This rule is issued under Marketing Agreement Nos. 916 and 917, both as amended (7 CFR parts 916 and 917), regulating the handling of nectarines and peaches grown in California, hereinafter referred to as the “orders.” The orders are effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

The handling of nectarines and peaches grown in California is regulated by 7 CFR parts 916 and 917, respectively. In early 2011, USDA conducted mandatory referenda among California nectarine and peach growers to determine if they favored continuation of their programs. The referenda results demonstrated a lack of grower support for continuing the orders. Thus, USDA intends to terminate the orders.

In an interim rule published in the Federal Register on April 18, 2011, and effective on April 19, 2011, (76 FR 21615, Doc. No. AMS-FV-11-0019, FV11-916/917-5 IR), §§ 916.110, 916.115, 916.234, 916.235, 916.350 and 916.356 and 917.143, 917.150, 917.258, 917.259, 917.442, and 917.459, were suspended indefinitely.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

There are approximately 97 California nectarine and peach handlers subject to regulation under the orders, and about 447 growers of these fruits in California. Small agricultural service firms, which include handlers, are defined by the Small Business Administration as those having annual receipts of less than $7,000,000, and small agricultural growers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201). A majority of these handlers and growers may be classified as small entities.

For the 2010 marketing season, the committees' staff estimated that the average handler price received was $10.50 per container or container equivalent of nectarines or peaches. A handler would have to ship at least 666,667 containers to have annual receipts of $7,000,000. Given data on shipments maintained by the committees' staff and the average handler price received during the 2010 season, the committees' staff estimates that approximately 46 percent of handlers in the industry would be considered small entities.

For the 2010 marketing season, the committees' staff estimated the average grower price received was $5.50 per container or container equivalent for nectarines and peaches. A grower would have to produce at least 136,364 containers of nectarines and peaches to have annual receipts of $750,000. Given data maintained by the committees' staff and the average grower price received during the 2010 season, the committees' staff estimates that more than 80 percent of the growers within the industry would be considered small entities.

This rule continues in effect the suspension of the quality, inspection, reporting, and assessment requirements for nectarines and peaches under the orders. This action is consistent with USDA's decision to seek termination of the nectarine and peach order provisions. Suspension of the requirements is expected to reduce the regulatory burden on handlers and growers of all sizes.

In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. Chapter 35), the orders' information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189, Marketing Order Administration Branch Generic OMB Fruit Crops. No changes in those requirements as a result of this action are necessary. Should any changes become necessary, they would be submitted to OMB for approval.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large California nectarine or peach handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Comments on the interim rule were required to be received on or before June 17, 2011. No comments were received. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule, without change.

To view the interim rule, go to: http://www.regulations.gov/#!documentDetail;D=AMS-FV-11-0019-0001.

This action also affirms information contained in the interim rule concerning Executive Orders 12866 and 12988, the Paperwork Reduction Act (44 U.S.C. Chapter 35), and the E-Gov Act (44 U.S.C. 101).

After consideration of all relevant material presented, it is found that the regulatory requirements suspended by the interim rule, (76 FR 21615, April 18, 2011), affirmed in this action, do not tend to effectuate the declared policy of the Act.

Accordingly, the interim rule that amended 7 CFR parts 916 and 917 and that was published at 76 FR 21615 on April 18, 2011, is adopted as a final rule, without change.

On March 31, 2008, the NRC promulgated a final rule which substantially revised its regulations for fitness for duty (FFD) in Title 10 of the Code of Federal Regulations (10 CFR) part 26 (73 FR 16966; March 31, 2008). The revised regulations updated the NRC's FFD requirements and made them more consistent with other relevant Federal rules, guidelines, and drug and alcohol testing programs that impose similar requirements on the private sector.

In addition, by establishing clear and enforceable requirements for the management of worker fatigue, the 2008 amendments require nuclear power plant licensees to ensure that worker fatigue does not adversely affect public health and safety and the common defense and security. Among these fatigue management requirements is a minimum days off requirement, which requires licensees to manage cumulative fatigue by providing workers with a minimum number of days off over the course of a period not to exceed 6 weeks.

On September 3, 2010, the Nuclear Energy Institute (NEI) submitted a petition for rulemaking (PRM-26-5). In PRM-26-5, the NEI stated that the “new rule has resulted in consequences not originally envisioned when the rule was developed” and that “[t]hese consequences have diminished the safety benefits of the rule.” The NEI stated that the unintended consequences stem from the minimum days off requirements, specifically § 26.205(d)(3) through § 26.205(d)(6), because they created an undue level of complexity and inflexibility in managing worker fatigue. These regulations mandated a specified minimum average number of days off per week, averaged over a fixed time period. The minimum average number of days off depended on the duties the individual performed and, for § 26.205(d)(3), the length of an individual's shift schedule ( i.e. , whether the individual was working 8-, 10- or 12-hour shifts).

The NEI requested, among other changes, that 10 CFR Part 26, Subpart I, be amended to replace the minimum days off requirements in § 26.205(d) with a performance-based objective, consisting of an average of 54 hours worked per week, averaged over a calendar quarter. The NEI also proposed changing the § 26.205(e)(1) annual assessment of actual hours worked and performance of individuals subject to the work hour controls to a quarterly assessment to provide a more frequent review of hours worked. The NEI proposed to eliminate the minimum days off requirements in § 26.205(d)(3) through § 26.205(d)(6), while the work hour limits and break requirements in § 26.205(d)(1)(i)-(iii) and (d)(2)(i)-(ii), respectively, would remain unchanged.

Separately from PRM-26-5, on September 23, 2010, the NEI submitted a request for enforcement discretion regarding the minimum days off provisions of 10 CFR Part 26. The request reiterated the NEI's opinion that the regulations that govern fatigue management impeded “many safety-beneficial practices at plant sites, adversely [impact] the quality of life of covered workers, and [result] in conflicts between rule requirements and represented bargaining unit agreements.” The letter requested that the NRC “exercise enforcement discretion from the [minimum days off] provisions of the rule” until the final disposition of PRM-26-5.

Mr. Erik Erb, a nuclear security officer at the Nine Mile Point Nuclear Station, submitted a petition for rulemaking (PRM-26-6) on August 17, 2010. Mr. Erb requested that the NRC amend 10 CFR Part 26, Subpart I, to decrease the minimum days off requirement for security officers working 12-hour shifts from an average of 3 days per week to an average of 2.5 or 2 days per week. This petition was endorsed by 91 security officers.

The NRC held a public meeting on November 18, 2010, to learn, directly from the affected stakeholders, more details about the unintended consequences of the minimum days off requirements. Although some of the stakeholders were comfortable with the minimum days off requirements in the 2008 final rule, the stakeholders at this public meeting claimed that the unintended consequences had diminished the safety benefits of the fatigue management provisions of 10 CFR part 26 and expressed the need for an alternative that was simpler and would provide greater scheduling flexibility. Additional public meetings were held on January 6, 2011, and January 25, 2011, to provide opportunities for stakeholders and the NRC staff to discuss alternatives to the minimum days off requirements.

In a February 8, 2011, public meeting, the NRC staff and stakeholders briefed the Commission on the implementation of the 10 CFR Part 26 fatigue management requirements. The nuclear power industry stakeholders conveyed many of the same concerns raised in the three public meetings. The NRC staff presented the scientific and technical bases for the requirements for managing cumulative fatigue and a proposal to address the concerns raised by the industry stakeholders. The NRC staff proposed a maximum average 54-hour work week, averaged over a 6-week rolling period, as an alternative to the § 26.205(d)(3) minimum days off requirements. The NRC staff and industry stakeholders generally agreed that this proposal could provide the relief sought by the industry while meeting the objectives of the minimum days off requirements. Other stakeholders were less certain that the NRC should consider proposals to change the requirements.

On March 24, 2011, the Commission issued a Staff Requirements Memorandum (SRM) that directed the NRC staff to conduct a rulemaking to provide an alternative to the minimum days off requirements that would be consistent with the proposal presented by the NRC staff at the February 8, 2011, briefing. The Commission limited the scope of the rulemaking to the alternative to the minimum days off requirements and instructed the NRC staff to consider the following in a separate rulemaking effort: (1) Other issues related to the petitions for rulemaking, (2) other changes to 10 CFR part 26, and (3) comments received in this rulemaking proceeding that are outside the limited scope of this rulemaking. The Commission also directed the staff to expedite this rulemaking and provide a 30-day public comment period for the proposed rule instead of the typical 75-day public comment period.

On April 25, 2011, consistent with the March 24, 2011, SRM, the NRC revised its Enforcement Policy to include an interim provision allowing licensees enforcement discretion for violations of § 26.205(d)(3) if the licensees implement an alternative approach to the minimum days off requirements (76 FR 22802). This alternative approach limits an individual's number of hours worked to a weekly average of 54 hours, calculated using a rolling window of up to 6 weeks. The enforcement discretion remains in place until the effective date of this final rule.

The NRC held public meetings on April 27, 2011, May 11, 2011, June 1, 2011, and June 23, 2011, to discuss implementation guidance for an alternative to the minimum days off requirements.

On May 16, 2011, consistent with the March 24, 2011, SRM, the NRC published notices that it would consider the issues raised in PRM-26-5 and PRM-26-6 in the planned “Quality Control/Quality Verification” rulemaking (Docket ID NRC-2009-0090) (76 FR 28191-28193).

The NRC issued a proposed rule on April 26, 2011, to amend 10 CFR Part 26 to provide licensees with an option for managing cumulative fatigue that differed from the minimum days off requirements in § 26.205(d)(3) (76 FR 23208). The proposed rule would have permitted licensees to maintain individuals' work hours at or below a weekly average of 54 work hours, calculated using a rolling period of up to 6 weeks, which would roll by no more than 7 consecutive calendar days at any time. On May 3, 2011, the NRC published a correction in the Federal Register to correct a typographical error in a Web site address that had appeared in the proposed rule (76 FR 24831). The public comment period closed on May 26, 2011.

The NRC received submittals from 10 commenters, which included 25 separate comments. Seven of the commenters supported the proposed rule's concept of providing the alternative method of managing cumulative fatigue that would be simpler and more flexible to implement than the minimum days off requirements. These seven commenters included Mr. Erb, the Union of Concerned Scientists (UCS), and the NEI, with endorsements from Dominion Resources Services, Inc., Entergy Operations, Inc. and Entergy Nuclear Operations, Inc., Arizona Public Service Company (APS), and the Tennessee Valley Authority. Although it supported the comments submitted by the NEI, the APS submitted additional comments concerning implementation of the alternative and minimum days off requirements. Another commenter, Mr. Larry Lawson, a nuclear power plant reactor operator, objected to the proposed rule. Two individuals, Mr. Harry Sloan and Mr. Mark Callahan, provided comments that were primarily outside the limited scope of this rulemaking.

Comments from the UCS indicate that one reason it supports the alternative is that, unlike the minimum days off requirements, the alternative would apply the same requirement to all workers subject to the work hour controls, without regard to their specific duties. The UCS remarked that this approach is supported by science, in contrast to the minimum days off requirements, which apply to individuals based on their duties and the length of their shift schedules.

Notwithstanding that the UCS supports the proposed rule as written, the NRC disagrees with the position in the comment that the minimum days off requirements are not supported by science. The intent of both of the minimum days off and alternative requirements is to manage cumulative fatigue. As explained in section III.A of this document, one method of managing cumulative fatigue is to require that an individual have a minimum number of days off from work. The Statement of Considerations (SOC) for the 2008 10 CFR Part 26 final rule provides the scientific basis for these requirements. The 2008 SOC describes why the number of days off each individual must have depends, in part, on their duties and the length of their shifts.

Another method of managing cumulative fatigue is to limit the number of hours an individual works, which indirectly imposes days off. The alternative provided by this final rule offers this method. This approach provides a level of assurance of the management of cumulative fatigue that is comparable to the minimum days off requirements. Although individuals who perform certain duties, such as security personnel, could work more hours in a 6-week period under the alternative as compared to the minimum days off requirements, the potential for fatigue that could result from the increased hours should be offset by anticipated reductions in fatigue that will result from using an averaging period that advances by one week increments rather than by non-overlapping shift cycles. As noted elsewhere in this document, an averaging period that incrementally advances on a regular basis reduces the potential for front-loading and backloading successive weeks of long work hours. In addition, the alternative provides more flexibility for licensees to manage work hour schedules, thereby reducing the potential for fatigue caused by scheduling constraints. Implementing the alternative also reduces the administrative burden on licensees by having only one set of requirements for all covered workers.

The availability of the alternative does not diminish or call into question the efficacy of the minimum days off requirements. The implementation of either approach provides reasonable assurance that individuals will not be impaired due to cumulative fatigue.

In the proposed rule's SOC, the NRC sought comments and supporting rationale from the public on the following issue: Would the alternative approach provide assurance of the management of cumulative fatigue comparable to the current minimum days off requirements? Two commenters, Mr. Erb and the UCS, agreed that the alternative requirements would provide assurance that licensees could manage cumulative fatigue at a level that is comparable to the assurance provided by the minimum days off requirements. Mr. Erb also said that the alternative would help to alleviate the unintended consequences caused by the minimum days off requirements.

The NRC agrees with the commenters. As described in section III.A of this document, the alternative provides licensees with a method for managing cumulative fatigue that is different in several ways from the minimum days off requirements but provides a comparable level of assurance that covered workers will not be impaired from cumulative fatigue due to their work schedules. The alternative also should eliminate the unintended consequences of the minimum days off requirements by offering a simpler method for computing work hours and allowing licensees to be more flexible in how they schedule individuals' work hours.

Although Mr. Lawson did not directly respond to the question presented in the proposed rule's SOC, he stated that the alternative would ease the minimum days off restrictions and increase fatigue.

The NRC disagrees that the alternative would relax the cumulative fatigue management requirements. For the reasons given in section III.A of this document, the NRC has determined that the alternative approach provides assurance of the management of cumulative fatigue that is comparable to assurance provided by the minimum days off requirements.

Other commenters did not address this specific request for comment.

The NEI stated that the proposed rule language uses the terms “rolling period” and “rolling window” interchangeably, and the SOC for the proposed rule also uses the term “averaging period,” when referring to the 6-week maximum period over which the 54-hour per week average is to be calculated. The NEI suggested that the NRC use only the term “averaging period.”

The NRC agrees with the NEI that the terms are used interchangeably throughout the proposed rule's SOC but notes that the proposed rule language uses “averaging period” and “rolling period.” The NRC agrees that, to ensure clarity, one term should be used when referring to the 6-week maximum period over which the 54-hour per week average is to be calculated. That term is “averaging period.” The term “incremental period” is used in this document to describe the amount of time by which a licensee rolls forward, or incrementally advances, its averaging periods.

The NEI also recommended that the following words in proposed § 26.205(d)(7)(i) be removed: “which rolls by no more than 7 consecutive calendar days at any time.” The NEI contended that those words add a new requirement that (1) Was not discussed at the February 8, 2011, Commission briefing; (2) is not based on the technical and regulatory analysis performed by the NRC staff; (3) is inconsistent with the minimum days off requirements and its associated guidance, neither of which stipulates the duration of the rolling increment; and (4) would be outside the scope of the March 24, 2011, SRM. According to the NEI, this proposed rule language would result in an unintended consequence of preventing the rolling periods from being matched to the licensee's payroll schedules, thereby possibly resulting in rolling schedules that are different for each individual worker and unwarranted complexity.

The NRC agrees in part and disagrees in part with the NEI comments. The words, “which rolls by no more than 7 consecutive calendar days at any time,” in proposed § 26.205(d)(7)(i), were not discussed at the February 8, 2011, Commission briefing. However, as noted by the NEI, the NRC and stakeholders discussed at public meetings how the averaging periods could be advanced on a weekly basis. The intent of the rule language in question was to establish the minimum and maximum periods by which a licensee could advance an averaging period. Thus, a licensee could advance its averaging period by as little as one day but by no more than one week, or 7 consecutive calendar days. Although licensees at the public meetings may have talked about advancing their averaging periods on a weekly basis, the NRC did not want to limit licensees' flexibility by requiring 1-week incremental periods.

More importantly, without having an upper limit on the length of the incremental period, licensees could advance their averaging periods on a 6-week basis, resulting in fixed 6-week schedules. An approach requiring a maximum weekly average of 54 work hours using fixed averaging schedules would allow more consecutive weeks of high levels of work hours than using averaging schedules that incrementally advance on a regular basis. Under the former type of schedule, a licensee could back-load one fixed schedule with long work hour weeks and front-load the next fixed schedule with long work hour weeks, resulting in several consecutive excessive work hour weeks and potentially cumulatively-fatigued individuals. The latter type of schedule limits the number of hours that can be worked in consecutive weeks because each week's hours affect the number of hours worked in the other weeks in the averaging period. By advancing the averaging period on a consistent basis, licensees must consider the impact of each week's work hours before and after each incremental advance. The use of fixed averaging schedules also would be inconsistent with the incrementally advancing averaging period concept considered in the NRC regulatory basis and with the NRC staff's statements to the Commission at the February 8, 2011, briefing. See, e.g. , Transcript of February 8, 2011, Commission Briefing on the Implementation of Part 26, p. 89, lines 4-9.

The NRC agrees with the NEI that use of an incremental period that is shorter than 7 days could introduce unintended complexity to the implementation of the alternative. In some cases, such as when an averaging period ends 4 days before a unit outage is scheduled to begin, the licensee cannot advance the averaging period by a full incremental period of 7 days. The proposed rule would have required the use of an incremental period of less than 7 days. The NRC is revising the rule language to eliminate the requirement to advance an averaging period by fewer than 7 calendar days. The final rule requires licensees to advance averaging periods on a 7-day ( i.e. , weekly) basis to preclude scheduling consecutive, excessively long work weeks without proper restorative rest. Thus, in a 6-week averaging period, once the averaging period has begun advancing, the incremental period will be 1 week long and will always be the sixth week of that averaging period. Also, in association with this final rule, the NRC is endorsing implementation guidance that includes an acceptable method for addressing averaging periods and incremental periods of less than 7 days in duration.

The NEI identified another unintended consequence of the words, “which rolls by no more than 7 consecutive calendar days at any time,” in proposed § 26.205(d)(7)(i). The definition of a day off contained in § 26.205(d)(3) states that a day off is a calendar day in which an individual does not start a work shift. For many licensees, this definition is used in computer software to count the work hours of a shift that begins at the end of a calendar day but ends during the next calendar day, as hours worked on the day the shift started as opposed to splitting the hours between the two days. The NEI claimed that the NRC's interpretation of this proposed rule language, as expressed at the May 11, 2011, public meeting, would impact this practice and cause an unnecessary change to the industry software.

The NRC agrees with the NEI's comment. At the May 11, 2011, public meeting, the NRC explained that when a shift begins near the end of a calendar day that also happens to be the last day of an averaging period, but that shift ends during the next calendar day (and, thus, the next averaging period), the proposed rule would have required licensees to: (1) Count the hours worked on the calendar day that was the end of the averaging period as hours worked during that averaging period; and (2) count the hours worked during that same shift but on the next calendar day as hours worked during the next averaging period. The NRC has added language to the final rule to clarify that when a shift starts at the end of a calendar day and concludes during the next calendar day, a licensee will have the option to consider the hours worked during that shift as if they were all worked on the day the shift started or count the hours on the calendar days the hours were actually worked. The licensee must choose only one option. Because the number of hours worked in an averaging period is averaged on a weekly incremental basis, hours counted in one averaging period instead of the next averaging period will still be taken into account in the weekly averaging calculation. In addition, this structure will not force upon licensees an undue burden of using a method for counting hours that is different from the way licensees currently count hours to determine a day off to comply with minimum days off requirements.

The NEI also commented that in the fourth paragraph in section III.C of the proposed rule's SOC, which includes a discussion of the force-on-force tactical exercise exception, the last sentence is inconsistent with the proposed rule language and the 2008 final rule. The NEI suggested that the paragraph should be revised to read: “exclude from the § 26.205(d)(7) calculations the shifts worked” instead of “exclude from the § 26.205(d)(7) calculations the hours worked.”

The NRC disagrees with this comment. The proposed rule would have allowed licensees to exclude the hours worked during a force-on-force exercise because the calculation of average hours worked per week is computed by dividing the number of hours worked during the averaging period by the number of weeks in the averaging period. So, when the licensee excludes the shifts worked during an NRC-evaluated force-on-force tactical exercise, it is actually excluding the hours in the shifts when calculating the individual's number of hours worked. No change was made to the SOC or rule language as a result of this comment.

