(9)(A) of the Act.” 72 FR at 67684. This final rule adopts this provision. However, in order to maintain consistency between this provision and the similar provision being adopted for the filing of petitions for review, this final rule revises the regulatory language to read: “if the alien had waived appeal of the immigration judge's decision, the alien's failure to post the required voluntary departure bond within the period allowed means that the alternate order of removal takes effect immediately pursuant to 8 CFR 1241.1(f), except that an alien granted the privilege of voluntary departure under 8 CFR 1240.26(c) will not be deemed to have departed under an order of removal if the alien: (i) Departs the United States no later than 25 days following the failure to post bond; (ii) provides to DHS such evidence of his or her departure as the ICE Field Office Director may require; and (iii) provides evidence DHS deems sufficient that he or she remains outside of the United States.”

As explained above in the context of petitions for review, in order for an alien to take advantage of this opportunity to avoid the stigma of departing under an order of removal, it will be necessary for the alien to establish a contemporaneous record documenting the alien's departure from the United States by notice to DHS documenting his or her departure and to establish that he or she remains outside of the United States. Evidence sufficient to meet these requirements may include proof of the alien's intended departure and itinerary, and prompt presentation by the alien to a United States consulate along with such evidence necessary to prove his or her timely departure. DHS may determine other acceptable proof documenting the alien's time of departure or define the timely period as meeting the definition of prompt presentation.

Finally, one commenter asks whether the filing of a motion would terminate the voluntary departure bond. As explained earlier, issues relating to the cancellation of bond implicate the authority of DHS. Thus, the Department is not in a position to unilaterally respond to this comment in this rulemaking. However, the Department has consulted with DHS regarding this question and DHS is considering the appropriate way to respond and provide guidance for this and similar bond questions.

In addition, this commenter states that the bond should be raised to $5,000 because $500 is not enough leverage to ensure departure. Under the regulations, the specific bond amount is within the discretion of the immigration judge, to be set “in an amount necessary to ensure that the alien departs within the time specified,” except that it can be no less than $500. 8 CFR 1240.26(c)(3). The Department did not include an increase in the minimum bond amount in the proposed rule, and declines at this time to impose such a change by regulation. However, as explained in the previous discussion, this rule uses other means to implement the requirement that the bond set by the immigration judge is posted.

The proposed rule also sought comment on whether the rule should provide for additional sanctions for aliens who fail to post the required bond. 72 FR 67684. One commenter urged the Department to table consideration of such a provision because it would be punitive and hurt individuals who would be least able to carry the additional financial burden. The Department is not adopting further changes in this final rule regarding posting of the bond. However, this issue may be revisited in the future, if necessary to address additional concerns.

Two commenters object to the proposed rule to set a minimum $3,000 civil penalty for failure to depart pursuant to section 240B(d)(1)(A) of the Act. One of the commenters argues that if Congress had intended the minimum penalty to be $3,000, it would not have specifically set the minimum at $1,000. The commenter also states that immigration judges should have discretion to set the amount anywhere between the statutory range of $1,000 and $5,000. Finally, this commenter argues that it does not make sense to have the immigration judge set the penalty when factors relevant to overstaying the voluntary departure period in order to determine an appropriate fine would only arise during the voluntary departure period.

Congress has provided that failure to depart is subject to a civil penalty. Through this regulation, the Department is using the consequences provided by Congress to further encourage aliens to adhere to their voluntary departure orders. As stated in the proposed rule, the Department does not have authority to enforce or collect the penalty, but this rule deals only with the authority to set the amount of the penalty. 72 FR at 67685. There is nothing in the statute that precludes having the immigration judge set the penalty in advance prior to the granting of voluntary departure. Moreover, nothing in this rule precludes DHS from adopting a process that allows for mitigation of the amount of a civil penalty that it seeks to collect based on the particular circumstances of an alien's case. Finally, there is much to be said for providing the additional clarity for the alien, up front, in deciding whether to accept voluntary departure and in choosing ultimately to comply with the obligation to depart voluntarily, rather than facing an uncertain and unknowable penalty amount to be selected in the future within a broad monetary range.

The final rule does make one change to allow greater flexibility regarding the amount of the monetary penalty, within the allowable statutory range. Rather than setting a minimum amount of $3,000 as the civil penalty, the final rule will set a rebuttable presumption that the civil penalty amount should be $3,000. The immigration judge will have discretion to set a lower or higher amount based on an alien's individual circumstances, including a consideration of the likelihood that the alien will comply or fail to comply with the grant of voluntary departure. The final rule will adopt, without change, the proposed rule that failure to pay a required civil penalty may be a relevant discretionary factor in later applications for relief.

One commenter argues that the final rule regarding motions should apply retroactively to persons granted voluntary departure before the effective date of the rule. Because the Department did not present such retroactive application as an option in the proposed rule, and because aliens would not otherwise receive notice that the filing of their motions would automatically terminate their voluntary departure, the Department will not apply this rule retroactively.

Since the provisions of this rule are prospective only, this rule does not provide transition rules with respect to aliens who were granted voluntary departure and had motions pending before an immigration judge or the Board or a petition for review pending with a federal court of appeals on or after the date of the Supreme Court's decision in Dada , and before the effective date of this final rule. It is worth noting that an alien who was within a period of voluntary departure on the day Dada was issued could have relied on that decision to withdraw from the request of voluntary departure in order to pursue a motion without being subject to the consequences for failing to voluntarily depart.

There are no other reasons to apply this rule retroactively. Accordingly, the proposed rule to apply this final rule prospectively only will be adopted without change. This means that this rule will apply to all cases pending before EOIR, or adjudicated by EOIR, on the effective date of this rule and any cases that later come before it. For instance, an alien who receives a decision by an immigration judge granting voluntary departure on or after the effective date of this rule will be subject to the voluntary departure bond provisions of this rule as well as all other applicable provisions. An alien who receives a decision by the Board reinstating voluntary departure on or after the day of the effective date of this rule will be subject to the automatic termination rule if that alien decides to seek judicial review, as well as all other application provisions. Likewise, if an alien's case is pending before a circuit court, and the case is remanded to the Board on or after the day of the effective date of this rule, any subsequent grant of voluntary departure will be subject to this rule.

The Attorney General, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation and, by approving it, certifies that this rule will not have a significant economic impact on a substantial number of small entities. This rule affects individual aliens and does not affect small entities as that term is defined in 5 U.S.C. 601(6).

This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year and also will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This rule is not a major rule as defined by section 251 of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 804). This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

The Attorney General has determined that this rule is a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and, accordingly, this rule has been submitted to the Office of Management and Budget for review.

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. Therefore, in accordance with section 6 of Executive Order 13132, it is determined that this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

This rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988.

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

OTS is amending its regulations to incorporate technical and conforming amendments. OTS is making the following miscellaneous changes:

Section 516.40—Application Processing Procedures. The final rule revises the table in 12 CFR 516.40 to add contact information for the agency's Central region.

Sections 575.9 and 575.14—Optional Charter Provisions in Mutual Holding Company Structures. OTS permits certain MHC subsidiaries to adopt an optional charter provision that would prohibit any person from acquiring, or offering to acquire beneficial ownership of more than ten percent of the MHC subsidiary's minority stock (stock held by persons other than the subsidiary's MHC). 1 This final rule modifies the instruction contained in sections 12 CFR 575.9(c) and 575.14(c)(3) to read: “[insert date within five years of a minority stock issuance] * * *.” Today's change corrects the July final rule which inadvertently stated “[insert date of minority stock issuance].”

OTS finds that there is good cause to dispense with prior notice and comment on this final rule and with the 30-day delay of effective date mandated by the Administrative Procedure Act. 2 OTS believes that these procedures are unnecessary and contrary to public interest because the rule merely makes technical changes to existing provisions. Because the amendments in the rule are not substantive, these changes will not affect savings associations.

Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 provides that regulations that impose additional reporting, disclosure, or other new requirements may not take effect before the first day of the quarter following publication. 3 This section does not apply because this final rule imposes no additional requirements and makes only technical changes to existing regulations.

Pursuant to section 605(b) of the Regulatory Flexibility Act, 4 the OTS Director certifies that this technical corrections regulation will not have a significant economic impact on a substantial number of small entities.

OTS has determined that this rule is not a “significant regulatory action” for purposes of Executive Order 12866.

OTS has determined that the requirements of this final rule will not result in expenditures by State, local, and tribal governments, or by the private sector, of $100 million or more in any one year. Accordingly, a budgetary impact statement is not required under section 202 of the Unfunded Mandates Reform Act of 1995.

History

On Friday, October 17, 2008, the FAA proposed to amend part 71 of the Federal Aviation Regulations (14 CFR part 71) to revoke the Class E airspace at Metlakatla, AK (73 FR 61752). The action was proposed in order to remove controlled airspace no longer necessary, due to the removal of the existing instrument approach procedure previously serving the Metlakatla Airport. Class E controlled airspace associated with the Metlakatla Airport area is revoked by this action.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No comments were received. The rule is adopted as proposed.

The area will be depicted on aeronautical charts for pilot reference. The coordinates for this airspace docket are based on North American Datum 83. The Class E airspace areas designated as 700/1,200 ft. transition areas are published in paragraph 6005 of FAA Order 7400.9S, Airspace Designations and Reporting Points , signed October 3, 2008, and effective October 31, 2008, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This amendment to 14 CFR part 71 revokes Class E airspace at the Metlakatla Airport, Alaska. This Class E airspace is revoked because there are no longer any instrument procedures at the Metlakatla Airport, and the airspace depiction will be removed from aeronautical charts.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle 1, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart 1, Section 40103, Sovereignty and use of airspace. Under that section, the FAA is charged with prescribing regulations to ensure the safe and efficient use of the navigable airspace. This regulation is within the scope of that authority because it revokes Class E airspace no longer necessary for the Metlakatla Airport and represents the FAA's continuing effort to safely and efficiently use the navigable airspace.

The electronic file of this document is available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html.

We currently decide claims for benefits using an administrative review process that consists of four levels: Initial determination, reconsideration, hearing before an ALJ, and Appeals Council review. See 20 CFR 404.900, 408.1000, and 416.1400. We make an initial determination at the first level. If a person is dissatisfied with the initial determination, he may request reconsideration. 1 If a person is dissatisfied with the reconsidered determination, he may request a hearing before an ALJ. 2 Finally, if a person is dissatisfied with the ALJ's decision, 3 he may request that the Appeals Council review that decision. Once a person has completed these administrative steps and received our final decision, the person may request judicial review of the final decision in Federal district court.

Each adjudicator reviewing a claim in the administrative process makes an independent (or de novo) determination or decision based on the evidence in the record. 4 For example, an ALJ would not simply review a State agency's initial and reconsideration disability determinations to determine whether they were correct. Rather, the ALJ would review the evidence in the record and make an independent decision.

In contrast, in deciding whether to grant a person's request for Appeals Council review of an ALJ's decision, the Appeals Council first considers the ALJ's decision and the evidence before the ALJ using the substantial evidence standard of review, which we discuss below. If the Appeals Council does not grant a request for review, the ALJ's decision becomes our final decision. 5 If the Appeals Council grants the request for review, it will usually either remand the case to an ALJ for additional proceedings and a new decision or issue its own decision.

A claimant has the burden of proving his claim with us. Adjudicators at each level of the administrative review process, including the Appeals Council, consider whether a claimant has proven his claim using an evidentiary standard called the “preponderance of the evidence” when they make a determination or decision. We define preponderance of the evidence as “such relevant evidence that as a whole shows that the existence of the fact to be proven is more likely than not.” 20 CFR 405.5.

The Social Security Act does not specify the standard of proof to use when we make a determination or decision. Courts and scholars have long recognized that the preponderance of the evidence standard is the traditional standard of proof in a civil or an administrative adjudicatory proceeding. 6 Our longstanding policy has been that the preponderance of the evidence standard applies to determinations or decisions on claims under parts 404, 408, and 416. 7 Prior to these final rules, we did not have regulations in parts 404, 408, and 416 that clearly stated that we use the preponderance of the evidence standard when we make a determination or decision. The absence of explicit language in these parts explaining the standards we use at each level of the administrative process caused some confusion about the applicable standard. By issuing these final rules, we intend to resolve any confusion about the applicable standard.

When the Appeals Council considers whether to grant a request for review of an ALJ's decision, it does not use a preponderance of the evidence standard. Instead, it considers, among other things, whether the action, findings, or conclusions of the ALJ are supported by substantial evidence. 8 20 CFR 404.970(a) and 416.1470(a). The definition of substantial evidence in these final rules is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” The substantial evidence standard of review gives deference to the findings of the ALJ rather than requiring a decision based on a new evaluation of the evidence. 9

Elanco Animal Health, A Division of Eli Lilly & Co., Lilly Corporate Center, Indianapolis, IN 46285, filed a supplement to NADA 12 491 for use of TYLAN (tylosin phosphate) Type A medicated article. The supplement provides for use of tylosin tartrate in medicated drinking water for swine for 3 to 10 days followed by administration of tylosin phosphate in medicated swine feed for 2 to 6 weeks for the control of porcine proliferative enteropathies (PPE, ileitis) associated with Lawsonia intracellularis .

Under section 512(c)(2)(F)(iii) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360b(c)(2)(F)(iii)), this supplemental approval qualifies for 3 years of marketing exclusivity beginning on the date of approval.

In accordance with the freedom of information provisions of 21 CFR part 20 and 21 CFR 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

Elanco Animal Health also filed a supplement to NADA 13 076 for use of TYLAN (tylosin tartrate) Soluble. The supplement provides for use of tylosin tartrate in medicated drinking water for swine for 3 to 10 days followed by administration of tylosin phosphate in medicated swine feed for 2 to 6 weeks for the treatment and control of swine dysentery associated with Brachyspira hyodysenteriae and for the control of porcine proliferative enteropathies (PPE, ileitis) associated with Lawsonia intracellularis .