The last paragraph in section III.C of the proposed rule's SOC addresses the applicability of EGM-09-008, “Enforcement Guidance Memorandum—Dispositioning Violations of NRC Requirements for Work Hour Controls Before and Immediately After a Hurricane Emergency Declaration,” dated September 24, 2009, to the proposed maximum average work hours alternative. The NEI requests that this paragraph include an explanation of whether licensees with exemptions from the minimum days off requirements could rely on those existing exemptions if they choose to adopt the maximum average work hours alternative.

The NRC agrees that the paragraph in question could benefit from further clarity. A licensee that has already been granted an exemption from § 26.205(d) before and immediately after a hurricane emergency declaration can rely on that exemption if it implements the requirements in the new § 26.205(d)(7). The final rule's SOC is also revised to provide further explanation of the conditions that must exist before the NRC staff may exercise enforcement discretion under EGM-09-008.

The NEI contends that the second sentence in proposed § 26.205(d)(7) is not necessary. That sentence reads: “Licensees voluntarily choosing to comply with the alternative maximum average work hours requirements in this paragraph are not relieved from complying with all other requirements in § 26.205 other than § 26.205(d)(3).” The NEI argues that there is nothing stated or implied in § 26.205(d)(7) that would lead one to conclude that § 26.205(d)(7) provides any relief from complying with all other requirements in § 26.205 other than those in § 26.205(d)(3).

The NRC agrees with the NEI's comment and has deleted the second sentence of § 26.205(d)(7) in the final rule, because it is unnecessary.

The APS commented that although the NRC analysis of the proposed alternative relied on a licensee's implementation of only the alternative for all covered workers, the proposed rule language does not prohibit implementation of both the minimum days off and alternative requirements at one site. The APS claimed that plant procedures and management tools have the capacity to implement either cumulative fatigue management approach. Because both methods are effective in controlling cumulative fatigue, the APS argued that licensees should be able to select the method that works best for a given covered work group. It also claimed that at the Palo Verde Nuclear Generating Station, not allowing split implementation may have the effect of delaying restoration of longstanding safety beneficial practices by approximately one year.

The NRC disagrees that the proposed rule language did not prohibit implementation of both the minimum days off and alternative requirements at one site. The APS pointed to the following language in proposed § 26.205(d)(3) to support its argument: “Licensees shall e ith e r ensure that individuals have , at a minimum, the number of days off specified in this paragraph, or comply with the requirements for maximum average work hours in § 26.205(d)(7)” (italics added by the APS). The NRC intends that sentence to convey that licensees shall either: (1) ensure that individuals have, at a minimum, the number of days off specified in § 26.205(d)(3) (i.e., the licensee shall comply with the minimum days off requirements in § 26.205(d)(3)); or (2) comply with the requirements for maximum average work hours in § 26.205(d)(7). This reading of proposed § 26.205(d)(3), which focuses on the licensee's obligations, is consistent with the language of proposed § 26.205(d)(7)(ii), which reads as follows: “Each licensee shall state, in its FFD policy and procedures required by § 26.27 and § 26.203(a) and (b), with which requirements the licensee is complying: the minimum days off requirements in § 26.205(d)(3) or maximum average work hours requirements in § 26.205(d)(7).” In both provisions, the licensee must choose which set of requirements it intends to follow. Thus, the proposed rule language clearly reflected the NRC's position that each licensee must implement only one method of managing cumulative fatigue for all of its covered workers: either the minimum days off requirements or the alternative requirements. A reading of the proposed rule language would have been consistent with the interpretation in the APS's comment if the word “either” had immediately followed “individuals” in the first sentence of § 26.205(d)(3), so that it read: “Licensees shall ensure that individuals either have, at a minimum, the number of days off specified in this paragraph, or comply with the requirements for maximum average work hours in § 26.205(d)(7).”

However, the NRC is clarifying the rule language to ensure that all licensees document, in their FFD policies and procedures, the set of requirements with which they will comply, without regard to whether they comply with the minimum days off or the alternative requirements. The proposed rule could have been read to require licensees to document their election only if they implemented the alternative. This change to the final rule results from the APS comment.

The NRC also disagrees that a licensee should be able to implement the minimum days off requirements and the alternative requirements simultaneously for different covered groups, even for less than one year. The NRC's determination that the proposed alternative is equivalent to the minimum days off requirements considered the collective advantages and disadvantages of having all individuals who are subject to the work hour controls under a single set of cumulative fatigue management requirements. Allowing licensees to implement the minimum days off and alternative requirements simultaneously would also create an undue burden for NRC inspectors and undue cost and burden for licensees. Moreover, during the public meetings and Commission briefing before the issuance of the proposed rule and in the request for enforcement discretion, industry stakeholders consistently requested swift relief from the minimum days off requirements for all covered workers. The industry stakeholders did not request relief from the minimum days off requirements for only certain covered groups of workers. By this final rule, which was produced on an expedited basis due to the compelling industry stakeholder needs, the NRC is providing an alternative to the minimum days off requirements for all covered workers. No change was made to the final rule as a result of this comment.

Mr. Lawson asserted that the work hour controls were issued to encourage licensees to adequately staff their plants, thereby reducing the effects of cumulative fatigue on plant operations. He stated that licensees have not hired more workers and won't hire more workers unless it is financially beneficial to do so. He argued that the proposed rule would provide relief from the work hour controls, thus removing any incentive for licensees to increase staffing.

The NRC disagrees with Mr. Lawson. The work hour controls were issued in 2008 to ensure against worker fatigue adversely affecting public health and safety and the common defense and security by establishing clear and enforceable requirements for the management of worker fatigue. The NRC requires that licensees comply with the requirements but does not direct licensees to satisfy these requirements by any particular means, such as by hiring more workers. Further, as stated in the SOC for this final rule, the alternative provides reasonable assurance of the management of cumulative fatigue that is comparable to the assurance provided by the minimum days off requirements. In doing so, the alternative does not provide relief from or relaxation of the minimum days off requirements. No change was made to the final rule as a result of this comment. Mr. Lawson also maintained that, as demonstrated by this rulemaking and the shortened public comment period, the NRC seems willing to give the industry whatever it wants. The NRC disagrees with this comment. At the November 18, 2010, public meeting, more than 20 individuals, representing maintenance, operations, and security workers, unions, and vendors, spoke of the unintended consequences of the minimum days off requirements. These stakeholders emphasized the industry's inability to continue practices that licensees consider beneficial, such as promoting continuity in work crew staffing and the continued development of licensee staff. The industry representatives further stated that the hours available for work are sufficient in almost all cases; however, they believe there should be more flexibility in how the time can be used to help improve workers' quality of life and lessen the complexity of the rule. The Commission directed the staff to develop the proposed rule based on the following: (1) Feedback from industry representatives; (2) information presented by two petitioners for rulemaking seeking changes to the work hour controls in 10 CFR 26.205; (3) NEI's request for enforcement discretion of those same regulatory provisions in 10 CFR 26.205; (4) evidence gathered from stakeholders at public meetings and the February 8, 2011, Commission briefing; and (5) analysis performed by the NRC staff and explained in memoranda to the Commission dated January 4, 2011, and February 28, 2011. The NRC also held three public meetings and one public briefing to the Commission on this issue between November 2010 and March 2011, thereby offering stakeholders several opportunities to provide their input. Taken together, all of this information provided the Commission with a reasonable basis to support its decision to issue the proposed rule and establish a 30-day comment period instead of the typical 75-day public comment period. No change was made to the final rule as a result of this comment.

Mr. Lawson contended that the alternative would allow licensees to give covered workers only one day off every 17 days, which, he said, the NRC admits could lead to fatigue. Nevertheless, the NRC proposed to permit this alternative. Mr. Lawson claimed that a violation of the alternative approach would result in either a “minor or non-cited violation,” which would not be much of “a deterrent to the type of abuse we had during [the period when the only industry-wide direction was based on Generic Letter 82-12, `Nuclear Power Plant Staff Working Hours'].”

The NRC agrees in part and disagrees in part with Mr. Lawson's comments. The alternative allows licensees to create work schedules that could result in cumulative fatigue. The industry representatives at the February 8, 2011, Commission briefing illustrated this point with an example of a schedule of four consecutive weeks of 72-hour work weeks, the most hours a licensee can schedule in a 7-day period under the work hour controls. See Transcript of February 8, 2011, Commission Briefing on the Implementation of Part 26, p. 52, lines 16-18. However, the industry representatives explained that such a schedule would not be possible because, in part, shifts would be unmanned. Id. at lines 18-20 and p. 54, lines 10-13. For instance, an individual who is scheduled to work four consecutive 72-hour work weeks would also need two weeks of zero work hours during the 6-week averaging periods containing the four weeks of 72-hour work weeks. Such a schedule would be improbable for licensees to maintain because plants cannot operate without proper staffing. Id.

A schedule that provides an individual only 1 day off in 17 consecutive days under the alternative approach could result in cumulative fatigue. However, to limit an individual's number of days off to one in a 17-day period and still meet the 54-hour maximum weekly average, a licensee could not schedule an excessive number of work hours every week in the averaging periods containing that 17-day period. The NRC is also endorsing implementation guidance for licensees that summarizes this concern and reiterates each licensee's obligation to schedule work hours of covered workers consistent with the objective of preventing impairment from fatigue due to the duration, frequency, or sequencing of successive shifts as required by 10 CFR 26.205(c). Therefore, with the inherent self-limiting nature of a maximum weekly work hour average schedule, the use of regularly-repeating standard shift schedules by most licensees, site procedures that reinforce the requirement to effectively manage fatigue, and the other work hour controls in § 26.205(d)(1) and (d)(2), the risk of cumulative fatigue is low under the schedule posited by Mr. Lawson. No change was made to the final rule as a result of this comment.

Concerning Mr. Lawson's comment comparing the alternative approach to the work hour controls that existed before the 2008 final rule, the NRC has examined the enforceability of the previous regulatory framework applicable to worker fatigue, which included the non-legally-binding Generic Letter 82-12. As explained in the 2008 final rule's SOC, the broad and nonprescriptive provisions of the pre-2008 10 CFR part 26 and the technical specifications and license conditions pertaining to fatigue that existed at that time lacked clearly defined terms or measures of fatigue. This regulatory structure made it difficult for the NRC to enforce worker fatigue requirements and work hour limits in an effective, efficient, and uniform manner that would ensure that all licensees provided reasonable assurance that workers were able to safely and competently perform their duties. In contrast to that framework, the 2008 final rule established fatigue management program requirements that can be readily and consistently enforced. This final rule does not detract from that program but rather provides an optional means to achieve the goal of providing reasonable assurance of the management of cumulative fatigue. No change was made to the final rule as a result of this comment.

The UCS suggested that workers on 12-hour shifts would be restricted to working alternating 5-day (60 hours per week) and 4-day (48 hours per week) work weeks to adhere to the 54-hour average limit. The NRC disagrees that such a schedule would be the only permissible schedule under the alternative. For example, licensees could arrange a 6-week schedule of 72 hours, 72 hours, 60 hours, 48 hours, 36 hours, and 36 hours, which would average 54 hours per week and also meet the work hour controls in § 26.205(d)(1) and (d)(2). No change was made to the final rule as a result of this comment.

The UCS commented that the proposed revision to § 26.205(d)(4) would require licensees to follow the minimum days off requirements during outages lasting longer than 60 days, even if they applied the alternative approach before and during the outage. The NRC does not agree that the proposed rule would have required these licensees to meet the minimum days off requirements following the first 60 days of a unit outage. Individuals subject to the minimum days off requirements before a unit outage are subject to those same requirements after the first 60 days of the outage, unless § 26.205(d)(6) applies. Under the proposed and final rules, licensees who use the maximum average work hours provisions before an outage must follow those requirements after the first 60 days of the outage, unless § 26.205(d)(6) applies. The amendment to § 26.205(d)(4) allows licensees who use the maximum average work hours provisions before an outage to use those requirements during the outage too. A similar option is and has been available to licensees implementing the minimum days off requirements. Amended § 26.205(d)(4) does not change licensees' obligations after the first 60 days of an outage. No change was made to the final rule as a result of this comment.

Mr. Sloan remarked that some duties do not require constant surveillance, so the individuals performing these duties should not be subject to the fatigue management requirements. He also commented that it is more important to have a qualified person performing a task than it is to ensure that the person performing the task complies with the work hour controls. Mr. Sloan also believes that the rule is too complex and does not guarantee that an individual subject to the work hour requirements will diligently perform their duties.

The NRC considers Mr. Sloan's comments to be beyond the limited scope of the proposed and final rules. Mr. Sloan's comments concern the overall concept of the 10 CFR part 26 work hour controls. As directed by the Commission in the March 24, 2011, SRM, the NRC will consider these comments in a separate rulemaking effort, which the NRC has identified as the Quality Control/Quality Verification rulemaking. No change was made to the final rule as a result of these comments.

Mr. Callahan claimed that the 10 CFR part 26 work hour controls do not reduce worker fatigue but can increase fatigue during outages. Specifically, he noted that when an individual works a backshift schedule, taking a 1-day break disrupts that person's sleep pattern. Recovery from this disruption takes several days, thus inducing fatigue. Mr. Callahan concluded that once a person adjusts to the unnatural sleep pattern (e.g., nightshift), it is far better to continue that pattern for the duration of an outage. He also stated that the current rule has caused a drop in his earnings.

The NRC considers Mr. Callahan's comments to be beyond the limited scope of the proposed and final rules. Mr. Callahan's comments concern the overall concept of the 10 CFR part 26 work hour controls. As directed by the Commission in the March 24, 2011, SRM, the NRC will consider these comments in a separate rulemaking effort, which the NRC has identified as the Quality Control/Quality Verification rulemaking. No change was made to the final rule as a result of these comments.

One cause of cumulative fatigue is consecutive days of restricted or poor quality sleep. In turn, consecutive days of restricted or poor quality sleep may be caused by such things as shift-work, extended work days, and extended work weeks. Former Subpart I of 10 CFR part 26 offered nuclear power plant licensees only one primary method to manage cumulative fatigue: provide individuals with a minimum number of days off over the course of a period not to exceed 6 weeks. The distribution of the days off during the 6-week period acts to either prevent or mitigate cumulative fatigue.

An alternative method for managing cumulative fatigue is to establish a requirement to limit actual hours worked instead of mandating the number of days off which individuals must have. A limit on actual hours worked, when applied to schedules that require regular shift coverage, limits the number of work hours that can contribute to cumulative fatigue and, as a practical matter, results in periodic days off for recovery rest. A schedule resulting in a weekly average of 54 hours worked, calculated using an averaging period of up to 6 weeks that incrementally advances on a consistent basis, is such a schedule.

In general, most individuals that work their normal shift schedule and receive only the minimum number of days off required under the minimum days off requirements of § 26.205(d)(3) could average as many as 54 hours of work per week. However, the NEI indicated that implementation of the minimum days off requirements reduced licensee scheduling flexibility and imposed a substantial administrative burden. By comparison, limiting work hours to an average of not more than 54 hours per week by using an averaging period of up to 6 weeks with 7-day incremental periods limits the number of consecutive weeks of extended work hours that an individual can work by using a comparable but simpler and more flexible requirement. The 6-week limit also remains consistent with the averaging duration and technical basis of the minimum days off requirements, as described in the SOC for the 2008 10 CFR part 26 final rule. In addition, this alternative does not depend on the length of an individual's shift schedule. The alternative eliminates for licensees and individuals the burden of tracking the number of days off that an individual receives in a period not to exceed 6 weeks. Based on stakeholder input, the alternative will relieve operational burdens by enabling licensee personnel to engage in certain safety-beneficial practices with fewer scheduling restrictions, such as holding off-shift shift manager meetings and using the most knowledgeable workers in responding to plant events and conditions. The flexibility provided by the alternative also could improve individuals' quality of life by allowing more flexibility in the way that individuals use their time when they are not working.

Use of 7-day incremental periods will provide reasonable assurance that licensees will not schedule several consecutive weeks of high levels of work hours and will not introduce unintended complexity to the implementation of the alternative. An upper limit on the length of the incremental period of 7 days prevents licensees from establishing fixed 5- or 6-week schedules. Those schedules permit licensees to back-load one fixed schedule with long work hour weeks and front-load the next fixed schedule with long work hour weeks, resulting in several consecutive weeks of long work hours and the potential for individuals to experience cumulative fatigue. Requiring licensees to advance their averaging periods on a 7-day basis limits the number of hours that can be worked in consecutive weeks because each week's hours affect the number of hours that can be worked in the other weeks in the averaging period. By advancing the averaging period on a consistent basis, licensees must consider the impact of each week's work hours before and after each incremental advance.

In summary, the maximum number of hours that can be worked under the alternative approach is comparable to the maximum number of hours that can be worked by most individuals under the 10 CFR part 26 minimum days off requirements, except that the alternative requirement provides greater simplicity and flexibility. Although the schedule required under the alternative approach limits the number of consecutive extended work weeks and thereby limits the potential for cumulative fatigue, there are unusual potential circumstances in which the alternative requirement could be met and the schedule could be fatiguing. Such schedules include having only one in every nine days off or consistently working the maximum allowable hours, which would likely result in cumulative fatigue. However, the industry has stated that these unusual schedules are improbable. The NRC concludes that this alternative approach, together with other aspects of the rule that remain unchanged, provide reasonable assurance that licensees will manage cumulative fatigue in a manner that contributes to the protection of public health and safety and common defense and security.

The NRC is creating a new § 26.205(d)(7) that contains the alternative method for managing cumulative fatigue. This final rule allows nuclear power plant licensees and other entities identified in § 26.3(a) and, if applicable, (c) and (d) to choose whether or not to implement this alternative approach, in lieu of compliance with the minimum days off requirements in § 26.205(d)(3). The NRC is not removing the § 26.205(d)(3) minimum days off requirements and mandating that all licensees instead adopt new maximum average work hours requirements. Some licensees may be satisfied with the minimum days off requirements. In addition, a mandated change would constitute backfitting under the NRC's Backfit Rule, 10 CFR 50.109. None of the exceptions in § 50.109(a)(4) to the requirement to prepare a backfit analysis could be justified, and a backfit analysis could not demonstrate that a mandatory rule would constitute a cost-justified substantial increase in protection to public health and safety or common defense and security. For these reasons, the NRC has decided to add the maximum weekly average of 54 work hours, averaged over a period of up to 6 weeks that advances every 7 days, as an alternative to the minimum days off requirements.

The alternative in this final rule can be used only in place of the minimum days off requirements in § 26.205(d)(3) and is applicable only to individuals subject to work hour controls under § 26.205(a). Under § 26.205(a), the subject individuals are those described in § 26.4(a). The NRC's determination that the proposed alternative is equivalent to the minimum days off requirements considered the collective advantages and disadvantages of having all individuals who are subject to the work hour controls under a single set of cumulative fatigue management requirements. Thus, licensees are not able to subject one group of individuals under § 26.4(a) to the minimum days off requirements in § 26.205(d)(3) and another group of individuals under § 26.4(a) to new § 26.205(d)(7) requirements. Licensees must select only one option. This choice establishes the legally-binding requirement for that licensee for all individuals subject to the work hour controls of § 26.205.

Allowing licensees to implement the minimum days off and alternative requirements simultaneously would also create an undue burden for NRC inspectors and undue cost and burden for licensees. Having different workers subject to different requirements would make inspections more burdensome because of the amount of administrative time that would be necessary for NRC inspectors to prepare for and conduct an inspection. Taking this extra time would reduce the amount of available time for inspectors to conduct risk-informed inspections. Furthermore, licensees implementing both options would incur additional costs associated with having two processes and two training programs to implement the options and increased burden in managing individuals on a work shift who are subject to different work-hour requirements. This scheduling challenge would also diminish the industry's desire to have scheduling flexibility that enables safety-beneficial practices such as shift manager meetings and just-in-time training. These were the types of safety-beneficial practices that were curtailed as a result of the inflexibility of the minimum days off requirements.