Under section 512(c)(2)(F)(iii) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360b(c)(2)(F)(iii)), this supplemental approval qualifies for 3 years of marketing exclusivity beginning on the date of approval. This period of marketing exclusivity applies only to the claim for the control of porcine proliferative enteropathies (PPE, ileitis) associated with Lawsonia intracellularis .

The supplemental NADAs are approved as of November 13, 2008, and the regulations in 21 CFR 520.2640 and 558.625 are amended to reflect the approval.

The agency has determined under 21 CFR 25.33(a)(1) that these actions are of a type that do not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Throughout this document, ``we,'' ``us'' and ``our'' refer to EPA.

On July 24, 2007 (73 FR 43186), EPA proposed to approve the following document into the California SIP.

We proposed to approve these rules because we determined that they complied with the relevant CAA requirements. Our proposed action contains more information on the submitted RACT analysis and our evaluation.

EPA's proposed action provided a 30-day public comment period. During this period, no comments were received.

No comments were submitted that change our assessment that the submitted RACT analysis complies with the relevant CAA requirements under the 8-hour ozone NAAQS. Therefore, as authorized in section 110(k)(3) of the Act, EPA is fully approving this document into the California SIP.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this 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 Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (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 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, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 17, 2009. 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)).

The contents of this preamble are listed in the following outline:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. This table lists the types of entities that EPA is currently aware could potentially be affected by this action; however, other types of entities not listed in the table could also be affected. To determine whether your facility is affected by this action, you should carefully examine the criteria in section III.A of this final rule and the applicability criteria in § 302.6 of title 40 of the Code of Federal Regulations (CFR) and 40 CFR Part 355, Subpart C-Emergency Release Notification. 1 If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. 9601 et seq. , as amended by the Superfund Amendments and Reauthorization Act (SARA) of 1986, gives the Federal government broad authority to respond to releases or threats of releases of hazardous substances from vessels and facilities. The term hazardous substance is defined in section 101(14) of CERCLA primarily by reference to other Federal environmental statutes. Section 102 of CERCLA gives the Environmental Protection Agency (EPA or the Agency) authority to designate additional hazardous substances. Currently, there are approximately 760 CERCLA hazardous substances, exclusive of Radionuclides, F-, K-, and Unlisted Characteristic Hazardous Wastes.

CERCLA section 103(a) calls for immediate notification to the National Response Center (NRC) when the person in charge of a facility has knowledge of a release of a hazardous substance equal to or greater than the reportable quantity (RQ) established by EPA for that substance. In addition to the notification requirements established pursuant to CERCLA section 103, section 304 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA), 42 U.S.C. 11001 et seq. , requires the owner or operator of certain facilities to immediately report to State and local authorities releases of CERCLA hazardous substances or any extremely hazardous substances (EHSs) if they exceed their RQ (see 40 CFR 355.33). This final rule only applies to CERCLA section 103 notification requirements, including the provisions that allow for continuous release reporting found in paragraph (f)(2) of CERCLA section 103, and EPCRA section 304 notification requirements.

The Agency has previously granted such administrative reporting exemptions (AREs) under the CERCLA section 103 and EPCRA section 304 notification requirements where the Agency has determined that a Federal response to such a release is impracticable or unlikely. For example, on March 19, 1998, the Agency issued a final rule (see 63 FR 13459) that granted exemptions for releases of naturally occurring radionuclides. The rule, entitled Administrative Reporting Exemptions for Certain Radionuclide Releases (“Radionuclide ARE”), granted exemptions for releases of hazardous substances that pose little or no risk or to which a Federal response is infeasible or inappropriate (see 63 FR 13461).

The Agency relies on CERCLA sections 102(a), 103, and 115 (the general rulemaking authority under CERCLA) as authority to issue regulations governing section 103 notification requirements. The Agency relies on EPCRA section 304 as authority to issue regulations governing EPCRA section 304 notification requirements, and EPCRA section 328 for general rulemaking authority. The Agency will continue to require certain reports under EPCRA section 304, specifically for those facilities that meet the size thresholds in 40 CFR 355.31(g) and outlined below in section III.B.ii of this preamble.

EPA is exempting certain releases of hazardous substances to the air from the notification requirements of CERCLA and to a limited extent EPCRA emergency notifications, as implemented in 40 CFR 302.6 and 40 CFR Part 355, Subpart C-Emergency Notification Requirement, respectively. Specifically, we are exempting those hazardous substance releases that are emitted to the air from animal waste at farms. The exemption to the CERCLA section 103 notification requirements will apply to all releases of hazardous substances to the air from animal waste at farms. However, to respond to comments expressing the desire to receive information regarding releases from large concentrated animal feeding operations (CAFOs), EPA is bifurcating these administrative reporting exemptions in order to continue to require EPCRA section 304 emergency notifications for those CAFO operations that confine the large CAFO threshold of an animal species or above, as defined in the National Pollutant Discharge Elimination System (NPDES) program regulations. As such, the exemption to EPCRA section 304 emergency notification requirements will apply to air releases of hazardous substances from animal waste at farms that are below the thresholds in 40 CFR 355.31(g) and for those farms that have animals that are not stabled or confined. (See 40 CFR 355.31(h)) For the purposes of this rule, EPA considers animals ( i.e. , cattle) that reside primarily outside of an enclosed structure ( i.e. , a barn or a feed lot) and graze on pastures, not to be stabled or confined, and thus are exempted from the reporting requirements under EPCRA Section 304.

Section 324 of EPCRA requires that the follow-up emergency notice shall be made available to the general public; thus emergency notifications filed under EPCRA section 304 will be available to the public. Farms that are required to report their releases under EPCRA section 304 emergency notifications may continue to use continuous release reporting as described in 40 CFR 355.32.

Ammonia and hydrogen sulfide are the most recognized hazardous substances that are emitted from animal waste. Specifically, ammonia is a by-product of the breakdown of urea and proteins that are contained in animal waste, while hydrogen sulfide is another by-product of the breakdown of animal waste under anaerobic conditions. However, other hazardous substances, such as nitrogen oxide (NO) and certain volatile organic compounds (VOCs) may also be released from animal waste. This rule extends the administrative reporting exemption to all hazardous substances emitted to the air from animal waste at farms.

These hazardous substances can be emitted when animal waste is contained in a lagoon or stored in under-floor manure pits in some animal housing, manure stockpiles, or where animals are stabled or confined.

Under CERCLA section 103(a), the person in charge of a vessel or facility from which a CERCLA hazardous substance has been released into the environment in a quantity that equals or exceeds its RQ must immediately notify the NRC of the release. A release is reportable if an RQ or more is released into the environment within a 24-hour period (see 40 CFR 302.6). This reporting requirement serves as a trigger for informing the Federal government of a release so that Federal personnel can evaluate the need for a response in accordance with the National Contingency Plan (NCP) and undertake any necessary response action in a timely fashion.

The NRC is located at the United States Coast Guard (USCG) headquarters and is the national communications center for the receipt of all pollution incidents reporting. The NRC is continuously staffed for processing activities related to receipt of the notifications. The NCP regulations, 40 CFR 300.125, require that notifications of discharges and releases be made by telephone and state that the NRC will immediately relay telephone notices of discharges or releases to the appropriate predesignated Federal on-scene coordinator (OSC). The NRC receives an average of approximately 34,000 notifications of releases or discharges per year, 99 percent of which are relayed to EPA.

Under EPCRA section 304(a), three release scenarios require notification.

• First, if a release of an extremely hazardous substance occurs from a facility at which a hazardous chemical is produced, used, or stored, and such release requires a notification under section 103(a) of CERCLA, the owner or operator of a facility shall immediately provide notice to the community emergency coordinator for the local emergency planning committees (LEPC) for any area likely to be affected by the release and to the State emergency response commission (SERC) of any State likely to be affected by the release. (EPCRA section 304(a)(1))

• EPCRA section 304(a) also requires the owner or operator of the facility to immediately provide notice under EPCRA section 304(b) for either of the following two scenarios:

○ If the release is an extremely hazardous substance, but not subject to the notifications under section 103(a) of CERCLA. (EPCRA section 304(a)(2))

○ If the release is not an extremely hazardous substance and only subject to the notifications under section 103(a) of CERCLA. (EPCRA section 304(a)(3))

EPCRA notification is to be given to the community emergency coordinator for each LEPC for any area likely to be affected by the release, and the SERC of any state likely to be affected by the release. Through this notification, state and local officials can assess whether a response action to the release is appropriate. EPCRA section 304 notification requirements apply only to releases that have the potential for off-site exposure and that are from facilities that produce, use, or store a “hazardous chemical,” as defined by regulations promulgated under the Occupational Safety and Health Act of 1970 (OSHA) (29 CFR 1910.1200(c)) and by section 311 of EPCRA.

Owners and operators of farms, like all other facilities, are required to report the release of hazardous substances into the environment in accordance with CERCLA section 103 and EPCRA section 304 when it meets or exceeds the RQ of the hazardous substance. For example, releases into the environment of ammonia or any other hazardous substance, from tanks located on a farm, at or above an RQ are required to be reported under CERCLA section 103 and EPCRA section 304.

In 2005, EPA received a petition (poultry petition) from the National Chicken Council, National Turkey Federation, and U.S. Poultry & Egg Association, seeking an exemption from the CERCLA and EPCRA reporting requirements for ammonia emissions from poultry operations. The Agency published a notice in the Federal Register on December 27, 2005 (70 FR 76452), that acknowledged receipt of the poultry petition and requested public comment. The comment period closed on March 27, 2006. This final rule does not address that petition. EPA will respond to the petition in a separate action.

Also, in 2005, EPA offered the owners and operators of animal agricultural operations an opportunity to participate in the National Air Emissions Monitoring Study (air monitoring study), that is being conducted by an independent, non-profit organization and overseen by EPA, through a consent agreement with the Agency. The purpose of the air monitoring study is to develop emissions estimating methodologies for all animal agricultural operations. Over 2,600 animal feeding operations, representing over 14,000 farms, signed up to participate in the study. The monitoring study, which began in the spring of 2007 includes 25 representative sites (lagoons or barns) on 21 different farms in ten states (NC, NY, IA, WI, CA, KY, TX, WA, IN, and OK). The sites will be monitored for a period of two years, allowing the Agency to account for emissions variability by season, and for the effect of any seasonal operational changes (such as pumping out lagoons), that could have an effect on emission levels.

The consent agreement also requires that within 120 days after receiving an executed copy of the consent agreement, for any farm that confines more than ten times the large CAFO threshold of animal species, as defined in the NPDES program regulations, the animal feeding operation provide to the NRC and to the relevant State and local emergency response authorities written notice describing its location and stating substantially as follows:

At the end of the monitoring study, EPA will use the data along with other relevant available data to develop emissions estimating methodologies. The monitoring study results will be publicly available upon completion of the study. In addition, EPA will publish the emissions estimating methodologies based on these results within 18 months of the study's conclusion. Thus, such information will be widely available to the public. Further details on the air monitoring study are available at http://www.epa.gov/oecaagct/airmonitoringstudy.html.

The scope of this rule is limited to releases of hazardous substances to the air from animal waste at farms. Specifically, the Agency is issuing an administrative reporting exemption from the CERCLA section 103 notification requirements to the NRC (Federal government) as implemented in 40 CFR 302.6 and a limited administrative reporting exemption from the EPCRA section 304 notification requirements as implemented in 40 CFR Part 355, Subpart C—Emergency Notification Requirement. ( See Section III.B.ii. for the thresholds that limit the administrative reporting exemption for EPCRA section 304.) The scope of this rule is intended to include all hazardous substances that may be emitted to the air from animal waste at farms that would otherwise be reportable under those sections. The Agency is not, in this rule, defining facility, normal application of fertilizer, or routine agricultural operations.

On December 28, 2007, the Agency proposed an administrative reporting exemption from the CERCLA section 103 notification requirements and the EPCRA section 304 emergency notification requirements for air releases of hazardous substances that meet or exceed their RQ from animal waste at all farms. The public comment period lasted 90 days and closed on March 27, 2008. Through the public comment process, the Agency received approximately 12,900 comments. A substantial number of those comments (about 11,600) came in the form of 15 mass mail campaigns that either supported or opposed the proposed rule. We also received many comments from people who appear to have misunderstood the proposed rule, or assumed that the proposed rule was a response to the poultry petition. Our response to significant comments are generally addressed below in Section III.G of this preamble, with all comments addressed in a response to comment document, which is in the docket (EPA-HQ-SFUND-2007-0469) to this final rule. 2

This rule finalizes the administrative reporting exemption from the CERCLA section 103 notification requirements as proposed, but limits the administrative reporting exemption to EPCRA section 304 emergency notification requirements by adding a size threshold. That is, at or above the threshold adopted in this final rule, farms that generate animal waste that release hazardous substances to the air at or above the RQ must still report under EPCRA section 304, using the existing notification procedures, including the use of continuous release reporting. EPCRA section 304 notification requirements apply only to releases that have the potential for off-site exposure.

The Agency is finalizing the administrative reporting exemption from the CERCLA section 103 notification requirements because EPA continues to believe that Federal on-scene coordinators are unlikely to respond to notifications of air releases of hazardous substances from animal waste at farms.