Consistent with the minimum days off requirements in § 26.205(d)(3), the alternative maximum average work hours provisions apply to all periods of operations, with several specified exceptions: (1) During force-on-force exercises; (2) during plant emergencies; and (3) for security personnel when they are needed to maintain the common defense and security. In those limited circumstances, special provisions, described in section IV. of this document, apply. In addition, licensees had the option under former § 26.205(d)(4) to comply with the minimum days off requirements in either § 26.205(d)(3) or (d)(4) during unit outages when the affected individuals are working on outage activities. Licensees also had the option under former § 26.205(d)(5) to comply with the minimum days off requirements in either § 26.205(d)(3) or (d)(5) during unit outages, security system outages, or increased threat conditions. Under the final rule, licensees also have the option to comply with the maximum average work hours requirements under the above conditions. The SOC for the 2008 10 CFR part 26 final rule explained the reasons why the Commission permits the exceptions and options involving the minimum days off requirements. The approach set forth in this final rule offers licensees an alternative to the minimum days off requirements that is equally effective at managing cumulative fatigue. Therefore, the SOC for the 2008 10 CFR Part 26 final rule also provides the justification for why the alternative applies to the exceptions and options described in section IV. of this document.

The NRC's Office of Enforcement issued EGM-09-008, “Enforcement Guidance Memorandum—Dispositioning Violations of NRC Requirements for Work Hour Controls Before and Immediately After a Hurricane Emergency Declaration,” on September 24, 2009. The EGM-09-008 gives the NRC staff guidance for processing violations of work hour controls requirements during conditions before and immediately after the declaration of an emergency for a hurricane, when licensees sequester plant staff on site to ensure personnel are available for relief of duties, and potentially granting enforcement discretion for the affected requirements. Under EGM-09-008, the NRC may exercise enforcement discretion for violations of 10 CFR 26.205(c) and (d) while a licensee sequesters site personnel in preparation for hurricane conditions that are expected to result in the declaration of an emergency caused by high winds and immediately after the licensee has exited the emergency declaration. The licensee must meet certain conditions, including having site-specific procedural guidance that specifies the conditions necessary to sequester site personnel, and having requested an exemption from 10 CFR 26.205(c) and (d), or any part thereof, to allow for sequestering site personnel before and immediately after a hurricane. If the licensee must sequester before an exemption has been submitted, then the licensee must agree, in writing, to request the exemption no later than 6 months before the onset of the next hurricane season, as established by the National Oceanic and Atmospheric Administration's National Hurricane Center. The EGM-09-008 refers to § 26.205(d) generally, and therefore, the requirements in § 26.205(d)(7) also fall under the enforcement discretion described by EGM-09-008. Also, licensees who, before the effective date of this final rule, were granted exemptions from § 26.205(d) before and immediately after a hurricane emergency declaration can rely on that exemption if they implement the requirements in § 26.205(d)(7).

Section 26.203 establishes requirements for licensees' fatigue management policies, procedures, training, examinations, recordkeeping, and reporting. The NRC is making conforming changes to paragraphs within § 26.203 to ensure consistency between the implementation of the minimum days off requirements in § 26.205(d)(3) and the implementation of the maximum average work hours requirements in § 26.205(d)(7).

Section 26.203(d)(2) requires licensees to retain records of shift schedules and shift cycles of individuals who are subject to the work hour requirements established in § 26.205. These records are necessary, in part, to ensure that documentation of the licensee's fatigue management program is retained and available for the NRC inspectors to verify that licensees are complying with the work hour requirements and waiver and fatigue assessment provisions. Licensees that implement the alternative must be able to demonstrate that individuals subject to the new work hour controls have not exceeded the average weekly work hours limit; therefore, inspectors need to know the averaging periods used by the licensee. The NRC is amending § 26.203(d)(2) to include the requirement that licensees implementing the requirements in § 26.205(d)(7) maintain records showing the beginning and end times and dates of all 6-week or shorter averaging periods. These licensees must also retain records of shift schedules to ensure compliance with the requirements in § 26.205(c) and (d)(2).

The former § 26.203(e)(1) required licensees to provide the NRC with an annual summary of all instances during the previous calendar year in which the licensee waived each of the work hour controls specified in § 26.205(d)(1) through (d)(5)(i) for individuals who perform the duties listed in § 26.4(a)(1) through (a)(5). The NRC is revising § 26.203(e)(1) to require licensees to also report the instances when the licensee waived the requirements in § 26.205(d)(7).

Section 26.203(e)(1)(i) and (e)(1)(ii) requires licensees to report whether work hour controls are waived for individuals working on normal plant operations or working on outage activities. The final rule requires licensees to include whether the alternative requirements in § 26.205(d)(7) were waived during normal plant operations or while working on outage activities.

Section 26.205 sets forth the NRC's requirements governing work hour controls applicable to individuals performing the duties in 10 CFR 26.4(a)(1) through (a)(5). The NRC is adding new § 26.205(d)(7) and (d)(8) and making conforming changes to paragraphs within § 26.205 to ensure consistency between the implementation of the minimum days off requirements in § 26.205(d)(3) and the implementation of the maximum average work hours requirements in § 26.205(d)(7).

Section 26.205(b)(5) allows licensees to exclude from the calculation of an individual's work hours unscheduled work performed off site (e.g., technical assistance provided by telephone from an individual's home), provided the total duration of the work does not exceed a nominal 30 minutes during any single break period. For the purposes of compliance with the minimum break requirements of § 26.205(d)(2) and the minimum days off requirements of § 26.205(d)(3) through (d)(5), such duties do not constitute work periods or work shifts. The NRC is revising § 26.205(b)(5) to exclude these incidental duties from hours worked under § 26.205(d)(7).

The former § 26.205(d)(3) required licensees to ensure that subject individuals have, at minimum, the days off as specified in this section. Under the final rule, licensees have the option of either complying with the minimum days off requirements in § 26.205(d)(3) or the alternative requirements in § 26.205(d)(7).

Section 26.205(d)(4) provides a limited discretionary exception from the minimum days off requirements in § 26.205(d)(3) for individuals performing the duties specified in § 26.4(a)(1) through (a)(4) (i.e., certain operations, chemistry, health physics, fire brigade, and maintenance activities). The exception from the minimum days off requirements is available during the first 60 days of a unit outage while a subject individual is working on outage activities. In these circumstances, licensees are not required to calculate the requisite number of an individual's days off by a weekly average over a period of up to 6 weeks. Instead, if the licensee elects to apply the exception, § 26.205(d)(4) requires licensees to ensure that individuals specified in § 26.4(a)(1) through (a)(3) have a minimum of 3 days off in each successive (i.e., non-rolling) 15-day period and that individuals specified in § 26.4(a)(4) have at least 1 day off in any 7-day period. Detailed guidance on the applicability of this rule provision is available in Regulatory Guide 5.73, “Fatigue Management for Nuclear Power Plant Personnel.” After the first 60 days of a unit outage, regardless of whether the individual is working on unit outage activities, the individual is again subject to the minimum days off requirements of § 26.205(d)(3), except as permitted by § 26.205(d)(6). The NRC is revising § 26.205(d)(4) to allow licensees that implement the maximum average work hours alternative before and after an outage to have the option to use the alternative or the fixed number of days off approach during the first 60 days of a unit outage.

Section 26.205(d)(5)(i) provides a discretionary exception from the minimum days off requirements of § 26.205(d)(3) for personnel performing the duties described in § 26.4(a)(5) during unit outages or planned security system outages. The requirement limits this exception period to 60 days from the beginning of the outage and requires that individuals performing the security duties identified in § 26.4(a)(5) during this period have a minimum of 4 days off in each non-rolling 15-day period. Amended § 26.205(d)(5)(i) allows licensees that implement the maximum average work hours alternative before and after an outage to have the option to use the alternative or the fixed number of days off approach in § 26.205(d)(5)(i) for security personnel during the first 60 days of a unit outage or planned security system outage.

Section 26.205(d)(5)(ii) provides a discretionary exception from the minimum days off requirements of § 26.205(d)(3) and (d)(5)(i) for security personnel during the first 60 days of an unplanned security system outage or an increased threat condition. Individuals performing the security duties identified in § 26.4(a)(5) during this period do not have to meet the minimum days off requirements of § 26.205(d)(3) or (d)(5)(i). The NRC is revising § 26.205(d)(5)(ii) to provide that, during the first 60 days of an unplanned security system outage or an increased threat condition, licensees would not need to meet the requirements of § 26.205(d)(3), (d)(5)(i), or (d)(7) for security personnel.

The NRC is including a new section in 10 CFR Part 26 governing maximum average work hours for subject individuals, which licensees can implement as an alternative to comparable provisions in § 26.205(d)(3). Licensees who choose to implement this alternative must nonetheless comply with all requirements in § 26.205 other than the minimum days off requirements in § 26.205(d)(3).

The individuals subject to the maximum average work hours requirements in this section are the same as the individuals subject to the comparable controls in § 26.205(d)(3), which, according to § 26.205(a), are the individuals described in § 26.4(a). Unlike the minimum days off requirements, the maximum average work hours alternative establishes a uniform requirement for all individuals described in § 26.205(a) without regard for their assigned duties or the lengths of their shift schedules.

Licensees who elect to implement the requirements of § 26.205(d)(7)(i) must manage affected individuals' cumulative fatigue by limiting the number of hours they work each week to an average of 54 hours. The 54-hour average is computed over an averaging period of up to 6 weeks. As an averaging period ends, a licensee advances (i.e., adjusts forward) the beginning and end times and dates of the averaging periods by 7 consecutive calendar days. Licensees must describe in their FFD procedures, as required by new § 26.205(d)(8), the beginning and end times and days of the week for the averaging periods.

Licensees implementing the maximum average work hours requirements in § 26.205(d)(7)(i) have an option under new § 26.205(d)(7)(ii) regarding how they count work hours, for purposes of computing an individual's average number of work hours, during an individual's overnight work shift. When a shift begins near the end of a calendar day and concludes during the next calendar day, licensees can treat the hours worked during that shift as if the hours were all worked on the day the shift started, or licensees can attribute the hours of the shift to the calendar days on which the hours were actually worked. For example, if an individual begins her 10-hour shift at 8 p.m. on Sunday, then that shift would end at 6 a.m. on Monday. The licensee could consider all 10 hours as having been worked on the Sunday, or the licensee could count 4 hours worked on Sunday (from 8 p.m.-12 a.m.) and 6 hours worked on Monday (from 12 a.m.-6 a.m.). The final rule and section IV. of this document refer to these two methods of counting the hours of an individual's overnight work shift under § 26.205(d)(7) as the “work hour counting systems.”

New § 26.205(d)(7)(iii) requires each licensee to document, in its FFD policies and procedures required by 10 CFR 26.27 and 10 CFR 26.203, which work hour counting system in § 26.205(d)(7)(ii) the licensee is using. As a general matter, good regulatory practice requires each licensee to clearly document its licensing basis, especially where the NRC's requirements offer the licensee one or more regulatory alternatives. If a licensee clearly and sufficiently documents its licensing basis, then the licensee can more easily determine, despite changes (as applicable) in personnel, procedures, or its design, whether the licensee continues to comply with its licensing basis and applicable NRC requirements. Effective documentation also allows the NRC to quickly and accurately determine the licensee's status of compliance and affords the public an opportunity to understand the legal constraints to which that licensee is subject.

Section 26.27 requires licensees to establish written FFD policies and procedures, and 10 CFR 26.203(a) and (b) requires licensees to include in the § 26.27 written policies and procedures the specific policies and procedures for the management of fatigue, including the process for implementing the work hour controls in § 26.205. To ensure clarity in the regulations and each licensee's licensing basis, new § 26.205(d)(7)(iii) clearly establishes the licensee's (and applicant's) regulatory obligation to document in its FFD policies and procedures, required by § 26.27 and § 26.203(a) and (b), the work hour counting system the licensee is using.

Under new § 26.205(d)(8), each licensee needs to explicitly state, in its FFD policies and procedures required by 10 CFR 26.27 and 10 CFR 26.203, the requirements with which it is complying: the minimum days off provisions in § 26.205(d)(3) or the maximum average work hours requirements in § 26.205(d)(7). Under 10 CFR 26.203(a) and (b), information concerning the process for implementing the maximum average work hours requirements would include, for instance, the beginning and end times and days of the week for the averaging periods. As with new § 26.205(d)(7)(iii), because licensees have the option of two cumulative fatigue management programs to implement, § 26.205(d)(8) establishes the licensee's (and applicant's) regulatory obligation to document in its FFD policies and procedures, required by § 26.27 and § 26.203(a) and (b), the requirements with which it will comply: the requirements in § 26.205(d)(3) or § 26.205(d)(7). Licensees are free to switch to the other set of legally-binding requirements, so long as the requirement of § 26.205(d)(8) is met.

Section 26.205(d)(8) was designated as § 26.205(d)(7)(ii) in the proposed rule. That provision of the proposed rule could have been read to require licensees to document their election of requirements only if they implemented the alternative. By removing the requirement from § 26.205(d)(7) and establishing the requirement in a regulatory provision independent of the provisions concerning the alternative, the NRC ensures that all licensees document their election.

Section 26.205(e)(1) requires licensees to review the actual work hours and performance of individuals who are subject to this section for consistency with the requirements of § 26.205(c), so that licensees can determine if they are controlling the work hours of individuals consistent with the objective of preventing impairment from fatigue due to the duration, frequency, or sequencing of successive shifts. Section 26.205(e)(1)(i) requires the licensees to assess the actual work hours and performance of individuals whose actual hours worked during the review period exceeded an average of 54 hours per week in any shift cycle while the individuals' work hours are subject to the requirements of § 26.205(d)(3). The NRC is amending § 26.205(e)(1)(i) to require licensees to assess the actual work hours and performance of individuals whose actual hours worked during the review period exceeded an average of 54 hours per week in any averaging period of up to 6 weeks. The duration of the averaging periods is the same duration that the licensees use to control the individuals' work hours to comply with the requirements of § 26.205(d)(7). In some instances, the averaging period used to control individuals' work hours to comply with the requirements of § 26.205(d)(7) will be a partial averaging period of 1 or more full ( i.e., 7 consecutive calendar days) weeks but less than the duration of the licensee's normal full averaging period. Section 26.205(e)(1)(i) requires licensees to review the actual work hours and performance of individuals whose actual hours worked exceeded an average of 54 hours per week in any averaging period, regardless of whether the averaging period was a full or partial averaging period.

Section 26.207 provides the criteria that licensees must meet to grant waivers and enact exceptions from the work hour requirements in § 26.205(d)(1) through (d)(5)(i). The NRC is making conforming changes to paragraphs within § 26.207 to ensure consistency between the implementation of the minimum days off requirements in § 26.205(d)(3) and the implementation of the maximum average work hours requirements in § 26.205(d)(7).

Section 26.207(a) permits licensees to grant waivers from the work hours requirements in § 26.205(d)(1) through (d)(5)(i) for conditions that meet the two criteria specified in § 26.207(a). The NRC is revising § 26.207(a) to authorize licensees to grant waivers from the work hours requirements in § 26.205(d)(7) if the criteria in § 26.207(a) are met.

Section 26.207(b) relieves licensees from the minimum days off requirements of § 26.205(d)(3) by allowing them to exclude shifts worked by security personnel during the actual conduct of NRC-evaluated force-on-force tactical exercises when calculating the individual's number of days off. The final rule amends § 26.207(b) to permit licensees to exclude from the maximum average work hours requirements of § 26.205(d)(7) the hours worked by security personnel during the actual conduct of NRC-evaluated force-on-force tactical exercises.

Section 26.209 requires licensees to take immediate action in response to a self-declaration by an individual who is working under, or being considered for, a waiver from the work hour controls in § 26.205(d)(1) through (d)(5)(i). The NRC is making a conforming change to § 26.209(a) to ensure consistency between the implementation of the minimum days off requirements in § 26.205(d)(3) and the implementation of the maximum average work hours requirements in § 26.205(d)(7).

Section 26.209(a) is amended to address the situation in which an individual is performing, or being assessed for, work under a waiver of the requirements contained in § 26.205(d)(7) and declares that, due to fatigue, he or she is unable to safely and competently perform his or her duties. The licensee shall immediately stop the individual from performing any duties listed in § 26.4(a), except if the individual is required to continue performing those duties under other requirements in Chapter 1 of Title 10. If the subject individual must continue performing the duties listed in § 26.4(a) until relieved, then the licensee shall immediately take action to relieve the individual.

Section 26.211 requires licensees to conduct fatigue assessments under several conditions. The NRC is making conforming changes to paragraphs within § 26.211 to ensure consistency between the implementation of the minimum days off requirements in § 26.205(d)(3) and the implementation of the maximum average work hours requirements in § 26.205(d)(7).

Section 26.211(b)(2)(iii) prohibits individuals from performing a post-event fatigue assessment if they evaluated or approved a waiver of the limits specified in § 26.205(d)(1) through (d)(5)(i) for any of the individuals who were performing or directing the work activities during which the event occurred if the event occurred while such individuals were performing work under that waiver. The final rule amends § 26.211(b)(2)(iii) to prohibit individuals from performing a post-event fatigue assessment if they evaluated or approved a waiver of the limits specified in § 26.205(d)(7) for any of the individuals who were performing or directing the work activities during which the event occurred if the event occurred while such individuals were performing work under that waiver.

Section 26.211(d) prohibits licensees from concluding that fatigue has not degraded or will not degrade an individual's ability to safely and competently perform his or her duties solely on the basis that the individual's work hours have not exceeded any of the limits specified in § 26.205(d)(1) or that the individual has had the minimum rest breaks required in § 26.205(d)(2) or the minimum days off required in § 26.205(d)(3) through (d)(5). The NRC is amending § 26.211(d) to include the maximum average work hours among the criteria that licensees may not solely rely on when concluding that fatigue has not degraded or will not degrade an individual's ability to safely and competently perform his or her duties.

The following table lists documents that are related to this final rule and available to the public and indicates how they may be obtained. See the ADDRESSES section of this document on the physical locations and Web sites where the documents may be accessed.

For the purposes of Section 223 of the Atomic Energy Act (AEA), as amended, the NRC is issuing this final rule that amends 10 CFR part 26 under one or more of Sections 161b, 161i, or 161o of the AEA. Willful violations of the rule are subject to criminal enforcement. Criminal penalties as they apply to regulations in 10 CFR part 26 are discussed in § 26.825.

Under the “Policy Statement on Adequacy and Compatibility of Agreement State Programs,” approved by the Commission on June 20, 1997, and published in the Federal Register on September 3, 1997 (62 FR 46517), this final rule is classified as compatibility “NRC.” Compatibility is not required for Category “NRC” regulations. The NRC program elements in this category are those that relate directly to areas of regulation reserved to the NRC by the AEA or the provisions of 10 CFR, and although an Agreement State may not adopt program elements reserved to the NRC, it may wish to inform its licensees of certain requirements via a mechanism that is consistent with a particular State's administrative procedure laws but does not confer regulatory authority on the State.

In accordance with Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277), the NRC has assessed this action against the seven factors set forth in this act. The NRC has determined that this action will not negatively affect family well-being.

The NRC is using this standard instead of the following voluntary consensus standard developed by the American Nuclear Society (ANS): American National Standards Institute (ANSI)/ANS-3.2-1988. The NRC has determined that using a Government-unique standard is justified. The NRC declined to use the ANS standard when the fatigue management provisions in Subpart I of 10 CFR part 26 were adopted in 2008. (73 FR 16966; March 31, 2008, at 17170 (second and third column)). The alternative for managing cumulative fatigue through a maximum average work hours requirement in this final rule has no counterpart in ANSI/ANS-3.2-1988 that could be adopted to manage cumulative fatigue, and the NRC declines to reconsider its overall decision in the 2008 rulemaking not to adopt the fatigue management approach embodied in the ANS standard. Accordingly, the NRC concludes that there are no voluntary consensus standards that could be adopted in lieu of the adoption of the Government-unique standard in this final rule.

The Commission has determined under the National Environmental Policy Act of 1969, as amended, and the Commission's regulations in Subpart A of 10 CFR part 51, that this final rule is not a major Federal action significantly affecting the quality of the human environment and, therefore, an environmental impact statement is not required. This final rule allows licensees of nuclear power reactors to use a different method from the one previously prescribed in the NRC's regulations for determining whether certain nuclear power plant workers must be afforded time off from work.