The Agency also believes that State or local emergency response authorities are unlikely to respond to notifications of air releases of hazardous substances from animal waste at farms. However, the Agency did receive comments from the public, as well as from environmental groups, a coalition of family farmers and others expressing the desire for information regarding emissions of hazardous substances to the air from large animal feeding operations. Accordingly, EPA decided to bifurcate the administrative reporting exemption for EPCRA section 304 so as to retain certain emergency notifications for large CAFOs. In addition, we sought comment on possible alternative definitions for farm , indicating EPA might take factors such as size into account. Although not specifically addressing the definition of a farm , we did receive many comments asserting that very large farms are no different than other industrial sources and should be regulated as such. We believe that our threshold approach addresses those concerns.

A farm is above the threshold if it stables or confines  3 animals in numbers equal to or more than the numbers of animals specified for each category given in the NPDES program regulations for large CAFOs. These thresholds are discussed further in section II I.E . below.

(1) 700 mature dairy cows, whether milked or dry.

(2) 1,000 veal calves.

(3) 1,000 cattle other than mature dairy cows or veal calves. Cattle includes but is not limited to heifers, steers, bulls and cow/calf pairs.

(4) 2,500 swine each weighing 55 pounds or more.

(5) 10,000 swine each weighing less than 55 pounds.

(6) 500 horses.

(7) 10,000 sheep or lambs.

(8) 55,000 turkeys.

(9) 30,000 laying hens or broilers, if the farm uses a liquid manure handling system.

(10) 125,000 chickens (other than laying hens), if the farm uses other than liquid manure handling system.

(11) 82,000 laying hens, if the farm uses other than a liquid manure handling system.

(12) 30,000 ducks (if the farm uses other than a liquid manure handling system).

(13) 5,000 ducks (if the farm uses a liquid manure handling system).

Continuous release reporting is available for those farms that are at or above the threshold described above in section II.B.ii. In general, the Agency believes that emissions from animal waste into the air are usually continuous and stable in quantity and rate to qualify as continuous releases pursuant to 40 CFR 302.8. The regulations implementing EPCRA section 304 are found in 40 CFR Part 355, Subpart C—Emergency Release Notification and describe the information required for the EPCRA emergency notifications. At the present time, EPA has not adopted conversion factors from which to derive quantities of common hazardous substances from numbers of particular species of farm animals. One purpose of the air monitoring study is to develop estimating methodologies. In the meantime, when reports are submitted pursuant to EPCRA section 304 for animal waste from farms, the Agency expects reports to reflect good faith estimates from reporting entities. In addition, EPA intends to issue guidance to assist those farms that are required to submit reports under EPCRA section 304 with continuous release reporting, as provided in 40 CFR 355, Subpart C—Emergency Release Notification.

The Agency believes it is important to provide clarity with respect to the scope of the reporting exemption. Therefore, the Agency is providing definitions for animal waste and farm that only pertain to regulations promulgated pursuant to CERCLA section 103 and EPCRA section 304, specifically 40 CFR 302.3. and 40 CFR 355.61. These definitions are not promulgated to apply for any other purpose.

Animal Waste—means manure (feces, urine, and other excrement produced by livestock), digestive emissions, and urea. The definition includes animal waste when mixed or commingled with bedding, compost, feed, soil, and other materials typically found with animal waste.

We sought comment on our proposed definition for animal waste , and whether an alternative definition may be more appropriate. A few commenters asked that we clarify that compost includes composted manure and manure-based compost. EPA agrees that the definition of animal waste does include such compost and to lend further clarity to the definition, we made a slight change. Other comments on our proposed definition for animal waste , along with our responses are addressed below in section III.G.v.1 of this preamble and in the response to comment document available in the docket (EPA-HQ-SFUND-2007-0469) to this rule.

The Agency is limiting the reporting exemption to animal waste that is generated on farms, and is using a specific definition for farm for this administrative reporting exemption. For the purpose of this administrative reporting exemption only, EPA defines farm by using the same definition as that found in the National Agricultural Statistics Service (NASS) Census of Agriculture, and adopting it.

Farm—means a facility on a tract of land devoted to the production of crops or raising of animals, including fish, which produced and sold, or normally would have produced and sold, $1,000 or more of agricultural products during a year.

We sought comment on our proposed definition for a farm , and whether an alternative definition may be more appropriate. Based on the comments received, we concluded that the proposed definition for farm was not consistent with other Agency uses for the term; that is, we realized that the definition proposed had deviated from the NASS definition, as well as the definition used by the Agency in its Spill Prevention, Control and Countermeasure (SPCC) rule. As a result, the definition for this rule has now been modified. Other comments on our proposed definition for farm , along with our responses are addressed below in section III.G.v.2 of this preamble and in the response to comment document available in the docket (EPA-HQ-SFUND-2007-0469) to this rule.

As noted previously, the administrative reporting exemption from the CERCLA section 103 notification requirements is limited in scope to those releases of hazardous substances to the air that meet or exceed their RQ from animal waste at farms and in the case of Section 304 of EPCRA, only those releases of hazardous substances to the air from animal waste at farms that are below the thresholds in 40 CFR 355.31(g) are exempt. EPA is not exempting from the CERCLA section 103 or EPCRA section 304 notification requirements releases of hazardous substances from animal waste that meet or exceed the RQ to any other environmental media or at any other facilities other than farms ( i.e. , meat processing plants, slaughter houses, tanneries). Thus, notifications must still be submitted if, for example, there was a release of any hazardous substances that meet or exceed the RQ from animal waste into water ( e.g. , a lagoon burst) or if there was a release of any hazardous substances that meets or exceeds the RQ from animal waste into the air or water at a slaughter house or meat processing plant. Likewise, EPA is not exempting from the CERCLA section 103 or EPCRA section 304 notification requirements any release of hazardous substances to the air that meets or exceeds the RQ from any source other than animal waste at farms. Thus, for example, EPA is not proposing to exempt ammonia releases from ammonia storage tanks at farms.

The Agency believes that in these situations, the release of hazardous substances that meets or exceeds the RQ should continue to be reported because it is less clear that they will not result in a response action from Federal, State or local governments. That is, such notifications would alert the government to a situation that could pose serious environmental consequences if not immediately addressed.

Finally, it should be noted that no CERCLA or EPCRA statutory requirements, other than the emergency hazardous substance notification requirements under CERCLA section 103 and EPCRA section 304, are included within this rule. The rule also does not limit the Agency's authority under CERCLA sections 104 (response authorities), 106 (abatement actions), 107 (liability), or any other provisions of CERCLA and EPCRA to address releases of hazardous substances from animal waste at farms.

EPA's rationale for this administrative reporting exemption is based on the purpose of notifying the NRC, and SERCs and LEPCs when a hazardous substance is released, and then the likelihood that a response to that notification would be taken by any government agency.

Upon receipt of a notification from the NRC, EPA determines whether a response is appropriate. See 40 CFR 300.130(c). If it is determined that a response is appropriate, the NCP regulations describe the roles and responsibilities for responding to the release. Thus, EPA considered whether the Agency would ever take a response action, as a result of such notification, for releases of hazardous substances to the air that meet or exceed their RQ from animal waste at farms. Based on our experience, the Agency believes that Federal on-scene coordinators are unlikely to respond to such notifications. Specifically, to date, EPA has not initiated a response to any NRC notifications of ammonia, hydrogen sulfide, or any other hazardous substances released to the air where animal waste at farms is the source of that release. Moreover, we can not foresee a situation where the Agency would initiate a response action as a result of such notification. Under this rule, however, EPA retains its authority to respond to citizen complaints or requests for assistance from State or local government agencies to investigate releases of hazardous substances from animal waste at farms and respond if appropriate. Furthermore, the Agency does not need to receive such notifications in order to enforce applicable Clean Water Act (CWA), Clean Air Act (CAA), Resource Conservation and Recover Act (RCRA), and/or other applicable CERCLA and EPCRA regulations at farms. EPA retains the enforcement authority to address threats to human health and the environment.

Several States and localities also indicated that such response actions are unlikely to be taken as a result of a notification of releases of hazardous substances from animal waste at farms. Specifically, EPA received 13 comment letters from State and/or local emergency response agencies in response to our proposed rule, as well as comments from 10 state agricultural departments that agreed with the proposal to not require such notifications. 4 These commenters all affirmed EPA's belief that a response to a notification of air emissions of hazardous substances from animal wastes is highly unlikely. In fact, while we also received comment letters from government officials and others, including environmental groups, that the proposed rule is not appropriate due to potential harmful effects of air pollution emanating from animal feeding operations, we received no comments from any government official suggesting a response action should or would be taken.

The Agency did receive comments expressing a concern that air emissions of hazardous substances from animal waste at the largest animal feeding operations may pose a risk and therefore State and local governments and the public should continue to receive reports of such emissions. CERCLA and EPCRA do not require release reports under section 103 of CERCLA and 304 of EPCRA, respectively, to be made publicly available. However, section 324 of EPCRA does require the LEPC and the SERC to make publicly available each follow-up emergency notice provided under section 304(c).

Based on these comments, the Agency has bifurcated the final rule and is promulgating an administrative reporting exemption in order to maintain the EPCRA section 304 reporting requirements for the largest farms, that is, those farms that meet or exceed the thresholds described in section III.B.ii, above. For this rule, the threshold that will trigger reporting requirements is the same as the numbers of animals specified in the categories regulated by the NPDES program for large CAFOs. Comments regarding the elimination of the reporting requirements are discussed below in section III.G.i.

This administrative reporting exemption will reduce the costs to farms that release hazardous substances to the air that meet or exceed their RQ from animal waste. Entities that are expected to experience a reduction in burden and cost include both the farms that are no longer required to report those releases, as well as the Federal government. The economic analysis completed for this rule is available in the docket for this rulemaking and is based on the underlying economic analyses that were completed for the regulations that established the notification requirements. We estimate that this final rule will reduce burden on farms associated with making notifications under CERCLA section 103 and EPRCRA section 304 by approximately 1,290,000 hours over the ten-year period beginning in 2009 and associated costs by approximately $60,800,000 over the same period. We estimate that this rule will also reduce burden on government (including Federal, State and local governments) for receipt and processing of the notifications under CERCLA section 103 and EPCRA section 304 by approximately 161,000 hours over the ten-year period beginning in 2009 and associated costs by approximately $8,110,000 over the same period. In evaluating the potential burden and cost savings to those farms that would no longer be required to make notifications under CERCLA section 103 and EPCRA section 304 and for the government entities that are no longer required to receive and process such notifications, we used the same universe as used in the 2008 CAFO Rule (see 73 FR 70417, Nov. 20, 2008).

The Agency received comments on: (1) The elimination of the reporting requirement; (2) the risk, harm, and exposure related to air emissions from animal waste at farms; and (3) the Agency's statutory authority to issue this rulemaking. Some comments also indicated a misunderstanding of the proposed rule. Lastly, the Agency sought specific comments in four areas. Those were: (1) Definitions (animal waste and farm); (2) whether it is appropriate to expand the reporting exemption to other facilities where animal waste is generated ( i.e. , zoos and circuses); (3) whether there might be a situation where a response would be triggered by such a notification of the release of hazardous substances to the air from animal waste at farms; and (4) if so, what an appropriate response would be. The following is our response to those substantive comments received. Comments not addressed in this preamble are addressed in the response to comment document that can be found in the Agency's docket for this rule (EPA-HQ-SFUND-2007-0469).

We received mixed comments on whether it is appropriate for the Agency to eliminate the notification requirements under CERCLA section 103 and EPCRA section 304 for hazardous substances released to the air at farms where the source of those hazardous substances is animal waste.

Many commenters expressed general support for the proposed elimination of the reporting requirements under CERCLA section 103 and EPCRA section 304. Many of these commenters, including some local emergency response agencies, stated that reporting emissions of hazardous substances to the air that meet or exceed their RQ from animal waste is of little value as it is common knowledge that agricultural operations release ammonia on an ongoing basis and receipt of such notifications could prove to be a hindrance in performing their mission by overwhelming the system with notifications that will not be responded to. Many commenters supporting the elimination of the reporting requirements, particularly commenters representing the agricultural community, also stated that emissions reporting is costly and could put them out of business should they have to adhere to such a regulation. Moreover, these same commenters defended the proposal by pointing out that information about the location and emissions of CAFOs is already publicly available. For example, one could readily determine the number of laying hens there are in a particular county through county specific data published by the U.S. Department of Agriculture's (USDA's) National Agricultural Statistical Service. According to these commenters, CERCLA/EPCRA reporting does not add in any meaningful way to this knowledge base.

On the other hand, the Agency received many comments that were opposed to the elimination of the notification requirements under CERCLA section 103 and EPCRA section 304. Many commenters opposed the proposed elimination of these reporting requirements on the grounds that reports provide good documentation, even if the content is not reviewed and no response is appropriate. Several commenters stated that reporting information about emissions enables citizens to hold companies and local governments accountable in terms of how toxic chemicals are managed and even allows agencies to identify a facility's proximity to schools where children may be at higher risk of adverse health effects due to exposure.

In addition, many commenters asserted that the proposed rule interferes with the public's right to know about large releases of toxic chemicals. Others stated that factory farms should not be protected from the laws that affect all other industries. Several commenters asserted that CAFOs are not family farms, arguing that they are industries that produce high amounts of pollutants and should be treated as such.

Finally, a commenter suggested that farms should be exempt from the monitoring and reporting of pollutant releases until measuring and testing procedures become more accurate and that the exemptions should apply until there are more feasible monitoring practices enacted. The commenter argued that it was unfair to require such reporting when the science surrounding ammonia releases is uncertain.