The NRC has determined that the alternative for determining time off does not significantly alter the likelihood that there will be an increase in fatigued workers causing operational problems or a radiological event, or being unable to properly perform their functions. The alternative provides affected licensees with a more-easily implemented approach for determining when subject individuals must be afforded the time off. The NRC recognizes that there are unusual potential circumstances in which the alternative requirement could be met and the schedule could be fatiguing. Such schedules include having only one in every nine days off or consistently working the maximum allowable hours, which would likely result in cumulative fatigue. However, the industry has stated that these unusual schedules are improbable. The NRC concludes that this alternative approach, together with other aspects of the rule that remain unchanged, provide reasonable assurance that licensees will manage cumulative fatigue in a manner that contributes to the protection of public health and safety and common defense and security. In addition, the alternative is expected to reduce scheduling constraints on certain safety-beneficial practices. Because the NRC's regulatory objective continues to be met under the alternative adopted in this final rule, there is no change in environmental impacts, during operation or while the nuclear power plant is in shutdown, as compared with the environmental impact of the minimum days off requirements.

The primary alternative to this action is the no-action alternative. The no-action alternative could result in a greater administrative burden on nuclear power plant licensees in complying with the minimum days off requirements, as compared with the alternative to the minimum days off requirements under the final rule. In addition, individuals subject to minimum days off requirements could personally believe that their quality of life and work conditions are less favorable under the no-action alternative, as compared with the alternative maximum average work hours requirements that could be selected under the final rule.

The no-action alternative provides little or no environmental benefit. In addition, the no-action alternative has led nuclear power plant licensees to use work scheduling approaches that, for example, reduce their capability to use the most knowledgeable workers in responding to plant events and conditions. This may provide less safety and greater risk as compared with the less burdensome scheduling approaches that licensees are allowed to use under the alternative to the minimum days off requirements under the final rule.

For these reasons, the NRC concludes that this rulemaking does not have a significant adverse impact on the environment. This discussion constitutes the environmental assessment for this final rule. The NRC received no comments on the draft environmental assessment in the proposed rule's SOC.

This final rule increases the burden on licensees that implement the alternate method of managing cumulative fatigue. These licensees will incur a one-time burden to revise FFD procedures, modify their work hour tracking systems and individual work scheduling systems, and state in their FFD policies and procedures the cumulative fatigue management requirements and work hour counting system being used. The public burden for this information collection is estimated to average 11.7 hours per recordkeeper. Because the burden for this information collection is insignificant, Office of Management and Budget (OMB) clearance is not required. Existing requirements were approved by the OMB Control Number 3150-0146.

Send comments on any aspect of these information collections to the Information Services Branch (T-5 F53), U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, or by Internet electronic mail to Infocollects.Resource@nrc.gov and to the Desk Officer, Office of Information and Regulatory Affairs, NEOB-10202 (3150-0146), Office of Management and Budget, Washington, DC 20503.

The NRC may not conduct or sponsor, and a person is not required to respond to, a request for information or an information collection unless the requesting document displays a currently valid OMB control number.

The NRC has not prepared a full regulatory analysis for this final rulemaking. The NRC has determined that the maximum average work hours requirement provides reasonable assurance that subject individuals are not impaired due to cumulative fatigue caused by excessive work hours. As such, adequate implementation of the alternative approach maintains reasonable assurance that persons subject to work hour controls can safely and competently perform their assigned duties and therefore meets the intent of the minimum days off requirement. The 2008 10 CFR Part 26 final rule contained a regulatory analysis to support the minimum days off requirement. Because the alternative approach offers licensees an option that is comparable to the minimum days off requirements in managing cumulative fatigue, the 2008 final rule regulatory analysis also supports this final rule.

Furthermore, both nuclear power plant licensees and individuals subject to the NRC's requirements in 10 CFR 26.205(d)(3) governing minimum days off derive substantial benefits by the NRC's adoption of the alternative approach for controlling cumulative fatigue through maximum average work hours that can be adopted by those licensees. In addition, the NRC concludes that providing an alternative maintains the ability of those licensees to continue using scheduling practices that have a positive safety benefit. The NRC's conclusions in this regard are based upon: (1) Information presented by two petitioners for rulemaking seeking changes to the work hour controls in 10 CFR 26.205; (2) NEI's request for enforcement discretion of those same regulatory provisions in 10 CFR 26.205; (3) evidence gathered from stakeholders at the three public meetings; (4) analysis performed by the NRC staff and explained to the Commission in memoranda dated January 4, 2011, and February 28, 2011; and (5) comments received on the proposed rule. In the memoranda to the Commission, the NRC staff documented its evaluation of the options available to the Commission to address the concerns raised in the petitions for rulemaking and request for enforcement discretion. At the February 8, 2011, Commission briefing on the implementation of 10 CFR part 26, stakeholders appeared to support the use of an expedited rulemaking process to address the issues presented by the industry. In view of all of this information, the NRC finds no added value in preparing a more detailed regulatory analysis for this final rule.

Under the Regulatory Flexibility Act (5 U.S.C. 605(b)), the NRC certifies that this final rule will not have a significant economic impact on a substantial number of small entities. This final rule affects only licensees that do not fall within the scope of the definition of “small entities” set forth in the Regulatory Flexibility Act or the size standards established by the NRC (10 CFR 2.810).

The NRC has determined that the Backfit Rule, 10 CFR 50.109, does not apply to this final rule, nor is the final rule inconsistent with any of the finality provisions in 10 CFR part 52. The final rule, in 10 CFR 26.205(d)(7), provides nuclear power plant licensees with an alternative for compliance with the controls in 10 CFR 26.205(d)(3) governing minimum days off for certain nuclear power plant workers. Licensees are free to comply with either the requirements governing minimum days off or with the alternative requirements in 10 CFR 26.205(d)(7). The NRC concludes that a backfit analysis is not required for this final rule because this final rule does not contain any provisions that constitute backfitting.

The final rule is not inconsistent with any finality provisions in 10 CFR part 52. No standard design certification rule or standard design approval issued under 10 CFR part 52, or currently being considered by the NRC, addresses FFD requirements in 10 CFR part 26. Accordingly, there are no issues resolved in those design certification rules or design approvals that would be within the scope of the cumulative fatigue controls in this final rule. In addition, the NRC has not issued any combined licenses under 10 CFR part 52. Hence, there are currently no holders of combined licenses who would be protected by applicable issue finality provisions. The NRC concludes that this final rule does not contain any provisions that would be inconsistent with any of the finality provisions in 10 CFR part 52

In accordance with the Congressional Review Act of 1996, the NRC has determined that this action is not a major rule and has verified this determination with the Office of Information and Regulatory Affairs of OMB.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR part 26.

I. Background

On May 26, 2011, the OCC published in the Federal Register a notice of proposed rulemaking (NPRM or proposal) to implement Title III, and certain other provisions, of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) (Dodd-Frank Act or Act). Title III of the Act transfers the powers, authorities, rights and duties of the OTS to other banking agencies, including the OCC, on the “transfer date.” The transfer date is one year after the date of enactment of the Dodd-Frank Act, July 21, 2011. The Dodd-Frank Act also abolishes the OTS ninety days after the transfer date.

Specifically, the Dodd-Frank Act transfers to the OCC all functions of the OTS and the Director of the OTS relating to Federal savings associations. As a result, the OCC will assume responsibility for the ongoing examination, supervision, and regulation of Federal savings associations. 1 The Act also transfers to the OCC rulemaking authority of the OTS relating to all savings associations, both state and Federal. 2 The legislation continues in effect all OTS orders, resolutions, determinations, agreements, regulations, interpretive rules, other interpretations, guidelines, procedures and other advisory materials in effect the day before the transfer date, and allows the OCC to enforce these issuances with respect to Federal savings associations, unless the OCC modifies, terminates, or sets aside such guidance or until superseded by the OCC, a court, or operation of law. 3 Title III also transfers OTS employees to either the OCC or FDIC, allocated as necessary to perform or support the OTS functions transferred to the OCC and FDIC, respectively.

As described in the preamble for the proposed rule, the OCC is undertaking a multi-phased review of its regulations, as well as those of the OTS, to determine what changes are needed to facilitate the transfer of supervisory jurisdiction for Federal saving associations to the OCC. This final rule, described in detail below, is part of the first phase of this review and includes provisions revising OCC rules that will be central to internal agency functions and operations immediately upon the transfer date, such as providing for the OCC's assessment of Federal savings associations and adapting the OCC's rules governing the availability and release of information to cover information pertaining to the supervision of those institutions. This final rule also amends OCC regulations necessary to implement certain revisions to the banking laws that either took effect on the enactment of the Dodd-Frank Act or are effective as of the transfer date.

As part of this first phase of our review of OTS and OCC regulations, the OCC also will issue an interim final rule with a request for comments, effective on publication, that republishes those OTS regulations the OCC has the authority to promulgate and will enforce as of the transfer date, with nomenclature and other technical changes. 4 These republished regulations will supersede the OTS regulations in Chapter V for purposes of OCC supervision and regulation of Federal savings associations, and for certain rules for purposes of the FDIC's supervision of state savings associations. OTS regulations that will be unnecessary following the transfer of OTS functions to the OCC, or that are superseded as of the transfer date by provisions of the Dodd-Frank Act, will be repealed at a later date.

In future phases of our regulatory review, the OCC will consider more comprehensive substantive amendments, as necessary, to these regulations. For example, we may propose to repeal or combine provisions in cases where OCC and former OTS rules are substantively identical or substantially overlap. In addition, we may propose to repeal or modify OCC or former OTS rules where differences in regulatory approach are not required by statute or warranted by features unique to either charter. We expect to publish these amendments in one or more notices of proposed rulemaking, the first of which we expect to issue later in 2011. This substantive review also will provide an opportunity for the OCC to ask for comments suggesting revisions to the rules for both national banks and Federal savings associations that would remove provisions that are “outmoded, ineffective, insufficient, or excessively burdensome,” consistent with the goals outlined in an executive order recently issued by the President. 5

The NPRM contained amendments to OCC rules at 12 CFR part 4 pertaining to its organization and functions, the availability of information under the Freedom of Information Act (FOIA), the release of non-public OCC information, and restrictions on the post-employment activities of senior examiners; and at 12 CFR part 8, pertaining to assessments. This NPRM also proposed to amend 12 CFR parts 5 and 28, pertaining to change in control of credit card banks and trust banks and deposit-taking by uninsured Federal branches, respectively, and 12 CFR parts 5, 7 and 34, pertaining to preemption and visitorial powers, pursuant to the Dodd-Frank Act. The public comment period closed on June 27, 2011, and the OCC received a total of 45, including comments from consumer advocacy groups, government agencies, representatives of Congress, associations of state officials, industry trade groups, Federal and state banks and thrifts, and law firms. Set forth below is a detailed description of these comments and the resulting final rule.

The NPRM contained a number of amendments to part 4 to incorporate the supervision of Federal savings associations within the OCC. We received no substantive comments on the proposed amendments to part 4 and therefore adopt them as proposed, with one technical correction to § 4.14 to include cites to OCC rules applicable to savings associations.

Subpart A describes the organization and functions of the OCC and provides the OCC's principal addresses. The final rule amends subpart A to reflect the organizational and functional changes resulting from the transfer of the powers and duties of the OTS to the OCC on the transfer date. Other changes conform this subpart to additional provisions in the Dodd-Frank Act, including the Comptroller's membership on the Financial Stability Oversight Council.

Subpart B contains the OCC's rules for making requests for agency records and documents under the FOIA. The final rule amends subpart B to apply these rules to FOIA requests relating to Federal savings associations received by the OCC as of the transfer date, ensures that records of the OTS are subject to the OCC's FOIA regulations, and makes various technical changes to part 4 to correct technical errors and to update appropriate references to OCC units charged with handling FOIA requests. The final rule also provides that the OTS's former rules will continue to govern requests received by the OTS prior to the transfer date.

Subpart C contains OCC rules and procedures for requesting access to various types of nonpublic information and the OCC's process for reviewing and responding to such requests. It also clarifies the persons and entities with which the OCC can share non-public information. The final rule amends subpart C to cover OTS nonpublic information transferred to the OCC and, going forward, OCC nonpublic information related to Federal savings associations. The final rule also provides that nonpublic information in the possession of former employees or officials of the OTS will remain subject to confidentiality safeguards and procedures for requesting access to such information. As with FOIA requests, the final rule provides that the OTS's former rules will continue to govern requests for nonpublic information received by the OTS prior to the transfer date.

Subpart E sets forth the employment restrictions placed on senior examiners for one year after these individuals leave the employment of the OCC. During this period, a former senior examiner of a national bank is prohibited from accepting compensation from the bank or from an entity that controls the bank. The OTS adopted nearly identical rules. The final rule amends subpart E to include senior examiners of savings associations.

This final rule contains amendments to 12 CFR part 5 to implement section 603 of the Dodd-Frank Act. Section 603 provides for a three-year moratorium (with certain exceptions) on the approval of a change in control of credit card banks, industrial banks and trust banks, if the change in control would result in a commercial firm controlling (directly or indirectly) such a bank. The moratorium took effect on the date of enactment of the Act, i.e., July 21, 2010. The proposal amended 12 CFR 5.50(f) to conform OCC regulations to this section of the Act. We received no comments on this amendment and adopt it as proposed.

Section 6 of the International Banking Act, 12 U.S.C. 3104(b), provides that uninsured Federal branches of foreign banks may not accept deposits in an amount of less than the standard maximum deposit insurance amount (SMDIA). The SMDIA is defined in 12 U.S.C. 1821(a)(1)(E) to mean $100,000, subject to certain adjustments provided for in the statute. Section 335 of the Dodd-Frank Act, which takes effect on the transfer date, amends 12 U.S.C. 1821(a)(1)(E) to change the amount from $100,000 to $250,000. Section 28.16(b) of the OCC's regulations states that an uninsured Federal branch may accept initial deposits of less than $100,000 only from certain persons. In order to conform this section of the OCC's regulations to the statutory changes and to prevent the need to continually amend this section for changes in the SMDIA, the proposal amended 12 CFR 28.16(b) to refer to 12 U.S.C. 1821(a)(1)(E), rather than the obsolete reference to $100,000. We received no comments on this amendment and adopt it as proposed.

The Dodd-Frank Act contains provisions, effective as of the transfer date (July 21, 2011), that affect the scope of preemption for operating subsidiaries, Federal savings associations, and national banks. 6 The Act also sets forth procedural requirements for future preemption determinations  7 and codifies the Supreme Court's visitorial powers decision in Cuomo v. Clearing House Association, L.L.C. 8

The Act precludes preemption of state law for national bank subsidiaries, agents and affiliates. 9 The Act also changes the preemption standards applicable to Federal savings associations to conform to those applicable to national banks. The Act specifically provides that, as of the transfer date, determinations by a court or by the OCC under the Home Owners' Loan Act (HOLA) with respect to Federal savings associations must be made in accordance with the laws and legal standards applicable to national banks regarding the application of state law. 10

The Act further provides that “state consumer financial laws”  11 may be preempted only if: (1) Application of such a law would have a “discriminatory effect” on national banks compared with state-chartered banks in that state; (2) “in accordance with the legal standard for preemption in the decision of the Supreme Court in” Barnett Bank of Marion County, N.A. v. Nelson, 12 the state consumer financial law “prevents or significantly interferes with the exercise by the national bank of its powers” ( Barnett standard); or (3) the state consumer financial law is preempted by a provision of Federal law other than Title LXII of the Revised Statutes. 13

The Dodd-Frank Act imposes new procedures and consultation requirements with respect to how the OCC may reach certain future preemption determinations and clarifies the criteria for judicial review of these determinations. Specifically, the Act requires that the OCC make preemption determinations with regard to state consumer financial laws under the Barnett standard by regulation or order on a “case-by-case basis” in accordance with applicable law. 14 The Act defines “case-by-case basis” as a determination by the Comptroller as to the impact of a “particular” state consumer financial law on “any national bank that is subject to that law” or the law of any other state with substantively equivalent terms. 15 When making a determination under this provision that a state consumer financial law has substantively equivalent terms as the law the OCC is preempting, the OCC must first consult with and take into account the views of the Consumer Financial Protection Bureau (CFPB). 16

The Dodd-Frank Act also requires there to be substantial evidence, made on the record of the proceeding, to support an OCC order or regulation that declares inapplicable a state consumer financial law under the Barnett standard. 17 Finally, the Act requires the OCC to conduct a periodic review, subject to notice and comment, every five years after issuing a preemption determination relating to a state consumer financial law and to publish a list of such preemption determinations every quarter. 18

Other features of the Dodd-Frank Act address the authority of state attorneys general to enforce applicable Federal and state laws. The National Bank Act, at 12 U.S.C. 484, vests in the OCC exclusive visitorial powers with respect to national banks, subject to certain express exceptions. 19 On June 29, 2009, the Supreme Court issued its opinion in Cuomo. The Court held that when a state attorney general files a lawsuit to enforce a state law against a national bank, “[s]uch a lawsuit is not an exercise of `visitorial powers' and thus the Comptroller erred by extending the definition of `visitorial powers' to include `prosecuting enforcement actions' in state courts.”  20 Conversely, the decision recognized the “regime of exclusive administrative oversight by the Comptroller”  21 applicable to national banks. Accordingly, under Cuomo, a state attorney general may bring an action against a national bank in a court of appropriate jurisdiction to enforce non-preempted state laws, but is restricted in conducting non-judicial investigations or oversight of a national bank. 22

The Dodd-Frank Act codifies the Supreme Court's decision in Cuomo regarding enforcement of state law against national banks by providing that no provision “of this title”  23 or other limits restricting the visitorial powers to which a national bank is subject shall be construed to limit or restrict the authority of any state attorney general to “bring an action against a national bank in a court of appropriate jurisdiction to enforce an applicable law and to seek relief as authorized by such law.”  24

In addition, the Act provides that these visitorial powers provisions shall apply to Federal savings associations and their subsidiaries to the same extent and in the same manner as if they were national banks or national bank subsidiaries. 25

The proposal amended provisions of the OCC's regulations relating to preemption (12 CFR 7.4007, 7.4008, 7.4009, and 34.4) (2004 preemption rules), operating subsidiaries (12 CFR 5.34 and 7.4006), and visitorial powers (12 CFR 7.4000) to implement the provisions of the Dodd-Frank Act that affect the scope of national bank and Federal thrift preemption and codify Cuomo.

First, we proposed rescission of 12 CFR 7.4006, which is the OCC's regulation concerning the application of state laws to national bank operating subsidiaries. The proposal also made conforming revisions to the OCC's operating subsidiary rules at 12 CFR 5.34(a) and paragraph (e)(3) to refer to new 12 U.S.C. 25b, which includes the codification of the Dodd-Frank Act preclusion of operating subsidiary preemption. 26

To implement the Act's changes to the preemption standards under the HOLA to conform to those applicable to national banks, we proposed adding new §§ 7.4010(a) and 34.6 to our regulations. The new sections provide that state laws apply to Federal savings associations and their subsidiaries to the same extent and in the same manner as those laws apply to national banks and their subsidiaries, respectively. The proposal also added § 7.4010(b) to similarly subject Federal savings associations and their subsidiaries to the same visitorial powers provisions in the Dodd-Frank Act that apply to national banks and their subsidiaries.

In addition, the proposal made conforming changes to the 2004 preemption rules at 12 CFR 7.4007 (concerning deposit-taking), 7.4008 (non-real estate lending), and 34.4 (real estate lending) to reflect the Act's provisions concerning preemption of state consumer financial laws. Those rules had provided that “state laws that obstruct, impair, or condition a national bank's ability to fully exercise its Federally authorized * * * powers are not applicable to national banks.” The proposal noted that, while the phrase “obstruct, impair or condition” had been drawn from and was intended to be consistent with the standards cited by the Supreme Court in Barnett, the terminology had resulted in misunderstanding and confusion. Accordingly, the proposal removed that phrase from these preemption rules. The proposal further clarified that a state law is not preempted to the extent that result is consistent with the Barnett decision. The proposal also deleted § 7.4009, which had provided only that “state laws that obstruct, impair, or condition a national bank's ability to fully exercise its powers to conduct activities under Federal law do not apply to national banks” without identifying any types of state laws that would be preempted.

Finally, the proposal made several changes to the OCC's visitorial powers regulation, 12 CFR 7.4000, to conform the regulations to the Supreme Court's decision in the Cuomo case as adopted by the Dodd-Frank Act. First, it added a reference to 12 U.S.C. 484 in the general rule, set forth § 7.4000(a)(1), that only the OCC may exercise visitorial powers with respect to national banks subject to certain exceptions. Second, to incorporate the Cuomo Court's recognition that nonjudicial investigations of national banks generally constitute an exercise of visitorial powers, the proposal revised the definition of “visitorial powers” in § 7.4000(a)(2)(iv) to clarify that those powers include “investigating or enforcing compliance with any applicable Federal or state laws concerning those activities.” Third, the proposal added a new paragraph (b) to provide that “[i]n accordance with the decision of the Supreme Court in Cuomo v. Clearing House Assn., L.L.C., 129 S. Ct. 2710 (2009), an action against a national bank in a court of appropriate jurisdiction brought by a state attorney general (or other chief law enforcement officer) to enforce a non-preempted state law against a national bank and to seek relief as authorized thereunder is not an exercise of visitorial powers under 12 U.S.C. 484.”

Commenters who disagreed with the preemption provisions of the proposal generally relied on several principal arguments:

○ First, that the Barnett standard preemption provision is a new statutory “prevent or significantly interfere” standard that the proposal impermissibly seeks to broaden. These commenters referred to portions of the language of the statute and legislative history in support of their assertion that the Dodd-Frank Act adopts a new preemption standard, narrower than the Barnett decision's “conflict” preemption analysis.

○ Second, that the “obstruct, impair, or condition” language introduced in the 2004 preemption rules, which the OCC proposed to delete, is inconsistent with Barnett and with the “prevent or significantly interfere” preemption standard. Many of these commenters asserted that the preemption rules adopted by the OCC in 2004 were impliedly repealed by the Dodd-Frank Act. Therefore, these commenters disagree with the OCC's conclusion that any portions of the 2004 preemption rules and precedents based on those rules remain applicable.

○ Third, by retaining, rather than repealing, rules that preempt categories of state laws, that the proposal would circumvent the Dodd-Frank Act procedural and consultation requirements. These commenters asserted that the preemption of categories and/or terms of state laws is equivalent to “occupation of the field,” rather than conflict, preemption. These commenters also believe that the Dodd-Frank Act procedural requirements apply to, and therefore (retroactively) invalidate, certain precedents, including the 2004 preemption rules, adopted prior to the Dodd-Frank Act.

In addition, some of these commenters objected to preemption of state and local laws on grounds that preemption is bad public policy and asserted that preemption had resulted in predatory lending to vulnerable consumers and the financial and subprime mortgage lending crises. A few commenters also asserted that the Dodd-Frank Act limits the OCC's preemption authority to state consumer financial laws only.

Some of these commenters further asserted that the proposed visitorial powers amendments:

○ Could be construed as prohibiting all types of investigative activities by state officials, including collecting complaints from consumers or researching public records.

○ Do not reflect the authority of state attorneys general to enforce compliance with certain Federal laws and regulations to be issued by the CFPB. 27

○ Incorrectly narrow the definition of visitorial powers to the investigation and enforcement of “non-preempted,” rather than “applicable” law.

Commenters who supported the preemption and visitorial powers portions of the proposal expressed agreement with the analysis of the Dodd-Frank Act preemption provisions and legislative history set out in the preamble to the proposal. In the view of these commenters, the Barnett standard preemption provision adopts the conflict preemption standard that is the fundamental legal standard of the Barnett decision. Some commenters agreed that the “obstruct, impair, or condition” phrasing used in the 2004 preemption rules was a distillation of this conflict preemption standard. These commenters agreed with the position stated in the preamble to the proposal that eliminating this language does not impact the continued applicability of precedents based on those rules.

In addition, supporting commenters argued that a contrary position would also have negative consequences for national banks because it would eliminate legal certainty concerning which laws apply to their operations. These commenters asserted that consumer loans and deposit products are subject to comprehensive regulation, and preemption has served to provide clarity and certainty as to which regulatory requirements and standards apply to national banks. These commenters opined that preemption of multiple, differing, and sometimes conflicting, state and local laws and regulations is crucial to the ability of banks and thrifts to conduct multi-state operations in a safe and sound manner to the benefit of consumers, small businesses, and the United States economy as a whole. They voiced concern that the imposition of an overlay of potentially 50 state and an indeterminate number of local government rules on top of myriad Federal requirements would have a costly consequence that could materially affect banks and their ability to serve consumers efficiently and effectively across the nation and could deter future product innovation and modernized, more effective consumer disclosures. 28 These commenters cited studies showing that compliance with a multiplicity of state laws can increase costs for consumers and loan losses for banks and decrease credit availability. Some commenters also noted that uniform national laws, and the court and regulatory determinations pursuant to them, have been used in the past as a device to open markets, redress local protectionist measures, reduce the price of credit, increase the availability of credit, and increase the efficiency of banks.

Bank and thrift commenters described the scope of their operations and provided examples of the burdens the application of state and local laws and regulations would impose. According to these institutions, the burdens of having to comply with multiple state and local laws would impair their efficiency in offering core banking products, such as checking accounts, credit cards, mortgage loans, and deposit products. Some commenters also voiced concern that their ability to prudently underwrite loans, offer borrowers needed flexibility, and provide effective consumer disclosures would be compromised by application of various state laws.

Finally, commenters also disputed the contention that preemption encouraged lenders to engage in predatory lending practices that contributed to the subprime mortgage crisis. Some commenters also suggested that the final rule include additional provisions to: clarify that the OCC's regulations concerning non-interest fees and charges (12 CFR 7.4002), adjustable rate mortgages (12 CFR 34.21) and debt cancellation contracts (12 CFR 37.1) remain in effect; revise, rather than eliminate, 12 CFR 7.4009 to conform with §§ 7.4007, 7.4008, and 34.4; clarify that the abrogation of 12 CFR 7.4006 will not be given retroactive effect, 29 confirm that the 2004 preemption rules will also apply to Federal savings associations, to the same extent that those rules apply to national banks; and confirm that all prior OTS preemption actions that are consistent with the holding in Barnett, including those based on the HOLA, also continue to be effective.

The OCC has carefully considered all of the points raised by all of the commenters. As described in detail in the next section and for the reasons next discussed, the OCC is issuing a final rule that is substantially the same as the proposal with additional instructive commentary and certain modifications to the visitorial powers provisions to address specific concerns that commenters raised and a clarifying change to §§ 7.4010(a) and 34.6 regarding the applicability of state law to Federal savings associations.

As noted above, in addition to comments on specific aspects of the proposed rule, some commenters urged general disfavor of the concept of Federal preemption as applied to the powers of national banks, and some also contended that preemption in the context of national banks contributed to predatory lending practices, which, in turn contributed to the recent financial crisis. Both of these concerns are important to address as threshold matters.

When Congress established the fundamental structure of the U.S. banking system in 1863, it created national banks and a national banking system to operate in parallel with the existing state banking system—a “dual banking system.” Congress did not abolish state banking, but it did include explicit protections in the new framework so that national banks would be governed by Federal standards administered by a new Federal agency—the Office of the Comptroller of the Currency—and not by state authority.

Perhaps not surprisingly, the independence of national banks from state authority over their banking business has produced tensions and disputes over the years. Yet, a long series of Supreme Court decisions beginning in the earliest years of the national banking system have confirmed the fundamental principle of Federal preemption as applied to national banks: that the Federally-granted banking powers of national banks are governed by national standards set at the Federal level, subject to supervision and oversight by the OCC. These characteristics are fundamental to the duality of the “dual banking system.” Thus established, the twin pillars of the national and state banking systems have been fundamental to the structure—and success—of the U.S. banking system for nearly 150 years. The Supreme Court's Barnett decision was a particularly thorough treatment of this background, applying a conflict preemption standard consistent with over a century of Supreme Court precedent as the yardstick for determining when state law applied to a national bank.

With this design, the state and national banking systems have grown up around each other in this “dual banking system.” Encompassing both large institutions that market products and services regionally, nationally and globally, and smaller institutions that focus their business on their immediate communities, this dual system is diverse, with complex linkages and interdependencies. In this context, and over time, a benefit has been that the “national” part of the dual banking system, the part that has allowed large and small banks to operate under uniform national rules across state lines, has helped to foster the growth of national products and services and multi-state markets. And the system also has supported the contributions of the state systems, allowing states to serve as a “laboratory” for new approaches applicable to their state-supervised institutions.

Throughout our history, uniform national standards have proved to be a powerful engine for prosperity and growth. National standards for national banks have been very much a part of this history, benefiting individuals, business and the national economy. In the 21st Century, the Internet and the advent of technological innovations in the creation and delivery of financial products and services has accentuated the geographic seamlessness of financial services markets, highlighting the importance of uniform standards that attach based on the product or service being provided, applying wherever and however the product or service is provided. However, the premise that Federally-chartered institutions would be subject to standards set at the Federal, rather than state-by-state level, does not and should never mean that those institutions are subject to lax standards. National banks are subject to extensive regulation at the Federal level—which is being considerably enhanced by many provisions of the Dodd-Frank Act—and to regular, and in some cases, continuous examination of their operations.

Because of the degree of regulation and supervision to which national banks are subject, national banks—and other Federally-regulated depository institutions—had limited involvement in subprime lending and the worst subprime loans were originated by nonbank lenders and brokers  30 where national bank preemption was not applicable. National bank preemption did not and does not prevent regulation of nonbank mortgage lenders and brokers, and going forward, the CFPB's authority in this area will bring a new level of Federal standards, oversight and enforcement over this “shadow banking system.” Concerns that have been expressed that Federal consumer protection rules were not sufficiently robust should be addressed by the CFPB's authority and mandate to write strong Federal consumer protection standards, and its research-based and consumer-tested rulemaking processes envisioned under the Dodd-Frank Act.

With respect to the specifics of the proposal, the OCC concludes that the Dodd-Frank Act does not create a new, stand-alone “prevents or significantly interferes” preemption standard, but rather, incorporates the conflict preemption legal standard and the reasoning that supports it in the Supreme Court's Barnett decision. This result follows from the language of the statute; is supported by language of other, integrally-related portions of the Dodd-Frank Act preemption provisions; was so described by its sponsors at the time of enactment as intending that result; is consistent with the interpretation Federal courts have accorded virtually identical preemption language in the Gramm-Leach-Bliley Act of 1999 (GLBA); and subsequently has been explained as embodying the intent of the sponsors of the language.

As described in the preamble to the proposal, the language of the Barnett standard preemption provision differs substantially from earlier versions of the legislation. Its sponsors have explained that this change was intended to provide consistency and legal certainty by preserving the preemption principles of the Supreme Court's Barnett decision, while specifying a process for preemption determinations, and integrating that process with other reforms implemented by the Dodd-Frank Act, prospectively. For example, when asked by Senator Carper to confirm that Section 1044 retained the Barnett standard for determining preemption of state consumer financial law passed by the Senate, Chairman Dodd confirmed that was so. 31

Some commenters assert, however, that the Barnett standard provision and the colloquy between Senators Carper and Dodd point to an intention to adopt a new “prevent or significantly interfere” preemption test for state consumer financial law. However, this assertion fails to take account of both the context and entirety of the colloquy and is not sustained by the language of the statute, or by the Barnett decision itself. Section 1044 of the Dodd-Frank Act provides in pertinent part that a state consumer financial law as applied to a national bank will be preempted only if, “in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett ], the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers * * * ”  32 The “legal standard for preemption” employed in the Court's decision is conflict preemption, applied in the context of powers granted national banks under Federal law. 33 “Prevent or significantly interfere” is not “the legal standard for preemption in the decision”; it is part of the Court's discussion of its reasoning; an observation made describing other Supreme Court precedent that is cited in the Court's decision. 34

Therefore, in order to apply the Barnett standard preemption provision in section 1044, the first step is that the preemption analysis must be “in accordance with the legal standard for preemption in the decision of the Supreme Court” in Barnett. Thus, the analysis should be a conflict preemption legal standard, and the analysis should be in accordance with the Court's reasoning applying that standard in the Barnett decision. The “prevent or significantly interfere” phrase that follows then provides a touchstone to that conflict preemption standard and analysis. 35 The phrase cannot be a new, stand-alone standard, divorced from the reasoning of the decision without ignoring the language that precedes it, which directs that the legal standard be the standard for preemption “in the decision” of the Court. That standard is conflict preemption, as supported by the reasoning of the decision, which includes, but is not bounded by, the “prevent or significantly interfere” formulation. If Congress had intended a different preemption analysis than the conflict preemption analysis in Barnett, it would have been rejecting not just Barnett, but also, as described above, well over a century of judicial precedent upon which the decision was founded. We decline to infer that result from legislative language that begins by stating that preemption would be determined “in accordance with the legal standard for preemption in the decision of the Supreme Court” in Barnett.

This result is supported by other portions of the Dodd-Frank Act and relevant precedent. 36 Specifically, in the same section 1044, the related requirement that the OCC must have “substantial evidence” on the record to support adoption of preemption rules or orders refers to “the legal standard of the decision of the Supreme Court in” the Barnett decision, not to any single phrase used in that decision. 37 It would not make sense for this “substantial evidence” requirement to require compliance with a different preemption standard than the standard intended by the Barnett standard preemption provision.

Other textual support is found in the Dodd-Frank Act section providing that Federal savings associations are to be subject to the same preemption standards applicable to national banks. Subsection (a) of section 1046 states that preemption determinations for Federal savings associations under the Home Owners' Loan Act “shall be made in accordance with the laws and legal standards applicable to national banks regarding preemption of state law.” The heading of subsection (b), which immediately follows, is “Principles of Conflict Preemption Applicable,” which can only refer to the national bank preemption standards to which Federal savings associations are made subject by subsection (a).

The Barnett standard preemption provision also uses language virtually identical to that used in section 104(d)(2)(A) of the GLBA. 38 The leading case applying that standard similarly treated the phrase “prevents or significantly interferes” as a reference to the whole of the Court's Barnett preemption analysis and referred to the GLBA statutory language as “the traditional Barnett Bank standards.”  39

Accordingly, because we conclude that the Dodd-Frank Act preserves the Barnett conflict preemption standard, precedents consistent with that analysis—which may include regulations adopted consistent with such a conflict preemption justification—are also preserved. 40 Further, as of July 21, 2011, those rules and precedents will apply to Federal savings associations to the same extent that they apply to national banks.

Some commenters asserted that the “obstruct, impair, or condition” phrasing in the 2004 preemption rules was not only inconsistent with Barnett but also inconsistent with the new, narrower “prevents or significantly interferes” standard that they assert is imposed by the Dodd-Frank Act. As discussed above, we conclude that the Dodd-Frank Act Barnett standard is the conflict preemption standard employed in the Court's decision, not a new test. The question remains, however, of the relationship between that standard and the “obstruct, impair or condition” formulation. As we noted in the preamble to the proposal, the words “obstruct, impair or condition” as used in the 2004 preemption rules were intended to reflect the precedents cited in Barnett, not to create a new preemption standard. Nevertheless, we acknowledge that the phrase created confusion and misunderstanding well before enactment of the Dodd-Frank Act. We also recognize that inclusion of the “prevents or significantly interferes” conflict preemption formulation in the Barnett standard preemption provision may have been intended to change the OCC's approach by shifting the basis of preemption back to the decision itself, rather than placing reliance on the OCC's effort to distill the Barnett principles in this manner. 41

For these reasons, the OCC is deleting the phrase in the final rule. 42 Eliminating this language from our regulations will remove any ambiguity that the conflict preemption principles of the Supreme Court's Barnett decision are the governing standard for national bank preemption. In response to concerns raised by commenters about Dodd-Frank Act legislative intent, misunderstanding and potential misapplication of the “obstructs, impairs or conditions” formulation, and the relevant legislative history, the OCC also has reconsidered its position concerning precedent that relied on that standard. To the extent that an existing preemption precedent is exclusively reliant on the phrase “obstructs, impairs, or conditions” as the basis for a preemption determination, we believe that validity of the precedent would need to be reexamined to ascertain whether the determination is consistent with the Barnett conflict preemption analysis as discussed above. 43

Some commenters also asserted that the preemption rules promulgated by the OCC in 2004 are not consistent with the Dodd-Frank Act, or with Barnett, because they identify categories and/or terms of state laws that are preempted; some of these commenters equated listing of categories of preempted state laws with field preemption. However, these rules are not based on a field preemption standard. 44 They were based on the OCC's conclusion that the listed types and terms of state laws would be preempted by application of the conflict preemption standard of the Barnett decision.

The essence of the Barnett conflict preemption analysis is an evaluation of the extent and nature of an impediment posed by state law to the exercise of a power granted national banks under Federal law. 45 The “conflict” that is analyzed in conflict preemption is the nature and scope of that impediment. Where the same type of impediment exists under multiple states' laws, a single conclusion of preemption can apply to multiple laws that contain the same type of impediment—that generate the same type of conflict with a Federally-granted power. Accordingly, a conflict preemption analysis can be state law-specific, or it can apply to provisions or terms in more than one law that present the same type of conflict. 46 But in all cases, 47 there must be a conflict that triggers preemption under the standard articulated in the Barnett decision. 48 As detailed below, the Dodd-Frank Act's case-by-case procedural requirement applicable to future determinations regarding preemption of state consumer financial laws allows categorical determinations where multiple state laws are identified. The Act defines “case-by-case basis” as a determination by the Comptroller as to the impact of a “particular” state consumer financial law on “any national bank that is subject to that law” or the law of any other state with substantively equivalent terms.

The types and terms of laws that are set out in the 2004 preemption rules were based on the OCC's experience with the potential impact of such laws on national bank powers and operations. 49 We have re-reviewed those rules in connection with this rulemaking to confirm that the specific types of laws cited in the rules are consistent with the standard for conflict preemption in the Supreme Court's Barnett decision. 50 For example, in the lending arena, based upon our assessment as the primary Federal supervisor of national banks, state laws that would affect the ability of national banks to underwrite and mitigate credit risk, manage credit risk exposures, and manage loan-related assets, such as laws concerning the protection of collateral value, credit enhancements, risk mitigation, loan-to-value standards, loan amortization and repayment requirements, circumstances when a loan may be called due and payable, escrow standards, use of credit reports to assess creditworthiness of borrowers, and origination, managing, and purchasing and selling extensions of credit or interests therein, would meaningfully interfere with fundamental and substantial elements of the business of national banks and with their responsibilities to manage that business and those risks.

Similarly, disclosure laws that impose requirements that predicate the exercise of national banks' deposit-taking or lending powers on compliance with state-dictated disclosure requirements clearly present a significant interference, within the meaning of Barnett, with the exercise of those national bank powers. This type of law falls squarely within the precedent recognized in the Supreme Court's Barnett decision, notably the Franklin Nat'l Bank decision specifically discussed and relied upon in Barnett. 51

And state laws that would alter standards of a national bank's depository business—setting standards for permissible types and terms of accounts and for funds availability, similarly would significantly interfere with management of a core banking business. Moreover, the imposition of state-based standards on national banks' depository activities implicates aspects of a bank's overall risk management and funding strategies, including liquidity, interest rate risk exposure, funding management, and fraud prevention. State and local law directives or instructions affecting these areas are significant, within the meaning of Barnett, since they affect whether and how the bank may offer a core banking product and manage some of its most basic funding functions in operating a banking business.

Several commenters identified particular types of laws in the foregoing categories and explained how they impaired or otherwise burdened their operations. Those commenters also emphasized that to the extent that multiple states' requirements may be asserted, the significance of the interference is magnified. Based upon the OCC's supervisory experience, these concerns are valid.

Some commenters asserted that maintaining any of the preemption rules contravenes the new Dodd-Frank Act preemption procedures. These commenters contend that OCC can preempt only on a “case-by-case basis” if a “particular” state law, or an equivalent one, prevents or significantly interferes with the exercise of bank powers, after consultation with the CFPB. However, these provisions clearly apply to determinations made under the Barnett standard provisions of the Dodd-Frank Act that are not effective until July 21, 2011. Actions and regulations in effect prior to the effective date are not subject to the case-by-case requirement, but, as discussed above, the continued validity of those precedents applicable to state consumer financial laws is subject to the standards of section 1044(b)(1). Future preemption determinations would be subject to the new Dodd-Frank Act procedural provisions. Where Congress wanted to make wholesale changes to existing preemption standards, it clearly did so, as it did by eliminating field preemption for Federal thrifts and preemption for operating subsidiaries, and those standards operate prospectively. 52

As explained above, some commenters voiced concern about the proposed revision to the definition of visitorial powers at § 7.4000(a)(2)(iv) to include “ [i]nvestigating or enforcing compliance with any applicable Federal or state laws concerning those activities.” This addition, consistent with the concept of visitation, was intended to include direct investigations of national banks such as through requests for documents or testimony directed to the bank to ascertain the bank's compliance with law through mechanisms not otherwise authorized under the rule. It would not include collecting information from other sources or from the bank through actions that do not constitute visitations or as authorized under Federal law. In response to commenters and to better reflect the Cuomo decision, we have revised the final rule to clarify this point.