The Agency appreciates the perspectives of both sides of the reporting issue. We understand that the regulated community and some SERCs and LEPCs believe that, in general, the release reports are unnecessary, burdensome, and would not likely result in “new” information regarding emissions from farms. The Agency agrees. However, many commenters also argued that reporting, especially for large CAFOs, is important. Therefore, we have adopted a final rule that seeks to address both concerns. As such, farms would be exempt from reporting under CERCLA section 103 for the reporting of air releases of hazardous substances from animal waste to the NRC; but, at the same time, those farms that exceed the threshold established in 40 CFR 355.31(g), and described above in section III.B.ii of this preamble, will still be required to notify the community emergency coordinator for the LEPC for any area likely to be affected by the release and to the SERC of any State likely to be affected by the release under EPCRA section 304(b). We believe the threshold is appropriate to continue to make available information regarding large CAFOs sought by commenters. In accordance with 40 CFR 355.31(h), farms that have animals that are not stabled or confined are also exempt from reporting under EPCRA section 304. For the purposes of this rule, EPA considers animals ( i.e. , cattle) that reside primarily outside of an enclosed structure ( i.e. , a barn) and graze on pastures not to be stabled or confined.

In addition, after completion of the Air Monitoring Study and the development and publication of emission estimating methodologies, the Agency intends to review the results and consider if the threshold for the EPCRA exemption is appropriate.

EPA's rationale for the proposed rule is based on the purpose of notifying the NRC, and SERCs and LEPCs when a hazardous substance is released, and then the likelihood that a response to that release would be taken by any government agency. The comments that cited risk, harm, and exposure were used to either support or oppose the proposed rule.

In supporting the proposed rule, many commenters provided general statements to the effect that emissions from CAFOs pose no threat to public health or the environment. Many other commenters also argued that there is no evidence or studies that emissions pose any public health risks or have environmental impacts that would warrant emergency release reports from farms to the Federal level.

In opposing the proposed rule, a number of commenters submitted studies to support their conclusion that emissions from some farms pose levels of risk, harm, and exposure that should be taken into consideration by the Agency. Several commenters specifically cited a 2002 study entitled, “Iowa Concentrated Animal Feeding Operations Air Quality Study,” conducted by Iowa State University and the University of Iowa Study Group. 5

Several commenters suggested delaying any decisions on finalizing the proposal until the Agency's air monitoring study is complete. These commenters argued that EPA may find that these airborne contaminants are more dangerous to human health than thought. Many of the commenters who opposed the proposed rule also provided information pertaining to the health impacts associated with CAFOs. Some provided anecdotal evidence, while others cited published literature drawing a causal link. Additional information regarding the anecdotal evidence and published literature is provided in the response to comment document available in the docket (HQ-EPA-SFUND-2007-0469) to this rule. Finally, a number of commenters suggested that the adverse health effects that have been demonstrated should be sufficient to continue to mandate CERCLA and EPCRA reporting of “toxic air emissions” and step up enforcement, as well.

EPA appreciates the information provided by commenters, especially those who submitted study information indicating the potential health issues associated with the emissions from animal waste at farms. We would first note that a number of the studies or information provided addressed risk or health issues for workers on the farm; reporting under section 304 of EPCRA addresses releases that are off-site of the facility. In addition, as we noted previously, EPA is currently overseeing a comprehensive study of CAFO air emissions (air monitoring study) that is being conducted by an independent, non-profit organization. The purpose of the air monitoring study is to develop emissions estimating methodologies for all animal agricultural operations. Over 2,600 agreements, representing over 14,000 farms, signed up for the study. The monitoring study, which began in the spring of 2007, includes 25 representative sites (lagoons or barns) on 21 different farms in ten states (NC, NY, IA, WI, CA, KY, TX, WA, IN, and OK). The sites will be monitored for a period of two years, allowing the Agency to account for emissions variability by season, and for the effect of any seasonal operational changes (such as pumping out lagoons), that could have an effect on emission levels. At the conclusion of the air monitoring study, EPA will use the data along with any other relevant, available data to develop emissions estimating methodologies. The air monitoring study results will be publicly available upon completion of the study. In addition, EPA will publish the emissions estimating methodologies based on these results, within 18 months of the study's conclusion. The notification requirements under CERCLA section 103 would not provide the type of data required in order to draw the same conclusions that the more comprehensive air monitoring study can provide. This rule does not address how air emissions from CAFOs should be controlled.

As we have discussed, EPA believes that a response to a notification about an air release of a hazardous substance from animal waste at a farm is unlikely and impracticable. We are therefore exempting those notifications from CERCLA section 103 notification requirements and to a limited extent EPCRA section 304 emergency notification requirements. As discussed above, EPA does recognize that the public may have a separate use for the notifications, and therefore, the reporting exemption under Section 304 of EPCRA is limited to farms that fall below the threshold discussed in III.B.ii. Moreover, EPA is not limiting any of its response authorities in this rule (should a State or local agency request assistance), nor are we limiting any of our other authorities under CERCLA and EPCRA.

A number of commenters challenged EPA's legal authority to grant these exemptions by stating that CERCLA and EPCRA do not give EPA the authority to grant reporting exemptions. Another commenter argues that EPA may not rest its basis for the exemption solely on evidence that a Federal response to animal waste releases is unlikely.

EPA disagrees with the commenters that challenge our authority to provide administrative reporting exemptions. First, we would note that EPA has on two other occasions exercised its authority to extend administrative reporting exemptions to certain well-defined release scenarios. Specifically, on March 19, 1998, the Agency issued a final rule (see 63 FR 13459) that granted exemptions for releases of naturally occurring radionuclides. The rule entitled, Administrative Reporting Exemptions for Certain Radionuclide Releases (“Radionuclide ARE”), granted exemptions for releases of hazardous substances that pose little or no risk or to which a Federal response is infeasible or inappropriate (see 63 FR 13461). Moreover, on October 4, 2006, the Agency issued a final rule (see 71 FR 58525) that broadened the existing reporting exemptions to include releases of less than 1,000 pounds of nitrogen oxide (NO) and less than 1,000 pounds of nitrogen dioxide (NO 2 ) to the air in 24 hours (“NO X ARE”) that are the result of combustion. The NO and NO 2 exemptions were granted for releases of hazardous substances at levels for which the CAA regulates nitrogen oxides that are considerably higher than ten pounds.

EPA also disagrees that it is barred from basing its exemption on evidence that a Federal response to a notification of a release of hazardous substances to the air from animal waste releases is unlikely. Rather, for this rule, EPA has made a determination that these reports are unnecessary because, in most cases, a federal response is impractical and unlikely ( i.e. , we would not respond to them since there is no reasonable approach for the response). We also believe that because this administrative reporting exemption is narrowly focused to the source (animal waste) and location (at farms) of the hazardous substance emissions, it is appropriate to base our rationale for this rule on the unlikelihood and inappropriateness of a response.

A number of the commenters seem to misunderstand what the Agency was proposing. For example, commenters expressed general opposition to removing air quality and clean air standards; removing clean air protections; reducing pollution or emission standards; exemptions to clean air standards; allowing farms to emit more pollutants; deregulation of hazardous emissions; and an exemption from the CAA and CWA. This rule would do none of this. Rather, this rule addresses only the notification requirements under CERCLA section 103 and in a limited manner, EPCRA section 304. EPA retains all other authorities under both CERCLA and EPCRA, and the CAA and CWA standards also are unaffected by this action.

In order to provide clarity with respect to the scope of the proposed reporting exemption, the Agency proposed definitions for animal waste and farm. The definitions, as proposed, would be limited in application to the regulations promulgated pursuant to CERCLA section 103 specifically 40 CFR 302.3 and 40 CFR 355.61. We solicited comment on those definitions.

Because the Agency does not have an existing definition for animal waste , EPA proposed to add a definition for animal waste to the Code of Federal Regulations. The definition for animal waste in the proposed rule was, “manure (feces, urine, other excrement, and bedding, produced by livestock that has not been composted), digestive emissions, and urea. The definition includes animal waste when mixed or commingled with bedding, compost, feed, soil and other materials typically found with animal waste.” We sought comment from the public on the appropriateness, clarity and completeness of the definition.

In general, the public was generally supportive of our proposed definition of animal waste, as long as it is understood that this definition is used solely for the purposes of CERCLA and EPCRA reporting; however, there were a few requests for further clarification. In particular, several commenters requested clarification regarding the treatment of compost material, and specifically whether composted manure is included in the definition of animal waste . Similarly, other commenters suggested that EPA clarify that manure-based compost is included in the definition of animal waste. We have clarified in the discussion in section III.C.i., above, that such composted manure and manure-based compost is included in the definition of animal waste. Furthermore, we made a small change to the definition of animal waste to help clarify this point.

Several other commenters submitted alternative definitions. For example, to reflect the need for controlling emissions of dangerous and toxic emissions, a commenter suggested that animal waste be defined as “manure (livestock produced feces, urine, other excrement, and bedding that has not been composted), digestive emissions, and urea, which emit dangerous and/or toxic gases in any quantity. This definition includes animal waste when mixed or commingled with bedding, compost, feed, soil and other materials typically found in animal waste.” Another commenter suggested an alternate definition which would define animal waste as “all constituents and byproducts of the decomposition of manure (feces, urine, other excrement, and bedding, produced by livestock or poultry that has not been composted), digestive emissions, and urea.” This suggested definition would also include “animal waste when mixed or commingled with water, bedding, compost, feed, soil and other materials typically found with animal waste.” Still another commenter suggested the following definition for animal waste, “manure (feces, urine, or other excrement produced by livestock, and including bedding), and any other livestock digestive emissions, regardless of how stored, handled, composted or otherwise stockpiled. The definition includes animal waste used in biogas production or other treatment processes, or when mixed or commingled with bedding, compost, feed, soil, and other materials typically found with animal waste.”

While the Agency appreciates the suggestions provided by the commenters, we believe that the proposed definition of animal waste is broad enough to serve the purpose of defining the source of hazardous substances emitted from farms for this administrative reporting exemption, with the one clarification noted above. The definitions proposed by the commenters do not offer additional clarity and in the case of “animal waste used in biogas production or other treatment processes,” suggest a broader use of manure that would extend to facilities other than farms, and thus, beyond the scope of the final rule.

EPA proposed a definition for farm by slightly modifying the definition found in the National Agricultural Statistics Service (NASS) Census of Agriculture, as well as included Federal and State research farms that utilize farm animals subject to the conditions experienced on other farms ( e.g. , poultry, swine, dairy, and livestock research farms). However, in the proposal, we incorrectly stated that the proposed definition was used by USDA. Thus, the proposed definition for farm was “(a) any place whose operation is agricultural and from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year. Operations receiving $1,000 or more in Federal government payments are counted as farms, even if they have no sales and otherwise lack the potential to have $1,000 or more in sales; or, (b) a Federal or state poultry, swine, dairy or livestock research farm.” The purpose of specifying that Federal and State research farms that utilize farm animals subject to the conditions experienced on other farms was to respond to concerns that Federal and State research farms were included in the exemption. The Agency sought comment on the proposed definition, and whether an alternative definition may be more appropriate.

Commenters generally expressed support for the definition of farm because they understood it to be the definition used by USDA and because it promotes consistency in definitions between agencies; however, one commenter pointed out that the proposed definition is inconsistent with the definition of farm used by EPA in its SPCC rule (see 71 FR 77266, December 26, 2006) and therefore the Agency has two differing definitions that could place a hardship on the regulated community and gives the impression that the Agency is picking and choosing definitions without considering the regulatory implications of its decisions. The Agency agrees with this commenter and thus, EPA has decided to use for this rule the same definition of farm as the definition used in the SPCC rule. This definition is also now the same definition found in the NASS Census of Agriculture. Although not specifically stated in the definition, this definition is broad and includes Federal or State poultry, swine, dairy or livestock research farms that were included in the proposed definition.

Another definition suggested by a commenter was to expand the definition to include “[any] operation that produces eggs, poultry, swine, dairy, or other livestock in any amount,” as well as all production areas and land application areas. Another commenter suggested that the definition be expanded to include non-Federal or State research facilities. EPA disagrees with the commenters that suggested an expanded definition of farm. We believe that the definition in this rule encompasses the universe of operations that the commenters are suggesting without adding confusion to the regulated facilities, especially in light of the SPCC regulations.

The Agency is aware that animal waste is also generated at other facilities, such as zoos and circuses. Because the focus of the proposal was on animal waste generated or found at farms, EPA did not propose to expand the reporting exemption beyond such facilities. However, because the potential for release to the air of hazardous substances from animal waste at other such facilities may present the same issues that are presented by animal waste at farms, we did specifically request comment on whether the administrative reporting exemption should be expanded to include other types of facilities that also generate animal waste, and if so, what other types of facilities should be included in the reporting exemption.

There was general support by the commenters for including within the exemption other types of facilities (besides farms) that produce animal waste. That is, while commenters generally agreed that the rule should stay narrowly focused, they also argued that other types of facilities that produce animal waste should also be included within the exemption. Several other commenters stated that because the generation of animal waste is a normal biological process, all animals' waste should be administratively excluded from reporting.

EPA appreciates the commenters' arguments that all animals' waste should be excluded; however, we have decided to limit the final rule to animal waste generated or produced at farms, and not include other types of facilities, because the Agency has not looked sufficiently at these other types of facilities to determine the likelihood that the Agency would take a response action, if there was such a release to the air of hazardous substances that meet or exceed their RQ from animal waste.

EPA specifically sought comment on whether there might be a situation where a response would be triggered by such a notification of the release of hazardous substances to the air that meet or exceeds the RQ from animal waste at farms, and if so, what an appropriate response would be to such notifications. Several commenters responded that there are no circumstances where a manure-related release of emissions would trigger an emergency response.