Commenters also opined that the proposed definition does not reflect the authority of state attorneys general to enforce certain Federal laws and certain regulations to be issued by the CFPB. We believe this authority is addressed in current § 7.4000(a)(3), which provides that the OCC has exclusive visitorial powers “[u]nless otherwise provided by Federal law,” and in § 7.4000(b)(1).

Finally, some commenters asserted that the phrase “non-preempted state law” used in the proposal could be interpreted more narrowly than the “applicable law” phrasing used in the Dodd-Frank Act. We intended the authority addressed in current § 7.4000(a)(3) in combination with the phrase “non-preempted state law” to have the result sought by these commenters, but we understand the commenters' concern regarding the clarity of this result. Accordingly, we have changed the language of the final rule to simply use the term “applicable law.” We note, however, that this is an exception from a prohibition of certain visitorial actions by an attorney general (or other chief state law enforcement officer), not an authorization. In the case of both non-preempted state law and Federal law, the law in question still must provide authority for the attorney general to enforce and seek relief as authorized under that applicable law.

For the reasons set forth in this preamble, the final rule amends provisions of the OCC's regulations relating to preemption (12 CFR 7.4007, 7.4008, 7.4009, and 34.4), operating subsidiaries (12 CFR 5.34 and 7.4006), and visitorial powers (12 CFR 7.4000) as follows:

• The final rule adds §§ 7.4010(a) and 34.6 to provide that Federal savings associations and their subsidiaries are subject to the same laws and legal standards, including OCC regulations, as are applicable to national banks and their subsidiaries regarding the preemption of state law. The final rule also adds § 7.4010(b) to subject Federal savings associations and their subsidiaries to the same visitorial powers provisions in the Dodd-Frank Act that apply to national banks and their subsidiaries.

• The final rule makes conforming changes to §§ 7.4007, 7.4008, and 34.4. It revises paragraphs (b) in § 7.4007, (d) in § 7.4008, and (a) in § 34.4 by removing “state laws that obstruct, impair, or condition a national bank's ability to fully exercise its Federally authorized * * * powers are not applicable to national banks.” The final rule further clarifies that a state law is not preempted to the extent consistent with the Barnett decision.

• The final rule deletes § 7.4009.

• The final rule deletes § 7.4006, which governs applicability of state laws to national bank operating subsidiaries. The final rule also makes conforming revisions to 12 CFR 5.34(a) and paragraph (e)(3) by expressly referencing the new section 12 U.S.C. 25b adopted by the Dodd-Frank Act.

• The final rule makes a number of changes to § 7.4000 to conform the regulations to the Supreme Court's decision in the Cuomo case as adopted by the Dodd-Frank Act. First, it adds a reference to 12 U.S.C. 484 in § 7.4000(a)(1). Second, it revises paragraph (a)(2)(iv) to read “[e]nforcing compliance with any applicable Federal or state laws concerning those activities, including through investigations that seek to ascertain compliance through production of non-public information by the bank, except as otherwise provided in paragraphs (a), (b) and (c).” Third, it adds a new paragraph (b), which specifically provides that “[i]n accordance with the decision of the Supreme Court in Cuomo v. Clearing House Assn., L.L.C., 129 S. Ct. 2710 (2009), an action against a national bank in a court of appropriate jurisdiction brought by a state attorney general (or other chief law enforcement officer) to enforce an applicable law against a national bank and to seek relief as authorized by such law is not an exercise of visitorial powers under 12 U.S.C. 484.” Fourth, it redesignates paragraphs (b) and (c) as new paragraphs (c) and (d) and makes conforming revisions to § 7.4000(c)(2), which provides an exception from the general rule in § 7.4000(a)(1) for such visitorial powers as are vested in the courts of justice.

We did not propose changes to 12 CFR 7.4002, 34.21, and 37.1 and therefore make no changes to these provisions in this final rule. However, we agree with commenters that these rules remain in effect.

The Dodd-Frank Act transfers authority to collect assessments for Federal savings associations from the OTS to the OCC. 53 This authority is effective as of the transfer date, July 21, 2011. 54 The Dodd-Frank Act also provides that, in establishing the amount of an assessment, the Comptroller may consider the nature and scope of the activities of the entity, the amount and type of assets it holds, the financial and managerial condition of the entity, and any other factor that is appropriate. 55

Prior to the transfer date, the OCC and the OTS assessed banks and savings associations, respectively, using different methodologies, although the agencies' methodologies generally resulted in similar levels of assessments. Under the OTS assessment system, assessments were due each year on January 31 and July 31, and were calculated based on an institution's asset size, condition, and complexity. 56 The asset size component of the assessment was calculated using a table and formula contained in the OTS's regulation. 57 The OTS set specific rates that apply to the table through a Thrift Bulletin on assessments and fees. 58

The condition component in the OTS's regulation applied to savings associations with Uniform Financial Institutions Rating System (UFIRS) ratings of 3, 4, or 5. The condition surcharge is determined by multiplying a savings association's size component by 50%, in the case of any association that receives a composite UFIRS rating of 3, and 100% in the case of any association that receives a composite UFIRS rating of 4 or 5. Under the OTS regulation, there was no cap on the condition surcharge.

The assessment for complexity was based on a savings association's trust assets and on certain non-trust assets. The OTS charged a complexity component for trust assets if a savings association had more than $1 billion in one of three components: trust assets managed by the savings association, the outstanding principal balance of assets that are covered by recourse obligations or direct credit substitutes, and the principal amount of loans that the institution services for others. The OTS charged the complexity component for these categories of assets above $1 billion under tiers and rates set out in a Thrift Bulletin.

If a savings association administers trust assets of $1 billion or less, the OTS could assess fees for its examinations and investigations of those institutions. The OTS also could assess a savings association for examination or investigation of its affiliates. Again, these fees were set in a Thrift Bulletin.

Under the OCC's assessment regulation, set forth at 12 CFR part 8, assessments for each national bank are due on March 31 and September 30 of each year. 59 The semiannual assessment for each national bank is based on an institution's asset size and is calculated using a table and formula in the OCC's regulation. 60 The OCC sets the specific rates for the table each year in the Notice of Comptroller of the Currency Fees (Notice of Fees). 61 The OCC may provide a reduced semiannual assessment for each non-lead bank within a bank holding company. 62

In addition to the semiannual assessment, the OCC applies a separate assessment for its examination of “independent credit card banks” and “independent trust banks.”  63 A bank is an independent credit card bank if it engages primarily in credit card operations and is not affiliated with a full-service national bank. 64 The assessment is based on “receivables attributable,” defined as the total amount of outstanding balances due on credit card accounts owned by the bank (the receivables attributable to those accounts), minus receivables retained on the bank's balance sheet.

An “independent trust bank” is a national bank with trust powers that has fiduciary and related assets, does not primarily offer full-service banking, and is not affiliated with a full-service national bank. 65 The independent trust assessment is made up of a minimum amount, set in the Notice of Fees, and an additional amount for banks with over $1 billion in fiduciary and related assets. The specific rate applicable to fiduciary and related assets above $1 billion is also set in the annual Notice of Fees.

The OCC applies a condition-based surcharge to the semiannual assessment of national banks. 66 The condition surcharge applies to national banks with UFIRS ratings of 3, 4, or 5. The condition surcharge is determined by multiplying the general semiannual assessment by 1.5, in the case of any national bank that receives a composite UFIRS rating of 3, and 2.0 in the case of any national bank that receives a composite UFIRS rating of 4 or 5. The condition surcharge is assessed against, and limited to, the first $20 billion of a national bank's book assets.

The OCC received two comments concerning the proposed changes to part 8 and the assessment of savings association, both supporting the proposal's approach to integrating savings associations into the OCC's assessment structure. The OCC is adopting the final rule as proposed.

The final rule amends part 8 to assess Federal savings associations using the same methodologies, rates, fees, and payment due dates that apply currently to national banks. The OTS's existing assessment regulation is no longer in effect and will be repealed at a later date. As a result, the next assessment for savings associations will occur in September 2011, and not July 2011.

Under the OCC's assessment system, some savings associations will pay marginally more assessments than in the past, while others will pay lower assessments. However, during the first two assessment cycles after the transfer date, the OCC will base savings association assessments on either the OCC's assessment regulation (as amended to include Federal savings associations) or the former OTS assessment structure, whichever yields the lower assessment for that savings association. After the March 2012 assessment, all national banks and Federal savings associations will be assessed using the OCC's assessment structure. The OCC intends to implement this phase-in through an amended Notice of Fees. The OCC believes that this phase-in will allow savings associations sufficient time to adjust to the OCC's assessment program.

One commenter suggested that the OCC add the phase-in period for Federal savings associations to the regulatory text. The OCC believes that the amended Notice of Fees discussed above, as well as the discussion of the phase-in included in the proposed rule and this preamble, provide sufficient guidance to Federal savings associations concerning the OCC's intention to delay application of higher assessments for affected Federal savings associations for two assessment cycles. Given the temporary nature of the phase-in, we decline to include a reference to the phase-in period in the regulatory text.

This commenter also suggested that the OCC provide an alternate assessment statement to Federal savings associations to show savings associations what the assessment would have been under the OCC's assessment structure, had it been applied. The commenter stated that this will assist those Federal savings associations that will pay marginally more under the OCC's assessment structure better prepare for the shift to OCC assessments in 2012. We agree that such notice would be helpful and plan to notify those Federal savings associations that will pay a lower assessment during the phase-in of the amount their assessments would have been under the OCC's assessment structure.

The final rule also implements section 605(a) of the Dodd-Frank Act, which provides the OCC (and other appropriate Federal banking agencies) with authority to conduct examinations of depository-institution permissible activities of nondepository institution subsidiaries of depository institution holding companies. Section 605 provides specific authority for the OCC and other regulators to assess such nondepository institution subsidiaries for the costs of examination. The final rule implements this new statutory assessment authority.

This final rule is effective on July 21, 2011, except as noted in the DATES section. A final rule may be published with an effective date that is less than 30 days from publication if an agency finds good cause and publishes such with the final rule. 67 The purpose of a delayed effective date is to permit regulated entities to adjust their behavior before the final rule takes effect. As described above, the OCC is amending its rules to implement various provisions of the Dodd-Frank Act, including the Act's transfer of functions of the OTS to the OCC, the Act's provisions regarding preemption and visitorial powers, and the Act's amendments relating to the change in control of credit card banks and trust banks and deposit-taking by uninsured Federal branches. The changes relating to the transfer of the OTS's functions to the OCC are essential to facilitating a seamless transition when the OCC assumes responsibility for supervising Federal savings associations on the transfer date (July 21, 2011) and must be in effect on that date in order to ensure that the appropriate regulatory structure is in place. Specifically with regard to the preemption and visitorial powers rules, it is important for the industry to have guidance by the effective date of the relevant Dodd-Frank Act amendments, July 21, 2011. Finally, the amendments relating to the change in control of credit card banks and trust banks and deposit-taking by uninsured Federal branches simply implement statutory changes made effective upon the enactment of the Dodd-Frank Act on July 21, 2010. For these reasons, the OCC finds good cause to dispense with a delayed effective date.

Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4802) (RCDRIA) requires that regulations imposing additional reporting, disclosure, or other requirements on insured depository institutions take effect on the first day of the calendar quarter after publication of the final rule, unless, among other things, the agency determines for good cause that the regulations should become effective before such time. The RCDRIA does not apply to the amendments to parts 4, 5, 7, 8, 28 and 34 of this final rule because these amendments do not impose any additional reporting, disclosure, or other requirements.

Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b) (RFA), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities and publishes its certification and a short, explanatory statement in the Federal Register along with its rule. We have concluded that the final rule does not have a significant economic impact on a substantial number of small entities currently supervised by the OCC ( i.e., national banks and Federal branches and agencies of foreign banks). In addition, although the final rule will directly affect all Federal savings associations, we have concluded that it does not have a significant economic impact on a substantial number of small Federal savings associations. Specifically, the amendments to part 4 do not contain new compliance requirements. Any costs that may be associated with integrating the functions of the two agencies, and other changes to part 4, will be borne by the OCC. In addition, there are no costs directly associated with the amendments to 12 CFR 5.50(f) and part 28, implementing sections 603 and 335 of the Dodd-Frank Act, respectively, or with the amendments necessary to apply national bank preemption standards to Federal savings associations. Furthermore, we have determined that the amendments to the preemption and visitorial powers provisions affecting national banks will not have a significant economic impact on a substantial number of small entities. Lastly, although the amendments to part 8, assessments, will economically impact a substantial number of small savings associations, this impact will not be significant. Therefore, pursuant to section 605(b) of the RFA, the OCC hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities. Accordingly, a final regulatory flexibility analysis is not needed.

The rule contains several currently approved collections of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520). 68 The amendments adopted today do not introduce any new collections of information into the rules, nor do they amend the rules in a way that substantively modifies the collections of information that OMB has approved. Therefore, no PRA submissions to OMB are required, with the exception of non-substantive submissions to OMB to adjust the number of respondents.

Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate that may 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. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OCC has determined that 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, this final rule is not subject to section 202 of the Unfunded Mandates Act.

For the reasons set forth in the preamble, chapter I of title 12 of the Code of Federal Regulations is amended as follows:

Under the Act, on the designated transfer date, July 21, 2011, 2 certain consumer financial protection authorities will transfer from seven transferor agencies  3 to the CFPB, and the CFPB will also assume certain new authorities. Subject to the limitations and other provisions of the Act, the CFPB will be authorized to enforce, inter alia , rules and orders issued by the transferor agencies under the enumerated consumer laws. 4 The CFPB will also have authority to enforce in some circumstances the Federal Trade Commission's Telemarketing Sales Rule and its rules under the Federal Trade Commission Act, although the Federal Trade Commission will retain full authority over these rules. 5

Section 1063(i) of the Act provides that, not later than the designated transfer date, the CFPB “(1) shall, after consultation with the head of each transferor agency, identify the rules and orders that will be enforced by the [CFPB]; and (2) shall publish a list of such rules and orders in the Federal Register .” The CFPB consulted with each transferor agency pursuant to section 1063(i) and developed an initial list of rules. After consultation, neither the transferor agencies nor the CFPB identified any orders for inclusion in the list. 6

The Small Business Act (Act) and implementing regulations require that, with the exception of certain specified entities, qualified HUBZone small business concerns (SBCs) have a principal office located in a HUBZone. 15 U.S.C. 632(p)(5)(A)(i)(I)(aa); 13 CFR 126.103. The Act and the implementing regulations also require that at least 35% of the HUBZone small business concern's employees reside in a HUBZone. Id. 13 CFR 126.200(b). The statute and regulations define a HUBZone to mean an area located within one or more qualified census tracts (QCTs), qualified non-metropolitan counties (QNMCs), lands within the external boundaries of an Indian reservation, redesignated areas, or base closure areas. Id. § 632(p)(1); 13 CFR 126.103.

The Act and SBA's regulations define a QCT by referring to the Internal Revenue Code of 1987, which in turn defines a QCT as any census tract which is designated by the Secretary of Housing and Urban Development (HUD) and, for the most recent year for which census data are available on household income in such tract, either in which 50 percent or more of the households have an income which is less than 60 percent of the area median gross income. See 26 U.S.C. 42(d)(5)(C). Thus, a QCT may be located in a nonmetropolitan or a metropolitan area. In addition, a QCT is not necessarily a “county,” but is an area located within a county.

The Act and regulations also define a QNMC as any county that was not located in a metropolitan statistical area and in which: (1) The median household income is less than 80 percent of the nonmetropolitan State median household income, based on the most recent data available from the Census Bureau; (2) the unemployment rate is not less than 140 percent of the average unemployment rate for the United States or for the State in which such county is located, whichever is less, based on the most recent data available from the Department of Labor (DOL); or (3) there is located a difficult development area, as designated by HUD within Alaska, Hawaii, or any territory or possession of the United States outside the 48 contiguous States. 15 U.S.C. 632(p)(4)(B).

In sum, the HUBZone areas are designated by statute and draw upon determinations and information obtained by other agencies. The SBA takes these designations and depicts them on an easy-to-use HUBZone map, available at http://www.sba.gov/content/hubzone-maps . The SBA does not have discretion when it comes to designating HUBZones.

With respect to both QCTs and QNMCs, the SBA relies on data from HUD, Census Bureau and DOL in order to determine which areas are HUBZones. With respect to the census tracts, HUD reviews census tracts as new data from the Census Bureau become available or when metropolitan area definitions change. HUD's current designations of census tracts are based on data from the 2000 Census because in the past, tract-level data was only available from a Decennial Census. However, due to changes in collection of income data at the tract level by the Census Bureau, HUD will now be relying on data from the American Community Survey (ACS). Although the ACS is an annual survey, tract-level data from the ACS will be released as five-year averages. The first release of this data will cover the 2005 through 2009 period and the Census Bureau expects to make this data available sometime soon. HUD will review this new data during 2012 and make census tract determinations. Census tracts will be subsequently reviewed based on new data every 5 years. SBA relies on these HUD designations for purposes of its program.

However, before HUD can designate a census tract, it must rely on the Census Bureau to define the census tract's boundaries. With respect to the census tracts, the Census Bureau defines the boundaries in cooperation with local authorities every ten years and, following a public comment period, has recently completed defining tract boundaries for the 2010 Census. Once census tract boundaries are set, they remain unchanged for the next decade. Thus, tract boundaries will not be changed again until the 2020 Decennial Census.

Therefore, with respect to HUBZone QCTs, SBA relies on designations from HUD and boundary designations from the Census Bureau.

With respect to nonmetropolitan counties, SBA receives unemployment data from DOL yearly. Further, designations based on the HUD defined Difficult Development Areas (DDAs) are updated annually. Thus, for QNMCs, the SBA relies on DOL data and HUD definitions for DDAs.

When the HUBZone Program first started, the receipt of such data or designations, especially the annual data, meant that in some cases certain HUBZone areas could be affected every year by the release of certain data, i.e. , the areas would lose HUBZone status. As a result, the Small Business Act was amended to add a new HUBZone area known as a “redesignated area.” At that time, a redesignated area, that is, any QCT or QNMC that ceased to be qualified, would become redesignated as a HUBZone area only for the 3-year period following the date on which the QCT or QNMC ceased to be so qualified. Public Law 106-554, § 613(1)(c) (2000). Congress added these redesignated areas because it believed that decertifying large numbers of small businesses that had not seen any benefit to the program would have threatened the HUBZone program by giving it a reputation as not worthwhile. Congress also believed any county that could change into and out of HUBZone status annually would not attract small businesses to the HUBZone program and would hinder investment in such a location. S. Rep. 107-19, 107th Cong. 1st Sess. (2001).

A few years later, the SBA encountered additional problems once the Census Bureau released the 2000 Decennial Census results as a large number of areas ceased to be considered HUBZones. In response, Congress amended the Act in 2004 to redefine a redesignated area to mean any QCT or QNMC that ceases to be qualified may be a redesignated area until the later of: (1) The date on which the Census Bureau publicly releases the first results from the 2010 Decennial Census that affects the eligibility of the HUBZone; or (2) three years after the date on which the census tract or nonmetropolitan county ceased to be so qualified. 15 U.S.C. 632(p)(4)(C). The purpose of extending the redesignated status until the 2010 Decennial Census or three years after the date the QCT or QNMC ceases to be a qualified HUBZone (whichever is later) was to provide adequate time for HUBZone SBCs to recoup a return on investment and assist the Federal government in meeting its statutory prime contracting HUBZone goal of 3 percent.

This year, the Census Bureau will publicly release the first results of the 2010 Decennial Census that affect the eligibility of the HUBZones. The Census Bureau uses the ACS to collect socioeconomic and housing information continuously from a national sample of housing units and people living in group quarters, and tabulates these data on a calendar year basis. Agencies will utilize the evaluated data from the ACS to make QCT and QNMC determinations. The first set of evaluated data using ACS numbers that affect HUBZone eligibility are expected to be available to the public in the Fall 2011. SBA will generate a new list of QNMCs at that time that will take into consideration the analysis of the income data coming from the five year ACS. At the moment that the new list is made public, those areas that were redesignated prior to 2008 will expire and cease to be HUBZones. The areas affected include redesignated QCTs and QNMCs (including QNMCs that are difficult development areas).

The following provides examples of how the statutory redesignated areas are affected or not affected by the release of the 2010 Decennial Census:

When the Census Bureau releases the data, the SBA will publish information and later update its current maps to show the public those areas that are no longer qualified HUBZones because they are no longer redesignated areas. Any current qualified HUBZone SBC with a principal office in one of those areas will be proposed for decertification. The SBA will also publish information and update its maps to show any areas that may become new HUBZones. In some cases, a redesignated area could remain a HUBZone by becoming a QNMC or QCT. The SBA does not have any information at this time to identify areas that will be designated as new HUBZones.

We note that the HUBZone Program was established in 1997, and all the redesignated areas have been allowed to stay in the program or reinstated since December 2004. Since then, no SBC has been decertified because of an expired redesignation. In general, SBA believes that many SBCs in these redesignated areas have been given ample time to recoup a return on their investment. However, we understand that many of these SBCs in the redesignated areas that are getting ready to expire may want to continue to utilize the HUBZone Program and could do so by moving their business into a HUBZone.

Specifically, the HUBZone Program has an average of 8,500 participating firms, and about 40% of the firms will be affected by the expiring redesignations based on principal office location. In addition there will be another set of small businesses that will be ineligible because they no longer meet the HUBZone 35% residency requirement. Further, the HUBZone Program receives approximately 4,000 applications per year. Of the 1,089 applications that where declined in FY10, 62% where declined due to the applicant not meeting the 35% employee HUBZone residence requirement and 46% because of not meeting the principal office requirement. Also, of the 742 firms that voluntarily decertified in FY09 and FY10, 23% did so because they were not meeting the 35% employee HUBZone residence requirement and 22% because of not meeting the principal office requirement.

Under the current regulations, once declined or decertified, these small businesses must wait one year to reapply. At the time it promulgated that rule, the SBA believed that a one year wait was sufficient time for a small business to come back into compliance. However, in many cases, the small business only has to hire a few additional HUBZone residents. In other cases, such as those small businesses with principal offices in HUBZone areas that are about to expire, the SBA has provided several years warning about the expiration. In preparation, some businesses may be planning to move to HUBZone areas. It would not serve the purposes of the program to make such small businesses wait one year to reapply.

The SBA believes that reducing the one year wait period to ninety (90) calendar days would encourage the businesses to move into newly designated HUBZones and hire HUBZone residents, which are the two purposes of the statute. It would also create an incentive for small businesses that no longer meet the HUBZone program requirements to voluntarily decertify and then seek eligibility when they come back into compliance. Because so many small businesses will be affected by the expiration of the redesignated areas—whether as a result of its principal office no longer being located in a HUBZone or employees no longer residing in a HUBZone—the SBA believes it is best to reduce the one year wait period, so that no small business is subject to this lengthy wait.

The SBA does not believe that reducing of the one year wait would increase fraud, waste, and abuse on the program. The business concern must meet all HUBZone eligibility requirements when it reapplies. In fact decreasing the one year wait to ninety (90) calendar days will incentivize small businesses to voluntarily decertify knowing that they do not need to wait a year before reapplying.

As a result of the foregoing, with this interim final rule, the SBA is reducing the one year wait period set forth in 13 CFR 126.309. Accordingly, 13 CFR 126.309 would simply state that a concern that SBA has declined or decertified may seek certification ninety (90) calendar days after the date of decline or decertification if it believes that it has overcome all reasons for decline or decertification through changed circumstances and is currently eligible.

In general, SBA publishes a rule for public comment before issuing a final rule in accordance with the Administrative Procedure Act (APA) and SBA regulations. 5 U.S.C. 553 and 13 CFR 101.108. The APA provides an exception to this standard rulemaking process where an agency finds good cause to adopt a rule without prior public participation. 5 U.S.C. 553(b)(3)(B). The good cause requirement is satisfied when prior public participation is impracticable, unnecessary, or contrary to the public interest. Under such circumstances, an agency may publish an interim final rule without soliciting public comment.

The purpose of the HUBZone program is job creation and capital investment in Historically Underutilized Business Zones. In the present case, the SBA believes that up to half of the currently certified HUBZone SBCs may be affected by the results of the 2010 Decennial Census, whether as a result of the company's principal office losing HUBZone status or the company's employees no longer residing in a HUBZone. Approximately 47.5% of current QNMCs will be removed from HZ qualification, 30% of the current DDAs will be removed and 27% of QCTs will be removed. This means that many small businesses will no longer be certified HUBZone small business concerns and would have to wait one year to reapply to the program, even if they moved their business to a HUBZone or hired new HUBZone residents as employees. Decreasing the one year wait would permit, and we believe encourage, the businesses to move into newly designated HUBZones, which is one of the purposes of the statute.

This rule will help the communities that qualify as HUBZones under the criteria established by the Act. In allowing concerns to apply for certification after ninety (90) calendar days from being declined or decertified, such qualified HUBZone communities would boost their capital investment and job opportunities for its residents, since these declined or decertified small businesses will need to either locate to HUBZone communities and/or hire HUBZone residents, giving them an increased prospect of positively impacting jobs and investment in historically underutilized areas.

In addition, we have been notifying small businesses whose principal office is located in a redesignated area that is expiring with the release of 2010 Census data but the SBA cannot easily notify other small businesses who have a principal office in a continuing HUBZone but who have employees who live in expiring areas, and must meet the 35% HZ residency requirement. Reducing the one-year wait will encourage such small businesses to voluntarily decertify from the program because they know they will be able to reapply immediately when they are eligible.

We note that the public will still have the opportunity to offer comments, which will be reviewed by the SBA. Accordingly, SBA finds that good cause exists to publish this rule as an interim final rule as quickly as possible.

The APA requires that “publication or service of a substantive rule shall be made not less than 30 days before its effective date, except * * * as otherwise provided by the agency for good cause found and published with the rule.” 5 U.S.C. 553(d)(3). SBA finds that good cause exists to make this final rule effective the same day it is published in the Federal Register .

The purpose of the APA provision is to provide interested and affected members of the public sufficient time to adjust their behavior before the rule takes effect. For the reasons set forth above in Section III, “Justification for Publication as Interim Final Status Rule”, SBA finds that good cause exists for making this interim final rule effective immediately, instead of observing the 30-day period between publication and effective date. Nonetheless, the public may provide comments to SBA by the deadline for comments. SBA will review any comments received.

The Office of Management and Budget (OMB) has determined that this rule does not constitute a significant regulatory action under E.O. 12866. This is not a major rule under the Congressional Review Act, 5 U.S.C. 800.

This action meets applicable standards set forth in Sections 3(a) and 3(b)(2) E.O. 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

For the purpose of E.O. 13132, SBA has determined that the 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, this final rule has no federalism implications warranting preparation of a federalism assessment.

SBA has determined that this rule does not impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C., Chapter 35.

Because this rule is an interim final rule, there is no requirement for SBA to prepare an Initial Regulatory Flexibility Act analysis. The RFA requires administrative agencies to consider the effect of their actions on small entities, small non-profit businesses, and small local governments. Pursuant to the RFA, when an agency issues a rule the agency must prepare analysis that describes whether the impact of the rule will have a significant economic impact on a substantial number of small entities. However, the RFA requires such analysis only where notice and comment rulemaking is required.

For the reasons stated in the preamble, the Small Business Administration amends 13 CFR part 126 as follows:

History

On March 18, 2011, the FAA published in the Federal Register a notice of proposed rulemaking to amend Class E airspace at Shenandoah Valley Regional Airport, Staunton, VA (76 FR 14822) Docket No. FAA-2010-1285.

Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9U dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR part 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This amendment to Title 14, Code of Federal Regulations (14 CFR) part 71 amends Class E airspace extending upward from 700 feet above the surface to support new SIAPs developed at Shenandoah Valley Regional Airport, Staunton, VA. Airspace reconfiguration is necessary due to the decommissioning of the Bridgewater NDB and cancellation of the NDB approach.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, 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 I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.

This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends Class E airspace at Staunton, VA.

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

On May 18, 2011, the FAA published in the Federal Register a notice of proposed rulemaking to amend Class E airspace for Grand Marais, MN, creating additional controlled airspace at Grand Marais/Cook County Airport (76 FR 28687) Docket No. FAA-2011-0047. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9U dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR part 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 by creating additional Class E airspace extending upward from 700 feet above the surface for new standard instrument approach procedures at Grand Marais/Cook County Airport, Grand Marais, MN. This action is necessary for the safety and management of IFR operations at the airport.

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. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, 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 U.S. 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 I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace for Grand Marais/Cook County Airport, Grand Marais, MN.

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

History

On May 18, 2011, the FAA published in the Federal Register a notice of proposed rulemaking to amend Class E airspace for Hannibal, MO, reconfiguring controlled airspace at Hannibal Regional Airport (76 FR 28685) Docket No. FAA-2011-0046. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9U dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR part 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 by amending Class E airspace extending upward from 700 feet above the surface for the Hannibal, MO area. Decommissioning of the Hannibal NDB and cancellation of the NDB approach at Hannibal Regional Airport has made reconfiguration of the airspace necessary for the safety and management of IFR operations at the airport. This action also updates the airport name from “Hannibal Municipal Airport” to “Hannibal Regional Airport” and adjusts the geographic coordinates to coincide with the FAA's aeronautical database.

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. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, 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 U.S. 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 I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace at Hannibal Regional Airport, Hannibal, MO.

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

History

On April 19, 2011, the FAA published in the Federal Register a notice of proposed rulemaking to amend Class E airspace for Fulton, MO, reconfiguring controlled airspace at Elton Hensley Memorial Airport (76 FR 21825) Docket No. FAA-2011-0121. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Class E airspace designations are published in paragraph 6005 of FAA Order 7400.9U dated August 18, 2010, and effective September 15, 2010, which is incorporated by reference in 14 CFR part 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 by amending Class E airspace extending upward from 700 feet above the surface for the Fulton, MO area. Decommissioning of the Guthrie NDB and cancellation of the NDB approach at Elton Hensley Memorial Airport has made reconfiguration of the airspace necessary for the safety and management of IFR operations at the airport.

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. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule, when promulgated, 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 U.S. 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 I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends controlled airspace at Elton Hensley Memorial Airport, Fulton, MO.

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

This rule amends Title 14, Code of Federal Regulations, part 97 (14 CFR part 97) by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (FDC)/Permanent Notice to Airmen (P-NOTAM), and is incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of Title 14 of the Code of Federal Regulations.

The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAP and the corresponding effective dates. This amendment also identifies the airport and its location, the procedure and the amendment number.

This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP as modified by FDC/P-NOTAMs.

The SIAPs, as modified by FDC P-NOTAM, and contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days.

Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This rule amends Title 14 of the Code of Federal Regulations, Part 97 (14 CFR part 97), by establishing, amending, suspending, or revoking SIAPS, Takeoff Minimums and/or ODPS. The complete regulators description of each SIAP and its associated Takeoff Minimums or ODP for an identified airport is listed on FAA form documents which are incorporated by reference in this amendment under 5 U.S.C. 552(a), 1 CFR part 51, and 14 CFR part 97.20. The applicable FAA Forms are FAA Forms 8260-3, 8260-4, 8260 -5, 8260-15A, and 8260-15B when required by an entry on 8260-15A.

The large number of SIAPs, Takeoff Minimums and ODPs, in addition to their complex nature and the need for a special format make publication in the Federal Register expensive and impractical. Furthermore, airmen do not use the regulatory text of the SIAPs, Takeoff Minimums or ODPs, but instead refer to their depiction on charts printed by publishers of aeronautical materials. The advantages of incorporation by reference are realized and publication of the complete description of each SIAP, Takeoff Minimums and ODP listed on FAA forms is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAPs and the effective dates of the associated Takeoff Minimums and ODPs. This amendment also identifies the airport and its location, the procedure, and the amendment number.

This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP, Takeoff Minimums and ODP as contained in the transmittal. Some SIAP and Takeoff Minimums and textual ODP amendments may have been issued previously by the FAA in a Flight Data Center (FDC) Notice to Airmen (NOTAM) as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for some SIAP and Takeoff Minimums and ODP amendments may require making them effective in less than 30 days. For the remaining SIAPS and Takeoff Minimums and ODPS, an effective date at least 30 days after publication is provided.

Further, the SIAPs and Takeoff Minimums and ODPS contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these SIAPS and Takeoff Minimums and ODPs, the TERPS criteria were applied to the conditions existing or anticipated at the affected airports. Because of the close and immediate relationship between these SIAPs, Takeoff Minimums and ODPs, and safety in air commerce, I find that notice and public procedures before adopting these SIAPS, Takeoff Minimums and ODPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making some SIAPs effective in less than 30 days.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule ” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26,1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, pursuant to the authority delegated to me, Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) is amended by establishing, amending, suspending, or revoking Standard Instrument Approach Procedures and/or Takeoff Minimums and/or Obstacle Departure Procedures effective at 0902 UTC on the dates specified, as follows:

The Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 301 et seq. ), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L. 94-295), the Safe Medical Devices Act of 1990 (SMDA) (Pub. L. 101-629), the Food and Drug Administration Modernization Act of 1997 (FDAMA) (Pub. L. 105-115), and the Medical Device User Fee and Modernization Act of 2002 (MDUFMA) (Pub. L. 107-250), established a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, defined by the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).

Under section 513 of the FD&C Act, FDA refers to devices that were in commercial distribution before May 28, 1976 (the date of enactment of the 1976 amendments), as “preamendments devices.” FDA classifies these devices after it takes the following steps: (1) Receives a recommendation from a device classification panel (an FDA advisory committee); (2) publishes the panel's recommendation for comment, along with a proposed regulation classifying the device; and (3) publishes a final regulation classifying the device. FDA has classified most preamendments devices under these procedures.

Devices that were not in commercial distribution before May 28, 1976, generally referred to as postamendments devices, are classified automatically under section 513(f) of the FD&C Act into class III without any FDA rulemaking process. Those devices remain in class III until FDA does the following: (1) Reclassifies the device into class I or II; (2) issues an order classifying the device into class I or II in accordance with section 513(f)(2) of the FD&C Act; or (3) issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a legally marketed device that has been classified into class I or class II.

The Agency determines whether new devices are substantially equivalent to previously marketed devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and 21 CFR part 807 of the regulations. FDAMA added a new section 510(m) to the FD&C Act. New section 510(m) provides that a class II device may be exempted from the premarket notification requirements under section 510(k) of the FD&C Act, if the Agency determines that premarket notification is not necessary to assure the safety and effectiveness of the device. FDA has determined that premarket notification is not necessary to assure the safety and effectiveness of electrocardiograph electrodes.

Under the 1976 amendments, class II devices were defined as devices for which there was insufficient information to show that general controls themselves would provide reasonable assurance of safety and effectiveness, but for which there was sufficient information to establish performance standards to provide such assurance. SMDA broadened the definition of class II devices to mean those devices for which the general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but for which there is sufficient information to establish special controls to provide such assurance, including performance standards, postmarket surveillance, patient registries, development and dissemination of guidelines, recommendations, and any other appropriate actions FDA deems necessary (section 513(a)(1)(B) of the FD&C Act). Elsewhere in this issue of the Federal Register , FDA is announcing the availability of the guidance document that will serve as the special control for this device. This action is being taken under the FD&C Act, as amended by the 1976 amendments, SMDA, FDAMA, and MDUFMA.

In the Federal Register of October 4, 2007 (72 FR 56702; Docket No. 2007N-0308), FDA proposed to classify electrocardiograph electrodes, intended to acquire and transmit the electrical signal at the body surface to a processor that produces an electrocardiogram (ECG) or vectorcardiogram, into class II. FDA also proposed to exempt this device from premarket notification requirements. FDA invited interested persons to comment on the proposed regulation by January 2, 2008. FDA received seven comments on the proposed rule.

FDA is amending the classification regulation for electrocardiograph electrodes into class II, by making this device exempt from 510(k) premarket notification requirements and subject to the new special controls described in the special controls guidance document entitled “Guidance for Industry and Food and Drug Administration Staff: Class II Special Controls Guidance Document: Electrocardiograph Electrodes.”

As described in that special controls guidance document, the special controls include the following:

• Documentation of device description, which includes compliance with 21 CFR 820.181(a) to maintain a device master record;

• Documentation of performance characteristics, which includes documentation on biocompatibility, electrical performance, adhesive performance, shelf life, reuse, electrodes intended for use in specified procedures, sterility, and, with respect to electrode lead wires and patient cables, compliance with 21 CFR part 898; and

• Specific labeling, including indications for use, cautions, precautions, and adverse reactions.

The public comments received in response to the proposed rule addressed issues pertaining to labeling, the scope of the devices subject to the classification rule, and testing as follows:

Regarding labeling, the comments requested the mandatory product labeling of all adhesive coated disposable electrocardiograph electrodes and the establishment of template labeling with which electrocardiograph electrodes should comply. In response, FDA has revised the labeling section of the special controls guidance document; however, FDA has not established template labeling.

Regarding the scope of the devices subject to the notice, the comments requested a products-based definition or listing of examples to flesh out the “type” of devices that are consistent with Agency intent, requested a clarification of the type of sensor that is included in the scope of the classification, and requested a clarification if the list of environmental conditions is intended to be an exclusive list. In response, FDA has revised the special controls guidance document to clarify what the scope of this classification rule includes and excludes and to clarify what labeling should be reported regarding conditions of use.

Regarding testing, the comments requested clarification of the shelf life, storage condition testing, and human clinical testing required to establish sensitivity and irritation for all adhesives. In response, FDA has revised the special controls guidance document to clarify testing for shelf life and has clarified the testing for biocompatibility.

FDA is adopting in final form the assessment of the risks to public health stated in the proposed rule published on October 4, 2007, and agrees that the risk of electrical shock should also be taken into account for purposes of this assessment. The guidance document has been revised accordingly. FDA is issuing this final rule which classifies the generic type of device, electrocardiograph electrode, into class II subject to special controls.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA has examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Agency believes that this final rule is not a significant regulatory action under the Executive Order 12866.

The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because manufacturers are already substantially in compliance with the recommendations in the guidance document and exemption from the premarket notification requirements for the devices following the specific measures recommended in the special control will simplify the entry to market for other manufacturers, the Agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities. In addition, this final rule will not impose costs of $100 million or more on either the private sector or state, local, and tribal governments in the aggregate, and therefore a written statement under section 202(a) of the Unfunded Mandates Reform Act of 1995 is not required.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $136 million, using the most current (2010) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this final rule to result in any 1-year expenditure that would meet or exceed this amount.

The specific measures recommended largely reflect current practices. With most manufacturers complying with most of the recommendations in the guidance document, any additional burden brought about by the final rule and guidance will likely be small.

FDA has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. Section 4(a) of the Executive order requires Agencies to “construe* * * a Federal statute to preempt State law only where the statute contains an express preemption provision or there is some other clear evidence that the Congress intended preemption of State law, or where the exercise of State authority conflicts with the exercise of Federal authority under the Federal statute.” Federal law includes an express preemption provision that preempts certain state requirements “different from or in addition to” certain Federal requirements applicable to devices. 21 U.S.C. 360k. See Medtronic v. Lohr, 518 U.S. 470 (1996); and Riegel v. Medtronic, 552 U.S. 312 (2008). The special controls established by this final rule create “requirements” to address each identified risk to health presented by these specific medical devices under 21 U.S.C. 360k, even though product sponsors may have flexibility in how they meet those requirements Cf. Papike v. Tambrands, Inc., 107 F.3d 737, 740-42 (9th Cir. 1997).

FDA concludes that this final rule contains no new collections of information. Therefore, clearance by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3501-3520) is not required.