On the other hand, there were some commenters that offered scenarios that described the importance of receiving the notifications. Specifically, one commenter noted that extreme weather fluctuations and various pit pumping techniques may cause emissions to exceed reportable quantities. Such fluctuations ( e.g. , differences in temperature, rainfall frequency and intensity, wind speed, topography and soils) could impact the amount of air emissions released from farms. Another commenter cited a 2004 study entitled, Concentrated Animal Feeding Operations: Health Risks from Air Pollution Institute for Agriculture and Trade Policy, 6 which noted that “when pits are agitated for pumping, some or all of these gases are rapidly released from the manure and may reach toxic levels or displace oxygen, increasing the risk to humans and livestock.”

With respect to responses, one commenter stated that responses may be needed to protect children who live in nearby homes and communities from elevated levels of airborne ammonia and/or the fine particulates that result from the ammonia releases. The commenter suggests that adequate monitoring will provide facility operators with sufficient warning to take remedial actions that will reduce ammonia formation and release before regulatory thresholds are exceeded.

Finally, one commenter stated that EPA has not examined such situations that may arise when maintaining feeding operations and that the Agency has not proven that emergency personnel would not benefit from continuous release reports of hazardous substances from these operations when attempting to save lives or prevent injury quickly in the future.

From a CERCLA section 104 response perspective, based on EPA's experience, the Agency would rarely respond to such scenarios. In any event, we retain our response authorities and would assist State and local officials in their response, if requested. State or local agencies ( i.e. , SERCs and LEPCs) also may require information for emergency planning purposes under section 303(d) of EPCRA and make this information available to the public under section 324 of EPCRA.

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a “significant regulatory action” because it has been determined that it raises novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under EO 12866 and any changes made in response to OMB recommendations have been documented in the docket for this action.

This action does not impose any new information collection burden. Rather, this final rule represents a reduction in burden for both industry and the government by administratively exempting the reporting requirement for releases of hazardous substances to the air that meet or exceed their RQ from animal waste at farms from the CERCLA section 103 notification requirements and to a limited extent, the EPCRA section 304 emergency notification requirements.

However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulation 40 CFR 302 under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2050-0046, EPA ICR number 1049.11 for 40 CFR 302.6 (Episodic releases of oil and hazardous substances), OMB control number 2050-0086, EPA ICR number 1445.07 for 40 CFR 302.8 (Continuous release reporting requirements) (pending approval) and OMB control number 2050-0092, EPA ICR number 1395.06 for 40 CFR 355 (Emergency planning and notification). The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

We estimate that this final rule will reduce burden on farms associated with the notification requirements under CERCLA section 103 and EPCRA section 304 by approximately 1,290,000 hours over the ten year period beginning in 2009 and associated costs by approximately $60,800,000 over the same period. We estimate that this rule will also reduce burden on government (including Federal, State and local governments) for receipt and processing of the notifications under CERCLA section 103 and EPCRA section 304 by approximately 161,000 hours over the ten year period beginning in 2009 and associated costs by approximately $8,110,000 over the same period. In evaluating the potential burden and cost savings to those farms that would no longer be required to make notifications under CERCLA section 103 and EPCRA section 304 and for the government entities that are no longer required to receive and process such notifications, we used the same universe as used in the 2008 CAFO Rule (see 73 FR 70417, Nov. 20, 2008).

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of this rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

Under the statutory and regulatory analyses of the Regulatory Flexibility Act for the proposed rule, we concluded that EPA expects the net reporting and recordkeeping burden associated with reporting air releases of hazardous substances that meet or exceed their RQ from animal waste at farms under CERCLA section 103 and EPCRA section 304 to decrease. We stated that this reduction in burden will be realized by businesses of all sizes. Although we concluded that the rule will relieve regulatory burden for all affected small entities as the statute requires, EPA requested comment on the potential impacts of the proposed rule on small entities and on issues related to such impacts.

One commenter explicitly concurred with EPA's analysis and conclusion that the proposed rule will provide relief from regulatory burden for small entities, stating that: “Small farms should not be affected even if the reporting requirements stay in place because these farms do not generally have a large enough herd of animals to reach the requisite levels of toxins.” EPA appreciates the commenter's perspective that small farms would probably not be affected by the reporting requirements, even if we did not issue this administrative reporting exemption.

After considering the economic impacts of this final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any additional requirements on small entities. Rather, this rulemaking will relieve regulatory burden because we are eliminating the reporting requirement for releases of hazardous substances to the air that meet or exceed their RQ from animal waste at farms under the CERCLA section 103 notification requirements and for those entities below the large CAFO threshold of animal species, as defined under the NPDES program regulations, under the EPCRA section 304 notification requirements. We expect the net reporting and recordkeeping burden associated with reporting air releases of hazardous substances from animal waste at farms under CERCLA section 103 and EPCRA section 304 to decrease. This reduction in burden will be realized by both small and large businesses. We have therefore concluded that this final rule will relieve regulatory burden for all affected small entities.

This action contains no Federal mandates under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538 for State, local, or tribal governments or the private sector.

This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. That is, the final rule imposes no enforceable duty on any State, local or tribal governments or the private sector; rather, this final rule will result in burden reduction in the receipt of notifications under section 103 of CERCLA and for those entities below the large CAFO threshold of animal species, as defined under the NPDES program regulations, under section 304 of EPCRA notification requirements of the release to the air of hazardous substances, primarily ammonia and hydrogen sulfide, that meet or exceed their RQ from animal waste at farms.

Additionally, EPA has determined that this final rule contains no regulatory requirements that might significantly or uniquely affect small governments. This final rule reduces regulatory burden and the private sector is not expected to incur costs exceeding $100 million. Thus, the final rule is not subject to the requirements of Sections 202 and 205 of UMRA.

Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), requires EPA 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 are 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.”

This final rule does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. There are no State and local government bodies that incur direct compliance costs by this final rule. Thus, Executive Order 13132 does not apply to this rule.

This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). This rule does not significantly or uniquely affect the communities of Indian tribal governments, nor would it impose substantial direct compliance costs on them. Thus, Executive Order 13175 does not apply to this action.

EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the EO has the potential to influence the regulation. This action is not subject to EO 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

This action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. This final rule will reduce the burden associated with the notification of releases to air of hazardous substances that meet or exceed their RQ from animal waste at farms.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.

This action does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards.

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. As discussed in the Background section of the preamble for this final rule, the requirement to notify the government under CERCLA section 103 or EPCRA section 304 does not require the notifying entity to take any specific action to address the release. Therefore, because EPA has determined that a response action would be unlikely, EPA does not believe that exempting these releases from CERCLA section 103 notification requirements or to a limited extent EPCRA section 304 emergency notification requirements will have a disproportionately high and adverse human health or environmental effect on minority or low-income populations, especially since the Agency is not limiting any of its other authorities under CERCLA, such as CERCLA sections 104 (response authorities), 106 (abatement actions), 107 (liability), or any other provisions of CERCLA or EPCRA. The Agency also retains its authority to apply existing statutory provisions in its efforts to prevent minority and or low-income communities from being subject to disproportionately high and adverse impacts and environmental effects. We therefore have determined that this final rule does not have disproportionately high and adverse human health or environmental effects on minority or low-income populations.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2). This rule will be effective January 20, 2009.

On May 23, 2008 (73 FR 30030), the Department of Health and Human Services (the Department) published in the Federal Register a proposed rule with a 60-day comment period that described the reporting requirements that we proposed to require of all insurers that issue qualified long-term care insurance policies under the State Long-Term Care Partnership Program. We received three timely pieces of correspondence in response to the proposed rule. Each piece of correspondence addressed multiple issues relating to the provisions of the proposed rule. We summarize these public comments and present the Department's responses to them under the applicable subject-area headings below. In addition, we have posted, for reviewers' convenience, all of the public comments received on the following Web site: http://www.regulations.gov.

The proposed rule and this final rule describe the reporting requirements that the Department is requiring of all insurers that issue long-term care insurance policies under a State Long-Term Care Partnership Program for a State with as Medicaid State plan amendment approved after May 14, 1993. We point out that neither the proposed rule nor this final rule requires participating insurers to report data from States with a Partnership Medicaid State plan amendment approved as of May 14, 1993. In addition to the promulgation of the proposed rule and this final rule, the Department anticipates taking other actions to further the implementation of the Long-Term Care Partnership Program. One such action is publication of a separate Federal Register notice containing Partnership State Reciprocity Standards. These standards outline an agreement whereby States can provide Medicaid asset disregards for Partnership policies purchased in other States.

Comment: One commenter suggested that language be added in the final rule to make clear that insurers are not required by the regulation to report Partnership data to the Department for States with a Partnership Medicaid State plan amendment approved as of May 14, 1993.

Response: We have added language above and in other applicable sections of this final rule, as the commenter suggested, to make clear the nonapplicability of the reporting requirements for submission of Partnership data by insurers in States with a Partnership Medicaid State plan amendment approved as of May 14, 1993.

In the late 1980's, a number of State Medicaid programs began to work with private insurance companies to create a bridge between Medicaid and insurance for long-term care. The goal of these collaborations was to create private insurance policies that were more affordable and provide better financial protection to consumers against large liabilities for long-term care costs than the policies generally available at that time. The result of these collaborations was the establishment of the State Long-Term Care Partnership Program that provided for expanded access to Medicaid by allowing applicants who use long-term care insurance policies to have higher assets and still be eligible for Medicaid, as long as they meet all other Medicaid eligibility criteria. The first four States that implemented Partnership programs, in 1993 (California, Connecticut, Indiana, New York), used two different methods for determining the amount of assets a participant was allowed to keep. Three States allowed participants to keep an amount equivalent to the amount paid by the insurance policy on his or her behalf (known as the “dollar-for-dollar approach”). The other State required the purchase of a more comprehensive policy and, in exchange, allowed participants to keep all of their assets (known as the “total assets approach”). Over time, one State combined these models to create a hybrid approach in which participants purchasing and using a policy that would cover fewer than 4 years of benefits would be allowed to keep one dollar for every dollar of paid benefits and those participants purchasing and using a policy that would cover 4 or more years of benefits would be allowed to keep all of their assets. These State partnership programs provided an incentive for insurers to offer affordable, high-quality benefits and for consumers to protect themselves against the high cost of long-term care through the purchase of insurance policies that can be used in conjunction with benefits provided under Medicaid.

As part of the implementation process, each of the four States that initially implemented Partnership programs in 1993 outlined a set of data reporting requirements for participating insurers. The data that were to be collected were intended to allow each State to monitor program activities and evaluate the impact of the Partnership Program on Medicaid long-term care expenditures. The insurers who participated in these partnerships recommended, as part of the design of the data collection requirements, that the participating States use a unified set of reporting requirements to streamline the reporting burden on the participating insurers. The participating insurers believed that if each State designed its own reporting requirements, the administrative costs for the program would be prohibitive. The four States agreed with the participating insurers and adopted a uniform set of reporting criteria.

The four initial States launched their Partnership programs using existing State authority through amendments to their State Medicaid plans (Partnership Medicaid State plan amendments). Each State requested a change in the treatment of assets in the Medicaid financial eligibility test. No other Federal authority was necessary at that time to operate the programs.

Comment: One commenter suggested that language be added to the Background section of the final rule to make clear that consumers who take advantage of the Partnership Program must also meet all other Medicaid eligibility requirements. Two commenters suggested that the discussion of the amount of asset protection offered under the original Partnership Programs be expanded in the final rule to reflect the differences between the “dollar-for-dollar model” and the “total assets model.”

Response: We have added language above in this final rule, as the commenters suggested, to specify that consumers who take advantage of the Partnership Program must also meet all other Medicaid eligibility requirements and to explain the differences between the “dollar-for-dollar model” and the “total assets model.”

Comment: One commenter suggested that language indicating that the regulations do not require insurers to report Partnership data to the Department for States with a Partnership Medicaid State plan amendment approved as of May 14, 1993, be added to the section of the final rule discussing the agreement reached by the original four States pertaining to a unified data reporting structure.

Response: The section in which the commenter is requesting a change relates to the history of the Partnership programs and is not an appropriate place to discuss the scope of the new regulations. However, we have incorporated the language in section II. (Scope) of this final rule, as well as in other applicable sections, to address the nonapplicability of the reporting requirements for Partnership data for States with a Partnership Medicaid State plan amendment approved as of May 14, 1993.

The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), Public Law 103-66, contained language that changed the conditions under which Medicaid State plan amendments relating to asset disregards for private long-term care insurance could be approved. OBRA 1993 allowed California, Connecticut, Indiana, and New York, as well as Iowa and Massachusetts, to continue their initial Long-Term Care Partnership Programs. However, OBRA 1993 specified a set of requirements for any additional States that chose to operate a Partnership Program. Any State, other than the initial four partnership States, that sought a Medicaid State plan amendment on or after May 14, 1993, was required to abide by the following additional conditions:

States establishing Long-Term Care Partnership Programs on or after May 14, 1993, were required to recover from the estates of Medicaid recipients in States with partnership agreements expenses incurred for the provision of long-term health care under Medicaid. Assets that were disregarded in the initial financial eligibility process were also exempt from estate recovery in the initial four States with Partnership Programs. States establishing new Partnership Programs were only allowed to disregard assets in the initial eligibility process but not in the estate recovery process. After a Medicaid recipient who had a long-term care insurance policy issued under a State Long-Term Partnership Program died, the State was required to recover an amount equivalent to what Medicaid spent on his or her behalf from the deceased recipient's estate, including any protected assets under the State Long-Term Care Partnership Program.

States establishing Long-Term Care Partnership Programs on or after May 14, 1993, were precluded from waiving the estate recovery requirement for Medicaid recipients who had obtained long-term care insurance policies under a State Long-Term Care Partnership Program.

States establishing Long-Term Care Partnership Program on or after May 14, 1993, were also required to use a specific definition of “estate” for recovery purposes when recovery of Medicaid expenditures was against the estates of Medicaid recipients who had obtained long-term care insurance policies issued under a State Long-Term Care Partnership Program. This definition was more expansive than the definition that was generally used by States.

While OBRA 1993 did not forbid additional States from attempting to establish new Long-Term Care Partnership Programs under the new conditions, the impact was essentially the same as a ban. A few States tried unsuccessfully to launch partnership programs under the new conditions. Other interested States passed enabling legislation with contingency language that allowed the State to proceed if the OBRA 1993 partnership provisions were repealed. No subsequent Federal legislation related to the Long-Term Care Partnership Programs was enacted until the Deficit Reduction Act of 2005 (DRA) Public Law 109-171. As discussed in detail under section II.A.3. of this proposed rule and under section III.A.3. of this final rule, the DRA included provisions that allow States to offer specific asset disregards for Medicaid eligibility purposes under a new set of conditions.

Section 6021(a)(1) of the DRA amended section 1917(b)(1)(C)(i) of the Act and added new sections 1917(b)1)(C)(iii) through (vi) to the Act that provide for an expansion of the State Long-Term Care Insurance Partnership Program through a new set of conditions. These conditions pertain to States with Partnership Medicaid State plan amendments approved after May 14, 1993. Under this provision, States may establish “qualified State long-term care insurance partnerships”, defined in the Act as an approved Medicaid State plan amendment under Title XIX of the Act that provides for the disregard of any assets or resources in an amount equal to the insurance benefit payments that are made to or on behalf of an individual who is a beneficiary under a long-term care insurance policy if certain requirements specified in sections 1917(b)(1)(C)(iii)(I) through (VII) of the Act are met. In other words, States establishing new Partnership programs must offer a dollar of asset disregard for every dollar paid out under a long-term care insurance policy issued under that State's long-term care partnership program.

Section 1917(b)(1)(C)(iii)(II) of the Act provides that the insurance policy must be a qualified long-term care insurance policy as defined in section 7702B(b) of the Internal Revenue Code of 1986, that is issued not earlier than the effective date of the State plan amendment. (If an individual has an existing long-term care insurance policy that does not qualify as a qualified partnership policy due to the issue date of the policy, and that policy is exchanged for another policy, the State insurance commissioner or other State authority must determine the issue date for the policy that is received in exchange. Under this provision, a long-term care insurance policy includes a certificate issued under a group insurance contract.)

Among other requirements specified in the statute for qualified long-term care insurance partnerships—

• The long-term care insurance policy must (1) be issued to an insured individual who is a resident of the State in which coverage first became effective under the policy (sections 1917(b)(1)(C)(iii)(I) of the Act); (2) be certified by the State insurance commissioner or other appropriate authority that the policy meets specific provisions of the National Association of Insurance Commissioners (NAIC) October 2000 Model Regulation and Model Act (sections 1917(b)(1)(C)(iii)(III) and 1917(b)(5)(B) of the Act); and (3) include certain protections against inflation on an annual basis (section 1917(b)(1)(C)(iii)(IV) of the Act).

• The State Medicaid agency must provide information and technical assistance to the State insurance department on the insurance department's role of assuring that any individual who sells a long-term care insurance policy under the partnership receives training and demonstrates evidence of an understanding of such policies and how they relate to other public and private coverage of long-term care (section 1917(b)(1)(C)(iii)(V) of the Act).

• Issuers of long-term care insurance policies under a State qualified long-term care insurance partnership must provide regular reports to the Secretary, in accordance with regulations of the Secretary, that include notification regarding when benefits provided under the policy have been paid and the amount of such benefits paid, notification regarding when the policy otherwise terminates, and such other information as the Secretary determines may be appropriate to the administration of State long-term care insurance partnerships (section 1917(b)(1)(C)(iii)(VI) of the Act). Section 1917(b)(1)(C )(v) of the Act provides that the regulations required under section 1917(b)(1)(C)(iii)(VI) of the Act shall be promulgated after consultation with the NAIC, issuers of long-term care insurance policies, States with experience with long-term care insurance partnership plans, other States, and representatives of consumers of long-term care insurance policies, and shall specify the type and format of the data to be reported and the frequency with which such reports are to be made. In addition, the Secretary, as appropriate, shall provide copies of the reports provided in accordance with that clause to the State involved.

• The State may not impose any requirement affecting the terms of benefits of a policy under the partnership program unless the State imposes such requirement on long-term care insurance policies without regard to whether the policy is covered under the partnership or is offered in connection with such a partnership (section 1917(b)(1)(C)(iii)(VII) of the Act).

Section 1917(b)(1)(C)(iv) of the Act provides that a State that had a State plan amendment approved as of May 14, 1993, satisfies the requirements of the statute under clause (II) and may continue operating as originally implemented if the Secretary determines that the State Medicaid plan amendment provides for consumer protection standards that are no less stringent than the consumer protection standards that applied under such a State plan amendment as of December 31, 2005.

Comment: One commenter requested that the language that describes the impact of the DRA of 2005 be modified in the final rule to clearly indicate that the conditions set forth in sections 6021(a) through (c) of the DRA of 2005 pertain only to States with Partnership Medicaid State plan amendments approved after May 14, 1993. One commenter suggested that the description of the “grandfathered” States also make clear that the regulations do not pertain to States with a Partnership Medicaid State plan amendment approved as of May 14, 1993.

Response: We have added language above and in other applicable sections in this final rule, to make these clarifications, as suggested by the commenters.

Currently, there are no Federal regulations directly related to State operation of State Long-Term Care Partnership Programs. In 2006, the Department provided guidance to States, through a letter to Medicaid Directors, on the implementation of State long-term care partnership programs under the DRA. In areas in which the program coordinates benefits with Medicaid coverage of long-term care, the existing Medicaid regulations at 42 CFR Chapter IV, Subchapter C, are applicable. In 2006, States were provided with guidance on the implementation of State Long-Term Care Partnership Programs under the DRA of 2005.

To implement section 1917(b)(1)(C)(iii)(VI) and 1917(b)(1)(C)(v) of the Act, as directed by the statute, in the May 23, 2008 proposed rule (73 FR 30033), we proposed to set forth in regulations the requirements for reporting information and data on qualified long-term care insurance policies issued under State Long-Term Care Partnership Programs under an approved State plan amendment. In this final rule, we are adopting the regulations as final with some technical changes, as discussed below.

California, Connecticut, Indiana, Iowa, Massachusetts, and New York had approved State Long-Term Partnership Programs under an approved State plan amendment as of May 14, 1993. They were “grandfathered” as satisfying the statutorily imposed requirements when, pursuant to section 1917(b)(1)(C)(iv) of the Act, the Secretary determined that the State plan amendments of these States provide protection no less stringent than that applied under their State plan amendments as of December 31, 2005.

At the time we issued the proposed rule, we stated that, as of December 2007, seven other States offered State Long-Term Care Partnership policies for sale under the DRA provisions: Florida, Idaho, Kansas, Minnesota, Nebraska, South Dakota, and Virginia. Nine States had approved State plan amendments for qualified State Long-Term Care Partnership Programs although policies had not yet been issued pursuant to those programs: Colorado, Florida, Georgia, Iowa, Minnesota, Missouri, North Dakota, Nevada, Ohio, and Oregon. Four States had submitted State plan amendments for which approval is pending: Arizona, New Hampshire, Oklahoma, and Pennsylvania. Ten other States were in the process of developing Partnership Programs: Illinois, Maine, Maryland, Michigan, Montana, New Jersey, Rhode Island, Texas, Vermont, and Wisconsin.

As of August 2008, Partnership policies are still for sale in the four States that first implemented a Partnership program, as well as in 13 additional States. Nine States have approved Medicaid State plan amendments, although policies are not yet for sale. Three other States have Medicaid State plan amendments pending approval from the Centers for Medicare and Medicaid, HHS.

As stated earlier, the DRA of 2005 requires insurers participating in State long-term care partnership programs to provide regular reports to the Secretary in a manner in accordance with regulations of the Secretary. The reports must include notification regarding when benefits provided under the policy have been paid and the amount of the benefits paid, notification regarding when the policy otherwise terminates, and any other information as the Secretary determines may be appropriate to the administration of State long-term care insurance partnerships. Section 1917(b)(1)(C )(v) of the Act provides that the regulations required under section 1917(b)(1)(C)(iii)(VI) of the Act must be promulgated after consultation with the NAIC, issuers of long-term care insurance policies, States with experience with long-term care insurance partnership plans, other States, and representatives of consumers of long-term care insurance policies, and must specify the type and format of the data to be reported and the frequency with which the reports are to be made. In addition, the Secretary, as appropriate, must provide copies of the reports provided in accordance with that clause to the State involved.

In accordance with section 1917(b)(1)(C)(v) of the Act, as added by the DRA of 2005, as we discussed in the proposed rule, we have consulted with numerous stakeholders in the development of the reporting requirements presented in this rule. In addition to one-on-one consultations with stakeholders representing States, insurers, consumers, and regulators, we have established a Technical Expert Panel to provide a forum for the exchange of ideas, perspectives, and expertise regarding the specification of individual data items. The Technical Expert Panel consists of approximately 25 members representing insurers, States, consumer organizations, the NAIC, the Federal Government, and the policy research community. The panel members were selected in January 2007, from responses to invitations sent by HHS along with an initial draft of the reporting requirements. We held numerous meetings and teleconferences with the panel members to discuss and further develop the draft reporting requirements and to obtain further input on partnership implementation. The reporting requirements presented in the proposed rule and finalized in this final rule represent the product of this ongoing stakeholder input process. We plan to continue ongoing work with the Technical Expert Panel.

In the proposed rule, the Department proposed to establish under Title 45, Part 144 of the Code of Federal Regulations a new Subpart B to incorporate the requirements for the reporting of data by insurers on qualified long-term care insurance policies issued under State Long-Term Care Partnership Programs that are established under an approved Medicaid State plan amendment. Specifically—

Proposed § 144.200, which contained the basis for the regulations.

Proposed § 144.202, which included the definitions used throughout the subpart.

Proposed § 144.204, which specified the applicability of the regulations under the subpart.

Proposed § 144.206, which specified the requirements for reporting of long-term care partnership program data and the frequency with which insurers must report the data.

Proposed § 144.208, which specified the deadlines for submission of reports.

Proposed § 144.210, which specified the format and manner in which the data are to be reported.

Proposed § 144.212, which specified the confidentiality of information requirements that will be applied.

Proposed § 144.214, which specified the action that the Secretary will take if an insurer fails to report the required data by the specified deadlines.

Under proposed § 144.202, Definitions, we included the following definitions:

Partnership qualified policy refers to a qualified long-term insurance policy issued under a qualified State long-term care insurance partnership.

Qualified long-term insurance care policy means an insurance policy that has been determined by a State insurance commissioner to meet the requirements of sections 1917(b)(1)(C)(iii)(I) through (IV) and 1917(b)(5) of the Act. It includes a certificate issued under a group insurance contract.

Qualified State long-term care insurance partnership means an approved Medicaid State plan amendment that provides for the disregard of any assets or resources in an amount equal to the insurance benefit payments that are made to or on behalf of an individual who is a beneficiary under a long-term care insurance policy that has been determined by a state insurance commissioner to meet the requirements of section 1917(b)(1)(C)(iii) of the Act [incorrectly cited in the proposed rule as section 1917(b)(a)(C)(iii)]. It includes any Medicaid State plan amendment approved as of May 14, 1993 [incorrectly stated in the proposed rule as May 4, 1993], that meets the requirements of section 1917(b)(1)(C)(iii) of the Act and for which the Secretary determined that the State plan amendments provides for consumer protection standards that are no less stringent than the consumer protection standards that applied under the State plan amendment as of December 31, 2005.

Comment: The commenter suggested that the word “care” be inserted into the definition of “Partnership qualified policy.” One commenter pointed out that we had reversed the order of two words and therefore incorrectly labeled the definition of “qualified long-term care insurance policy” as “qualified long-term insurance care policy”

Response: We agree with the first commenter's suggestion and have revised the definition of “Partnership qualified policy” in this final rule to refer to a qualified long-term care insurance policy issued under a qualified State long-term care insurance partnership. We thank the commenter for bringing to our attention the inadvertent mislabeling of the definition of “qualified long-term care insurance policy” and have made the correction in this final rule.

Comment: One commenter suggested that the definition of a “Qualified State long-term care insurance partnership” be modified to clarify that the regulations do not require insurers to report Partnership data to the Department for States with a Partnership Medicaid State plan amendment approved as of May 14, 1993.

Response: In response to the commenter's suggestions, we have revised the proposed definition for “Qualified State long-term care insurance partnership”, by removing the last sentence of the definition, to clarify that the regulations do not require insurers to report Partnership data to the Department for States with a Partnership Medicaid State plan amendment approved as of May 14, 1993.

After consideration of the public comments received, we are adopting as final proposed §§ 144.200, 144.202, and 144.204, with the following modifications. We have revised the definition of “Partnership qualified policy” by adding the word “care” in the definition. We have corrected the inadvertent mislabeling of the definition of “Qualified long-term care insurance policy.” We have revised the definition of “Qualified State long-term care partnership” by removing the last sentence of the proposed definition.

Each of the additional proposed regulatory requirements is discussed in detail in the sections below.

As discussed in the proposed rule, in consultation with stakeholders and the Technical Expert Panel, we developed requirements for insurers for reporting data under the State Long-Term Care Partnership Program under two categories: (1) Registry data; and (2) claims data (proposed § 144.206).

We proposed that these two categories would require the submission of data in four distinct file types. Generally, participating long-term care insurers will report under only two of these files. For all four file types, as we proposed, we are requiring insurers to report on only those insured individuals, policyholders, and claimants who have active qualified long-term care insurance partnership policies or certificates. The reporting requirements will not apply to insurance policies or certificates that are not partnership qualified.

Insurer reporting specifications are detailed in an HHS document entitled “State Long-Term Care Partnership Insurer Reporting Requirements” which we expect will be available via the Internet at the Web site at: http://aspe.hhs.gov/daltcp/reports/2008/PartRepReq.pdf no later than October 1, 2008. (We noted in the proposed rule that we expected that this document would be available by June 1, 2008. However, the release date has been delayed.) We are in the process of developing an integrated database through which insurers will submit these data. As we proposed, we are requiring that data be submitted through a secure Web site that meets all current Health Insurance Portability and Accountability Act requirements for security of personal health information.

In the proposed rule (73 FR 30034), we proposed to require insurers to report data, on a semiannual basis, on all insured individuals who have been issued qualified long-term care insurance policies or certificates under qualified State Long-Term Care Partnership Programs; that is, for the 6-month reporting periods of January 1 through June 30 and July 1 through December 31 of each year (proposed § 144.206(b)(1)(ii)). We proposed that the reports must include data on qualified long-term care insurance partnership policies sold on either an individual basis or a group basis, as long as individual-level data are available to the insurer. Under proposed § 144.206(b)(1)(iii), these data would include, but are not limited to, the following:

• Current identifying information on each insured individual.

• The name of the insurance company and the issuing State.

• The effective date and terms of coverage under the policy.

• The coverage period and benefits.

• The annual premium.

• Other information as specified by the Secretary in “State Long-Term Care Insurance Partnership Insurer Reporting Requirements.”

Comment: One commenter pointed out that we used different terminology in the proposed rule to describe the instruction document we would issue for reporting data.

Response: We thank the commenter for bringing this inconsistency to our attention. In the proposed rule, we inconsistently used the term “Reporting Instructions” when referring to the title of this document; rather, we should have used “Reporting Requirements.” Throughout this final rule, we have standardized references to the document containing the detail instructions for insurers on how to report data to the Department under the title “State Long-Term Care Partnership Insurer Reporting Requirements.”

After consideration of the public comments received, we are adopting as final our proposed § 144.206 with one technical change to the title of the instruction document, as discussed above.

In the proposed rule, we proposed to require insurers to report data, for each quarter of the calendar year, on all benefit claims paid for all insured individuals who have been issued qualified long-term care insurance policies or certificates (individual policies or under group coverage plans) under qualified State Long-Term Care Partnership Programs (proposed § 144.206(b)(2)). Under proposed § 144.206(b)(2)(ii), these data would include, but are not limited to, the following:

• Current identifying information on the insured individual.

• The type and cash amount of the benefits paid during the reporting period and lifetime to date.

• Remaining lifetime benefits.

• Other information as specified by the Secretary in “State Long-Term Care Insurance Partnership Insurer Reporting Requirements.”

We did not receive any public comments on this section other than the notification that we had used different titles for the instruction document discussed above. Therefore, we are adopting as final the proposed provisions of § 144.206 with the technical change noted above.

In the proposed rule, we proposed to require insurers to submit data for different reporting periods, depending upon the file type.

We proposed to require insurers to submit the required registry data to the Secretary on a semiannual basis; that is, for the 6-month reporting period of January 1 through June 30 and July 1 through December 31 of each year under proposed § 144.206(b)(1)(ii). The proposed deadline for submittal of registry data reports was 30 days after the end of the reporting period (proposed § 144.208(b)).

Comment: One commenter stated that the discussion of frequency of reports in the preamble of the proposed rule failed to list the frequency of the reports on insurance claims.

Response: The commenter is correct. Even though we specified the frequency of the reports on insurance claims data in the regulation text under proposed § 144.208(c), we did not include a detailed discussion in the preamble. The description of the submission of the claims data along with a reference to the detailed documentation of the reporting requirements is as follows:

We are requiring insurers to submit the required claims data to the Secretary on a quarterly basis; that is, for the 3-month reporting period of January 1 through March 30, April 1 through June 30, July 1 through September 30, and, October 1 through December 31 of each year under § 144.206(b)(2)(i). The deadline for submittal of claims data reports is 30 days after the end of the reporting period (§ 144.208(c)). Detailed reporting instructions can be found on the Internet at the Web site: http://aspe.hhs.gov/daltcp/reports/2008/PartRepReq.pdf.

After consideration of the public comments received, we are adopting as final proposed §§ 144.208(b) and (c) without modification.

For insurers who have issued or exchanged a qualified Partnership policy prior to the effective date of the final regulations we issue, we proposed a transition provision under § 144.208(a). We proposed that the first reports required for these insurers would be the reports that pertain to the reporting period that begins no more than 120 days after the effective date of the final regulations.

We did not receive any public comments on the proposed § 144.208(a). Therefore, we are adopting it as final without modification in this final rule.

In the proposed rule, we proposed to require that insurers submit the required data in the format and manner specified by the Secretary in the HHS-issued insurer reporting specifications document, “State Long-Term Care Insurance Partnership Insurer Reporting Requirements” (proposed § 144.210). As we mentioned earlier, we are in the process of developing an integrated database that would be accessible through a secure Web site, and we plan to issue instructions as to how insurers will access and input the required data into the HHS reporting system.

We did not receive any public comments on the proposed § 144.210. Therefore, we are adopting it as final without modification in this final rule.

As we discussed in the proposed rule, the overall purpose of the data is twofold: First, to be used in efforts to monitor program performance at both the State and Federal level; and second, to provide data for a longer term evaluation of the effectiveness of the Partnership Program. The Department and the States participating in the State Long-Term Care Partnership Program will use the information provided by insurers in compliance with the reporting requirements for analytical studies and for program monitoring. The data provided by insurers will reflect the combined experience of all State Long-Term Care Partnership Programs in terms of policies sold and benefits used. We plan to use the data to produce reports for Congress and other interested stakeholders on the implementation of the State Long-Term Care Partnership Program. In addition, we plan to use the data to generate individual State-level reports that will be used by the States to track the implementation of the Partnership Program at the State level. The Department may also use the data to examine public policy issues related to long-term care insurance in general as opportunities arise.

HHS does not intend to use the data to determine asset disregard levels for individuals who participate in the State Long-Term Care Partnership Program and eventually apply for Medicaid coverage. We will not collect data on “point in time” information regarding the amount of insurance benefits used by claimants, nor exact information on when private insurance benefits may be exhausted, which clearly would depend upon how claimants use benefits to purchase long-term care services. The computation of asset disregard levels and the determination of Medicaid eligibility coverage are matters that will be dealt with among the insurer, the insured individual, and the State Medicaid eligibility office. We expect that when insured individuals exhaust their insurance coverage (or otherwise become eligible for Medicaid prior to the exhaustion of benefits), insurers will provide them with documentation of their participation in the State Long-Term Care Partnership Program and of the amount of benefits that the insured received. This documentation will become part of the entire documentation provided by the insured individual at the time he or she applies for Medicaid. The Medicaid eligibility office will then determine, based upon the documentation provided by the applicant, the asset disregard level that will be applied.

It is possible that State Medicaid programs may wish to access the collected data for monitoring purposes, to help them anticipate the number of insured individuals who may become eligible for Medicaid asset disregards over a projected time period. For example, through reports provided to each State from the integrated database, States would know how many partnership policyholders are “in claim” during any 3-month reporting period. States would also know, approximately, to what extent policyholders who are in claim have utilized the insurance benefits for which they are eligible and the amount of benefits remaining under their policy maximums. However, once an insured individual uses his or her insurance benefits under the policy, his or her eligibility for Medicaid will still depend upon the amount of available assets he or she retains, relative to his or her asset disregard, as well as other Medicaid eligibility criteria. For example, an insured individual may be eligible for an asset disregard of $150,000, but still retains $250,000 in countable assets. In this case, he or she would have to spend down $100,000 of his or her available assets before applying for Medicaid coverage. Thus, in general terms, States will be able to use the data to project future applications for Medicaid (and their potential budgetary impacts) but, at the individual level, the specific financial circumstances of each insured individual would determine his or her eligibility for Medicaid coverage.

Comment: One commenter suggested that the Department consider a broader use of the data to investigate a number of issues related to long-term care insurance in general as well as issues related to the Partnership Program.

Response: The Department will explore using the Partnership data to examine other issues related to long-term care insurance, to the extent possible. We have modified the preamble discussion above to indicate this.

Comment: One commenter suggested that the language included in this section of the preamble of the proposed rule could imply that participants must exhaust their benefits before they can take advantage of the Partnership Program.

Response: The commenter is correct in asserting that exhaustion of benefits is not required by the DRA of 2005. Participants may apply for a Medicaid asset disregard before they have exhausted their insurance benefits. We have modified the preamble language in this final rule to reflect the possibility that someone may apply for Medicaid and seek an asset disregard before they have exhausted their insurance benefits.

The DRA of 2005 explicitly states that there is nothing in the statute that prohibits States from imposing additional reporting requirements on insurers participating in the Long-Term Care Partnership Program, beyond the Federal reporting requirements that we proposed in the proposed rule and are finalizing in this final rule. This regulation does not require insurers to report Partnership data to the Department for States with a Partnership Medicaid State plan amendment as May 14, 1993. However, we believe that the information that will be made available to the Secretary and to the States participating in the Long-Term Care Partnership Program through these mandated reporting requirements will be sufficient to meet the policy analysis and program monitoring needs of the States. We, as well as the stakeholders participating in the development of these reporting requirements, attempted to achieve a proper balance between the legitimate needs of the Federal Government and State governments to monitor the implementation and operation of the State Long-Term Care Partnership Program, and the desire not to impose undue cost burdens on participating insurers, to the point where they may consider it not economically beneficial to participate in the Partnership Program.

Comment: One commenter suggested that the discussion of State-mandated reporting in the final rule be revised to clarify that nothing in the regulation prohibits any State (including grandfathered States) from requiring data from participating Partnership insurers. The commenter further suggested that the section describe the motivations of States for requiring State-specific data. The commenter also suggested that all references to costs of data collection on the part of insurers be deleted. The commenter stated that the costs of reporting are “often minimal or nonexistent.”

Response: We are not modifying the language in this section as the commenter suggested. The balance between the Government's need for data and the cost burden on participating insurers is, in our view, a real issue, especially given the varying size of different participating States. Finding a balance between the need for data and the cost burden was part of the charge given to the stakeholder group mandated by the DRA. We believe the discussion of the costs of data collection in this section is appropriate and that its presence does not diminish States' ability to negotiate for State-specific data.

In the proposed rule, we proposed to provide in the regulations that the data collected and reported under the requirements of the regulations would be subject to the confidentiality of information requirements specified in regulations under 42 CFR Part 401, Subpart B, and 45 CFR Part 5, Subpart F and any other applicable confidentiality statute or regulation (proposed § 144.212).

We did not receive any public comments on this section. Therefore, we are adopting as final the proposed § 144.212 without modification in this final rule.

In the proposed rule, we proposed under § 144.214 that if an insurer of a qualified long-term care insurance policy does not submit the required reports by the due dates specified in the new subpart B of 45 CFR Part 144, the Secretary notifies the appropriate State insurance commissioner within 45 days after the deadline for submission of the information and data specified in § 144.208.

We did not receive any comments on this proposed section. Therefore, we are adopting as final the proposed § 144.214 without modification.

Section 1917(b)(1)(C)(v) of the Act provides that the Secretary, as appropriate, must provide copies of the reports provided by insurers to the State involved. We plan to make reports containing the reported data available to States in a timely and efficient manner.

The Department of Health and Human Services has determined that this notice of proposed rulemaking contains information collections that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520). In compliance with the requirement of section 3506(c)(2)(A) of the PRA , the Office of the Secretary (OS), Department of Health and Human Services, published in the May 23, 2008, proposed rule the following summary of a proposed information collection request for public comment. Interested persons were invited to send comments regarding the burden estimate or any other aspect of the collection of information, including any of the following subjects: (1) The necessity and utility of the proposed information collection for the proper performance of the agency's functions; (2) the accuracy of the estimated burden; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) the use of automated collection techniques or other forms of information technology to minimize the information collection burden.

Individuals were given the opportunity to request and obtain copies of the supporting statement and any related forms for the proposed paperwork collections described below. Written comments and recommendations for the proposed information collections were due within 60 days of publication of the proposed rule.

Further, the Department acknowledges that this regulation is covered under the Privacy Act and that this collection of data constitutes a System of Records. The Department is publishing elsewhere in this issue of the Federal Register a System of Records Notice for this collection of data.

Title: Partnership for Long Term Care Data Set.

Description: This information collected under the final rule is intended for insurers participating in the State Long-Term Care Partnership Program as authorized by the DRA of 2005. Insurers will provide data in the prescribed format to the Department on Partnership certified long-term care insurance policies for partnership participants in states with Partnership Medicaid state plan amendments approved after May 14, 1993. The requirements include the identity of the policy holder, the type of coverage purchased, and the amount of insurance benefits used. Data from this submission will be provided to State Medicaid agencies to assist in determining the amount of asset protection earned by program participants.

Comment: One commenter brought to our attention two technical errors in the narrative portion of the instruction document and another error in the detailed data element specifications.

Response: We have made the appropriate changes to the instruction document, which is now listed as Version 1.1. This instruction document is available on the Web site at: http://aspe.hhs.gov/daltcp/reports/2008/PartRepReg.pdf.

It is estimated that insurers participating in the Partnership Program will be able to provide the necessary reports from data currently within their insurance operations systems. Fulfilling the reporting requirements will require that they write programs to extract the data in the manner specified by the Department. There are no costs to the respondents, other than their time.

We indicated that public comments addressed as a result of the notice in the proposed rule would be taken into account in the formal OMB request for clearance for this data collection. The new information collection provisions in this final rule have been approved by OMB under OMB control number 0990-0333, effective through December 31, 2011.

We have examined the impacts of this final rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review) and the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.

Executive Order 12866 (as amended by Executive Order 13258, which merely reassigns responsibility of duties) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year).

While we have determined that this final rule is not economically significant, it is, however, a significant regulatory action. We estimate that the aggregate cost to participating private insurers of implementing the reporting requirements in this final rule will be approximately $1.5 million.

The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies. Most insurance companies are not considered to be small entities because they generally have revenues of more than $29 million in any 1 year. (For details, see the Small Business Administration's final rule that sets forth size standards for industries at 65 FR 69432, November 17, 2000.) For purposes of the RFA, all insurance companies are not considered to be small entities. Individuals and States are not included in the definition of a small entity. However, we solicited comments on our estimates and analysis of the impact on insurers of the proposed rule.

There are approximately 100 insurance companies located nationwide that issue long-term care insurance policies. We expect that, of these 100 companies, approximately 30 insurance companies will participate in qualified State Long-Term Care Partnership Programs. Currently, there are 15 to 20 companies operating in States that are selling or have issued qualified long-term care insurance policies under the State Long-Term Care Partnership Programs. As of December 2007, approximately 300,000 policies have been sold. We believe this represents approximately 80 percent of the policies that might be sold when the Partnership Programs are established nationwide. We anticipate that the number of insurance companies selling qualified long-term care insurance partnership policies might increase by about 10 as more States obtain approved State plan amendments to operate State Long-Term Care Partnership Programs.

As we stated earlier, insurers participating in the original four Partnership Programs have been reporting data on policies sold and benefits used in the program for more than a decade. The reporting requirements in this final rule were designed to take advantage of data already available in insurer data sets. Insurers will not be asked to collect new data, but simply to recode existing data into a common format for submission to the Secretary. It is estimated that participating insurers will have to make a one-time investment to produce the computer programs necessary to compile the reports. Should the reporting requirement change in the future, there will also be a cost to make the necessary changes. We are estimating that the programming will require 400 hours of labor on average (this number will vary widely by company depending on the type of systems used) to create the necessary changes. We also estimate an average cost per hour of programming time of $125. The cost per company is estimated at $50,000 and the total estimate for all companies is estimated at $1.5 million.

Subsequently, there will be a much smaller investment to run the quarterly and semi-annually reports. The data submissions were designed to be primarily snapshots of data elements in the insurers' files with very little tabulation or summary reporting. We note that all of the currently participating insurers participated in the development of the reporting requirements in this final rule and have given their consensus to the requirements.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed rule (and subsequent final rule) that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. This final rule does not affect small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $120 million. This final rule will not mandate any requirements for State, local, or tribal governments. However, it will affect private sector costs to insurance companies who sell qualified long-term care insurance partnership policies. We note that participation by insurers in the Partnership Program is voluntary. We have also determined that the costs of reporting the required data are not significant.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. As stated above, this final rule will not have a substantial effect on State and local governments.

FAR 12.503 and 12.504 list the laws that are inapplicable to Executive agency contracts and subcontracts for the acquisition of commercial items. The DFARS supplements the FAR listing with those laws unique to DoD at 212.503 and 212.504.

This final rule removes Section 806 of Public Law 102-190, Payment Protections for Subcontractors and Suppliers, from the lists at DFARS 212.503 and 212.504, since this law was added to the lists at FAR 12.503 and 12.504 in the final rule published at 73 FR 54007 on September 17, 2008. This rule also amends DFARS 212.504 to remove the paragraphs that were designated as “Reserved.”

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

This rule will not have a significant cost or administrative impact on contractors or offerors, or a significant effect beyond the internal operating procedures of DoD. Therefore, publication for public comment under 41 U.S.C. 418b is not required. However, DoD will consider comments from small entities concerning the affected DFARS subpart in accordance with 5 U.S.C. 610. Such comments should cite DFARS Case 2008-D021.

The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

10 U.S.C. 2533a restricts DoD procurement of foreign synthetic fabric or coated synthetic fabric, including textile fibers and yarns for use in such fabrics. Section 807 of the National Defense Authorization Act for Fiscal Year 1999 (Pub. L. 105-261) provides authority for DoD to waive the restriction at 10 U.S.C. 2533a with regard to para-aramid fibers and yarns. On February 12, 1999, the Under Secretary of Defense for Acquisition and Technology waived the restriction at 10 U.S.C. 2533a for para-aramid fibers and yarns manufactured in the Netherlands. On August 15, 2008, the Under Secretary of Defense for Acquisition, Technology, and Logistics expanded the existing waiver to permit the acquisition of para-aramid fibers and yarns manufactured in any qualifying country listed in DFARS 225.872-1.

This interim rule amends DFARS text addressing the acquisition of para-aramid fibers and yarns to implement the Under Secretary's August 15, 2008 determination. In addition, the rule clarifies the definition of “qualifying country” at DFARS 225.003 and 252.225-7012 by including a list of the qualifying countries within the definition instead of referring to the list at DFARS 225.872-1.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because small entities normally are not involved in the production of para-aramid fibers and yarns. Therefore, DoD has not performed an initial regulatory flexibility analysis. DoD invites comments from small businesses and other interested parties. DoD also will consider comments from small entities concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. Such comments should be submitted separately and should cite DFARS Case 2008-D024.

The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. This interim rule implements the determination made by the Under Secretary of Defense for Acquisition, Technology, and Logistics on August 15, 2008, that procuring articles that contain only domestic para-aramid fibers and yarns would result in sole-source contracts or subcontracts for such fibers and yarns; such sole-source contracts or subcontracts would not be in the best interest of the Government, except as specifically justified and approved consistent with 10 U.S.C. 2304; and all qualifying countries listed at DFARS 225.872-1 permit the United States firms that manufacture para-aramid fibers and yarns to compete with foreign firms for the sale of para-aramid fibers and yarns in that country. Comments received in response to this interim rule will be considered in the formation of the final rule.

This final rule amends DFARS text as follows:

○ 252.203-7001. Updates a phone number and adds a Web link.

○ 252.211-7007. Corrects punctuation.

Regulations implemented under the authority of the Atlantic Tunas Convention Act (16 U.S.C. 971 et seq. ) and the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act; 16 U.S.C. 1801 et seq. ) governing the harvest of BFT by persons and vessels subject to U.S. jurisdiction are found at 50 CFR part 635. Section 635.27 subdivides the U.S. BFT quota recommended by the International Commission for the Conservation of Atlantic Tunas (ICCAT) among the various domestic fishing categories, per the allocations established in the Consolidated Highly Migratory Species Fishery Management Plan (Consolidated HMS FMP) (71 FR 58058, October 2, 2006).

The 2009 BFT fishing year, which is managed on a calendar year basis and subject to an annual calendar year quota, begins January 1, 2009. Starting on January 1, 2009, the General category daily retention limit (§ 635.23(a)(2)), is scheduled to revert back to the default retention limit of one large medium or giant BFT (measuring 73 inches (185 cm) CFL) or greater per vessel per day/trip. This scheduled retention limit applies to General category permitted vessels and HMS Charter/Headboat category permitted vessels (when fishing commercially for BFT).

Each of the General category time periods (January, June-August, September, October-November, and December) is allocated a portion of the annual General category quota, thereby ensuring extended fishing opportunities in years when catch rates are high and quota is available. In August, NMFS adjusted the General category limit for September through December 2008 from the default level of one large medium or giant BFT to three (thus maintaining a three fish limit for all of the 2008 season). However, NMFS decided not to make an adjustment for January 2009 until after the 2009 western Atlantic BFT Total Allowable Catch (TAC) and resulting U.S. quota were set at the November 2008 ICCAT meeting (73 FR 50885, August 29, 2008).

The 2008 ICCAT recommendation reduced the TAC (currently 2,100 mt) to 1,900 mt for 2009, resulting in a 2009 U.S. quota of 1,034.9 mt. Consistent with the allocation scheme established in the Consolidated HMS FMP, the baseline General category share of the 2009 U.S. quota would be 475.7 mt, and the baseline January 2009 General category subquota would be 25.2 mt.

In order to implement the ICCAT recommendation, NMFS is planning to publish proposed quota specifications in the beginning of 2009 to set BFT quotas for each of the established domestic fishing categories and to set effort controls for the General category and Angling category. In the meantime, the General category BFT fishery remains active into the winter, with substantial landings reported in November and December.

Under § 635.23(a)(4), NMFS may increase or decrease the daily retention limit of large medium and giant BFT over a range of zero to a maximum of three per vessel based on consideration of the criteria provided under § 635.27(a)(8), which include: the usefulness of information obtained from catches in the particular category for biological sampling and monitoring of the status of the stock; the catches of the particular category quota to date and the likelihood of closure of that segment of the fishery if no adjustment is made; the projected ability of the vessels fishing under the particular category quota to harvest the additional amount of BFT before the end of the fishing year; the estimated amounts by which quotas for other gear categories of the fishery might be exceeded; effects of the adjustment on BFT rebuilding and overfishing; effects of the adjustment on accomplishing the objectives of the fishery management plan; variations in seasonal distribution, abundance, or migration patterns of BFT; effects of catch rates in one area precluding vessels in another area from having a reasonable opportunity to harvest a portion of the category's quota; and a review of dealer reports, daily landing trends, and the availability of the BFT on the fishing grounds.

NMFS has considered the set of criteria cited above and their applicability to the General category BFT retention limit for the 2009 fishing year. For example, January 2008 catch rates were high, and under a 3-fish limit, the January subquota was exceeded. Based on these considerations, and the reduced 2009 quota and subquotas, NMFS has determined that the General category retention limit should be adjusted to allow for retention of the anticipated 2009 General category quota, but that an approach more conservative than used for January 2008 is warranted. Therefore, NMFS increases the General category retention limit from the default limit to two large medium or giant BFT, measuring 73 inches CFL or greater, per vessel per of one day/trip, effective January 1, 2009, through January 31, 2009. Regardless of the duration of a fishing trip, the daily retention limit applies upon landing. For example, whether a vessel fishing under the General category limit takes a two-day trip or makes two trips in one day, the daily limit of two fish may not be exceeded upon landing. This General category retention limit is effective in all areas, except for the Gulf of Mexico, and applies to those vessel permitted in the General category as well as to those HMS Charter/Headboat permitted vessels fishing commercially for BFT.

This adjustment is intended to provide a reasonable opportunity to harvest the U.S. landings quota of BFT without exceeding it, while maintaining an equitable distribution of fishing opportunities, to help achieve optimum yield in the General category BFT fishery, to collect a broad range of data for stock monitoring purposes, and to be consistent with the objectives of the Consolidated HMS FMP.

NMFS selected the daily retention limit and the duration after examining an array of data as it pertains to the determination criteria. These data included, but were not limited to, current and previous catch and effort rates, quota availability, previous public comments on inseason management measures, stock status, etc. NMFS will continue to monitor the BFT fishery closely through the mandatory dealer landing reports, which NMFS requires to be submitted within 24 hours of a dealer receiving BFT. Depending on the level of fishing effort and catch rates of BFT, NMFS may determine that additional retention limit adjustments are necessary to ensure available quota is not exceeded or to enhance scientific data collection from, and fishing opportunities in, all geographic areas.

Closures or subsequent adjustments to the daily retention limits, if any, will be published in the Federal Register . In addition, fishermen may call the Atlantic Tunas Information Line at (888) 872-8862 or (978) 281-9260, or access the internet at www.hmspermits.gov , for updates on quota monitoring and retention limit adjustments.

The Assistant Administrator for NMFS (AA), finds that it is impracticable and contrary to the public interest to provide prior notice of, and an opportunity for public comment on, this action for the following reasons:

The regulations implementing the Consolidated HMS FMP provide for inseason retention limit adjustments to respond to the unpredictable nature of BFT availability on the fishing grounds, the migratory nature of this species, and the regional variations in the BFT fishery. Affording prior notice and opportunity for public comment to implement these retention limits is impracticable as it would preclude NMFS from acting promptly to allow harvest of BFT that are available on the fishing grounds. Analysis of available data shows that the General category BFT retention limits may be increased with minimal risks of exceeding the ICCAT-allocated quota.

Delays in increasing these retention limits would adversely affect those General and Charter/Headboat category vessels that would otherwise have an opportunity to harvest more than the default retention limit of one BFT per day and may exacerbate the problem of low catch rates and quota rollovers. Limited opportunities to harvest the respective quotas may have negative social and economic impacts to U.S. fishermen that either depend upon catching the available quota within the time periods designated in the Consolidated HMS FMP. Adjustment to the retention limit needs to be effective January 1, 2009, to minimize any unnecessary disruption in fishing patterns and for the impacted sectors to benefit from the adjustments so as to not preclude fishing opportunities from fishermen who only have access to the fishery during this time period.

Therefore, the AA finds good cause under 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment. For all of the above reasons, and because this action relieves a restriction (i.e., the default retention limit is one fish per vessel/trip but this action increases that limit and allows retention of more fish), there is also good cause under 5 U.S.C. 553(d) to waive the 30-day delay in effectiveness.

This action is being taken under 50 CFR 635.23(a)(4) and (b)(3) and is exempt from review under Executive Order 12866.