This final rule designates a guidance document as a special control. FDA also concludes that the special control guidance document does not contain new information collection provisions that are subject to review and clearance by OMB under the PRA.

For access to the docket to read references or the public comments received, go to http://www.regulations.gov or go to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852. A hard copy of any document can be obtained by submitting a Freedom of Information Act request to the Division of Freedom of Information (ELEM-1029), Food and Drug Administration, 12420 Parklawn Dr., Element Bldg., Rockville, MD 20857.

The following references have been placed on display in the Division of Dockets Management (see section IX of this document) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday, or can be obtained in hardcopy by submitting a Freedom of Information Act request to the Division of Freedom of Information (see section IX of this document). (FDA has verified the Web site address, but we are not responsible for any subsequent changes to the Web site after this document publishes in the Federal Register. )

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 870 is amended as follows:

The BSA, Titles I and II of Public Law 91-508, as amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314 and 5316-5332, authorizes the Secretary of the Treasury (the “Secretary”) to issue regulations requiring financial institutions to keep records and file reports that the Secretary determines “have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence matters, including analysis, to protect against international terrorism.”  1 In addition, the Secretary is authorized to impose anti-money laundering (“AML”) program requirements on financial institutions. 2 The Secretary's authority to administer the BSA has been delegated to the Director of FinCEN. 3 FinCEN has implemented the BSA through regulations (“BSA regulations,” “implementing regulations” or “BSA rules”) that appear at 31 CFR Chapter X. 4

The BSA defines the term “financial institution” to include, in part: a currency exchange; an issuer, redeemer, or cashier of travelers' checks, checks, money orders, or similar instruments; the United States Postal Service; a person who engages as a business in the transmission of funds; and any business or agency which engages in any activity determined by regulation to be an activity similar to, related to, or a substitute for these activities. 5

FinCEN has issued regulations under the BSA implementing the recordkeeping, reporting, and other requirements of the BSA with respect to these types of financial institutions. These regulations refer to these types of financial institutions as “money services businesses” (“MSBs”). 6 Like other financial institutions under the BSA, MSBs must implement AML programs, make certain reports to FinCEN, and maintain certain records to facilitate financial transparency. MSBs are generally required to: (1) Establish written AML programs that are reasonably designed to prevent the MSB from being used to facilitate money laundering and the financing of terrorist activities;  7 (2) file Currency Transaction Reports (“CTRs”)  8 and Suspicious Activity Reports (“SARs”);  9 and (3) maintain certain records, including those relating to the purchase of certain monetary instruments with currency, 10 transactions by currency dealers or exchangers (to be called “dealers in foreign exchange” under this rulemaking), 11 and certain transmittals of funds. 12 Most types of MSBs are required to register with FinCEN  13 and all are subject to examination for BSA compliance by the Internal Revenue Service (“IRS”). 14

In 1997, FinCEN held public meetings to give members of the financial services industry an opportunity to discuss the proposed MSB regulations and any impact they might have on operations. 15 In drafting the final rules defining the MSB categories, 16 FinCEN relied in part on the comments made in these public forums.

On March 8, 2005, FinCEN held a fact-finding meeting in Washington, DC on the provision of banking services to MSBs. 17 MSBs recounted their challenges in obtaining and maintaining banking services due to the perception that their businesses posed a high risk of money laundering and terrorist financing. In 2006, FinCEN issued an advance notice of proposed rulemaking seeking input on how to address these challenges, 18 and received 142 comments in response, which have informed this rulemaking. 19

More than ten years have passed since FinCEN issued the BSA regulations defining the categories of MSBs. 20 Since that time, FinCEN has received numerous requests to apply the MSB regulations to fact patterns specific to particular businesses. Over one-third of these requests came from persons inquiring whether or not they were an MSB. 21 Some of these requests for guidance were prompted by significant technological advances such as stored value products and the online provision of financial services. These and other developments have changed the nature of the MSB industry. Where possible, FinCEN has provided guidance to the industry on how to interpret and apply the regulations.

With respect to check cashers and money transmitters in particular, FinCEN has developed a large body of guidance in the years since the issuance of the final MSB regulations in 1999. 22 Similarly, over the years, FinCEN has issued guidance and administrative rulings that provide examples of activities that do not meet the regulatory definition of a money transmitter, even though entities engaged in such activities may be involved in accepting and transmitting funds. 23 Given the nature and scope of these important interpretative rulings, FinCEN has updated, streamlined, and clarified the MSB regulations in this rulemaking by incorporating and extending these interpretations in the regulatory revisions.

The final rule contained in this document is based on the Notice of Proposed Rulemaking “Definitions and Other Regulations Relating to Money Services Businesses” published in the Federal Register on May 12, 2009 (the “Notice”). 24 With the intent of more clearly delineating the scope of entities regulated as MSBs, the Notice proposed a number of changes to the MSB definitions, in particular: (1) Emphasizing that the MSB definition is based on a person's activities; (2) ensuring that certain foreign-located persons engaged in MSB activities within the United States, such as having customers located in the United States, are subject to the BSA rules; (3) separating the provisions dealing with stored value from those dealing with issuers, sellers, and redeemers of traveler's checks and money orders; (4) deferring the proposal of a new definition of stored value to a separate rulemaking; and (5) combining the definitions in 31 CFR 1010.100(ff)(3) (formerly 31 CFR 103.11(uu)(3)) and 31 CFR 1010.100(ff)(4) (formerly 31 CFR 103.11(uu)(4)) into one paragraph dealing with both issuers and sellers of traveler's checks and money orders excluding stored value. The Notice also specifically requested comment on a number of aspects of the proposed changes, particularly with respect to a definition of the term “funds,” aggregating multiple MSB services for threshold purposes, foreign-located MSBs, thresholds, and stored value. The Notice also proposed a number of minor edits to make the regulations more readable.

The comment period for the Notice ended on September 9, 2009. FinCEN received a total of 25 comment letters. 25 Of these, two were submitted by depository institutions, eight by industry associations, seven by various industry participants, two by government agencies, and six by individuals. Generally, commenters were supportive of the proposals to clarify the MSB definitions. FinCEN requested comment on a number of issues for informational purposes that are not addressed by this final rule, such as stored value-related issues, whether check cashers should have SAR filing requirements and whether additional recordkeeping requirements for MSBs should be implemented. Although these requests for comment were not tied to any specific regulatory changes FinCEN was proposing in the Notice, the information provided by commenters can be useful to FinCEN in formulating policy decisions in the future. FinCEN values and appreciates the comments received on these questions.

Approximately half of the comments received in response to the Notice addressed stored value-related issues that responded to questions and requests for comment posed in the Notice. The questions were intended to elicit responses that would assist FinCEN's effort to regulate stored value.

On May 22, 2009, shortly after the Notice was published, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (“Credit CARD Act”)  27 was signed into law. Section 503 of the Credit CARD Act requires the Secretary to “issue regulations in final form implementing the Bank Secrecy Act, regarding the sale, issuance, redemption, or international transport of stored value, including stored value cards.” The congressional mandate of Section 503 of the Credit CARD Act is broader in scope than the stored value-related questions posed in the Notice.

In furtherance of that mandate, FinCEN has separately published a notice of proposed rulemaking specific to stored value, which FinCEN has proposed to rename “prepaid access” (the “Prepaid Access NPRM”). 28 FinCEN believes that to address stored value-related issues in this MSB rule could cause confusion among the public. Accordingly, FinCEN has decided to comprehensively address stored value-related issues in the pending Prepaid Access rulemaking, generally including those stored value-related issues raised in the Notice. The comments received in response to the Notice provided valuable insights and were considered in drafting the Prepaid Access NPRM.

In the Notice, FinCEN proposed to revise several portions of the current definition of “money transmitter” to clarify which activities are covered by or excluded from the definition. Most commenters generally supported the proposed changes. All commenters supported excluding from the definition of “money transmitter” persons that have only a “custodial interest” in currency they are transporting. 29 One commenter construed the definition of “money transmitter” to exclude the agents of a principal money transmitter. FinCEN wishes to clarify that any person that satisfies the definition of a “money services business,” including an agent, is an MSB. Whether it is the agent of another MSB is relevant only for registration purposes. Two commenters suggested additional exclusions to the definition of “money transmitter” for intermediaries and certain bill payment services. The suggestions regarding intermediaries and certain bill payment services are discussed further in the Section-by-Section Analysis.

In the Notice, FinCEN proposed to make several changes to the definition of “currency dealer or exchanger” (to be called “dealers in foreign exchange” under this rulemaking) to more accurately reflect the actual underlying activity of the industry. Eight commenters addressed various issues related to this definition. Most commenters supported the proposed changes. As a result, the proposal was adopted without change. These comments are further discussed in the Section-by-Section Analysis below.

FinCEN received a comment letter from the Commodity Futures Trading Commission (“CFTC”) regarding certain amendments recently made to the Commodity Exchange Act (“CEA”), which, among other things, adds a new registration category for dealers in off-exchange retail foreign exchange known as “retail foreign exchange dealers” (“RFEDs”). 30 MSBs, including dealers in foreign exchange, do not include persons registered with, and regulated or examined by, the CFTC. FinCEN is considering the CFTC's comments and has decided that it would not be appropriate to address the issue of RFEDs in this rulemaking.

Prior to this rulemaking, the regulatory definition of MSB covered “[e]ach agent, agency, branch or office within the United States of any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(6) of this section.”  31 In the Notice, FinCEN proposed to amend 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)) by removing the phrase “doing business,” and replacing it with the phrase “engaged in activities.” FinCEN proposed this amendment because the phrase “doing business” has been misunderstood as an implied reference to the status that an entity has taken on itself or been assigned, such as a business licensed by a state. Based on such a misunderstanding, some have wrongly concluded that an unlicensed business is not subject to regulation as an MSB, even if it is engaged in one or more of the activities listed in 31 CFR 1010.100(ff)(1)-(5). Most of the comments received regarding the proposed change were supportive. However, although FinCEN emphasized in the Notice that the proposed change would not expand the definition of MSB beyond its present scope, two commenters expressed concerns about this proposed change.

One commenter argued that removing the phrase “doing business” from the regulations would cause the definition of MSB to include persons who were not in fact doing business as MSBs, and asserted that expanding the category to this extent would be beyond FinCEN's powers under the BSA, which specifically refers to several types of financial institutions as “businesses” in several places. 32

FinCEN will not remove the phrase “doing business” from the definition of MSB in this final rule. Instead, the definition will be rephrased to state that an MSB is “[a] person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(6) of this section.” We moved the qualifying phrase “whether or not on a regular basis or as an organized business concern” from the end of the sentence to immediately follow “doing business” in an effort to emphasize our concern that “doing business” can be misinterpreted to refer to status, not activity. To that end, the words “or licensed” have been added before “business concern” to further clarify the issue.

FinCEN wishes to emphasize that whether a person is subject to regulation as an MSB does not depend on factors such as whether the person is licensed as a business by any state; whether the person has employees; or whether the person is engaged in a for-profit venture. Although the final rule continues to use the phrase “doing business,” it is a person's activities, rather than formal business status, that would cause the person to be categorized as an MSB.

Another commenter suggested that the change proposed by the Notice might expand the definition of MSB to include, for example, an individual who cashed a check as an accommodation for a family member. Despite not moving forward with the change proposed in the Notice, FinCEN remains concerned that the definition might be misunderstood to include such an individual. In response to this concern, the final rule includes a provision that excludes “a natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit” from the MSB definition. By using the phrase “a natural person” in the limitation, FinCEN excludes only individuals; not business entities, non-profits, or other legal persons from the MSB definition. By “infrequent” activities, FinCEN intends to limit the exclusion to activity that is rare. 33 By “gain or profit,” FinCEN intends this exclusion not to be available to persons engaging in these activities for the purpose of monetary gain or other economic benefit, such as an exchange of valuable favors. This exclusion forestalls any interpretation of the definition of MSB to include persons solely providing accommodation services to family members, as in the commenter's hypothetical. Nevertheless, whether a person engages in MSB activities depends on all of the facts and circumstances of each case.

Currently, the MSB regulations apply to persons engaged in specified activities that exceed $1,000 for any person in any day (“activity threshold”). The activity threshold applies to all MSB categories  34 except money transmitters, which do not have an activity threshold. FinCEN proposed no changes to the activity thresholds in this rulemaking. However, FinCEN sought comments from the public regarding whether possible adjustments to the activity threshold should be made in a future rulemaking. More than one-third of all comment letters received in response to the Notice expressed an opinion regarding the current activity thresholds. Several commenters supported the proposition that the threshold should be reviewed, but expressed no opinion as to whether it should be increased, decreased, eliminated, or maintained at current levels. One commenter supported the elimination of all thresholds to create uniformity among different types of MSBs, and argued that the thresholds are ineffective insofar as one can operate under those levels without decreasing the risk of money laundering. Another commenter supported raising the thresholds, and argued that the current levels place an undue burden on small businesses. Several commenters supported adjusting the thresholds to take into account disparate thresholds imposed by various state authorities, inflation, or the transaction volume of each individual MSB. Finally, several commenters supported maintaining the current thresholds.

FinCEN also sought specific comments from the public regarding whether transactions involving multiple MSB services should be aggregated together for purposes of determining whether the activity threshold has been met. The comments received on this proposal stressed the logistical complications of compliance with an aggregation requirement on the part of retailers that sell multiple MSB products and act as agents for multiple MSBs. All comments received regarding this proposal were opposed to it.

FinCEN will continue to study these issues and consider the need for a separate rulemaking to adjust the MSB activity thresholds.

FinCEN proposed to amend 31 CFR 1010.100(ff) to provide that foreign-located persons engaging in MSB activities in the United States are subject to the BSA rules. Specifically, FinCEN proposed to revise 31 CFR 1010.100(ff) so that an entity qualifies as an MSB based on its activity within the United States, not the physical presence of one or more of its agents, agencies, branches, or offices in the United States. This proposal arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations. FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of each person's physical location. To permit foreign-located persons to engage in MSB activities within the United States and not subject such persons to the BSA would be unfair to MSBs physically located in the United States and would also undermine FinCEN's efforts to protect the U.S. financial system from abuse.

Of the seven comments received on the issue of extending the BSA regulations to cover foreign-located MSBs conducting activities in the United States, five commenters supported it, including two government and three industry commenters. The two commenters opposed were from industry.

Two commenters argued that a foreign-located person's mere maintenance of a bank account in the United States should not cause that person to be defined as an MSB. FinCEN agrees with that position. 35 Under the final rule, a foreign-located person will be subject to the BSA as an MSB to the extent that it does business in one or more of the capacities listed in 1010.100(ff)(1) through 1010.100(ff)(5) wholly or in substantial part within the United States. 36 Whether or not a foreign-located person's MSB activities occur within the United States depends on all of the facts and circumstances of each case, including whether persons in the United States are obtaining MSB services from the foreign-located person, such as sending money to or receiving money from third parties through the foreign-located person.

A commenter also noted that foreign banks, broker dealers, and possibly other financial institutions might be subject to the MSB regulations. FinCEN does not intend to include these institutions in the MSB definition. FinCEN, therefore, has expanded the limitations to the MSB definition to cover foreign banks, as well as other foreign financial agencies that engage in financial activities that, if conducted in the United States, would require the foreign financial agency to be registered with the Securities and Exchange Commission (“SEC”) or CFTC. These provisions parallel the existing limitations covering domestic banks and entities registered with the SEC or CFTC.

Two commenters expressed general concerns regarding the practicality of regulating foreign-located MSBs. Both commenters also argued that the proposed change could create a misperception that foreign-located MSBs are too risky for financial institutions to provide them with financial services. Consequently, foreign-located MSBs would find it increasingly difficult to open accounts with banks unwilling to assume such potential risks. Although FinCEN acknowledges that regulating foreign-located MSBs may present challenges, FinCEN believes that there are meaningful benefits to be derived from such regulation.

Under the final rule, foreign-located MSBs will have the same reporting and recordkeeping and other requirements as MSBs with a physical presence in the United States, with respect to their activities in the United States. Foreign-located MSBs will be subject to the same civil and criminal penalties as MSBs with a physical presence in the United States, with respect to their failure to comply with regulatory requirements. 37 Foreign-located MSBs will also be required to designate a person who resides in the United States to function as an agent to accept service of legal process, including with respect to BSA compliance.

For clarity, FinCEN proposed to add 31 CFR 1010.100(ff)(8) to create a new section providing limitations to the definition of MSB. FinCEN proposed to move the first two limitations, excluding (1) Banks and (2) persons registered or required to register with, and functionally regulated or examined by, the SEC or the CFTC, from the definition of MSB at 31 CFR 1010.100(ff) for clarity. Also, as noted above, foreign banks and certain foreign financial agencies have been included in the limitations in the final rule to address issues raised by commenters with regard to foreign-located MSBs. The third limitation, as discussed above, clarifies the scope of the definition of MSB, excluding individuals engaging in infrequent activity as an accommodation. There were no comments on moving the first two limitations to a separate section. The addition of the third limitation regarding natural persons and the extension of the first two limitations to include foreign institutions, while not proposed, do not alter any obligations but merely clarify the scope of 31 CFR 1010.100(ff).

FinCEN proposed several changes to 31 CFR 1010.100(ff)(1) (formerly 31 CFR 103.11(uu)(1)), which defines “currency dealer or exchanger” as a category of MSB. Comments regarding proposed changes, while noting a few concerns (discussed below), were largely supportive, and the final rule adopts all of the proposed changes.

The final rule replaces the phrase “currency dealer or exchanger” with “dealer in foreign exchange.” Removal of the term “currency” from the category's name is designed to clarify that persons meet the definition by not only exchanging currency, but also by exchanging other monetary instruments, funds, or other instruments denominated in currency. Although the BSA uses the term “currency exchange,” FinCEN interprets this language as having been intended to capture the underlying activity involved in foreign exchange services, which includes the exchange of instruments other than currency. The proposed change is consistent with current industry practice, which commonly involves exchanging instruments other than currency.

The final rule inserts the term “foreign” into the category's name to clarify FinCEN's longstanding policy that any exchange that occurs in the United States is covered by the definition, even if the exchange consists of currency, other monetary instruments, funds, or other instruments denominated exclusively in non-U.S. currencies. Therefore, if all other requirements are fulfilled, and a person exchanges currency, other monetary instruments, funds, or other instruments denominated in one non-U.S. currency for those in another non-U.S. currency, the person is a dealer in foreign exchange for BSA purposes. Though such transactions may not involve U.S. dollars, the potential use of a dealer in foreign exchange in this manner to launder money, finance terrorism, or carry out other illicit activity nevertheless would impact the U.S. financial system and should be subject to regulation. Failure to capture exchanges within the United States of two foreign currencies (or of payment instruments denominated in two foreign currencies) would leave a significant and unnecessary gap in the BSA rules. This change also underscores the international nature of money laundering and terrorist financing.

By inserting the phrase “currency, or other monetary instruments, funds or other instruments” the final rule clarifies that dealing in foreign exchange is not limited to the physical exchange of the currency of one country for the currency of another country. This language sets forth the media of exchange that trigger the definition more clearly than in the previous version of the rule. FinCEN's current rules and existing body of administrative rulings establish that a person who converts funds denominated in the currency of one country into funds denominated in the currency of another country is an MSB by virtue of that activity. 38 Additionally, the phrase “other instruments” is intended to capture those types of payment instruments that do not fall precisely into one of the other categories, but nevertheless are readily recognizable as payment instruments.

One commenter expressed concern that the inclusion of “other instruments denominated in currency” in addition to “currency” would cover persons offering foreign exchange transactions that involve stored value or other products in a manner that would implicate a wide range of retailers and other entities not generally understood to be dealers in foreign exchange. FinCEN does not consider this to be the case however, because payment devices such as debit cards, credit cards, and stored value do not involve currency exchanges at a point of sale. The point of sale transaction, from the perspective of the buyer and the seller (including the U.S.-located merchant hypothesized by the commenter), is only denominated in U.S. dollars. Any exchange of currency involved in such a transaction occurs in the back office processing of the financial institution issuing the device. A merchant's acceptance of foreign issued stored value to purchase U.S. issued stored value or U.S. currency, other monetary instruments, funds, or other instruments does not make that merchant a dealer in foreign exchange. On the other hand, there are transactions involving stored value that FinCEN would deem foreign exchange, including scenarios where a merchant either accepts or pays out foreign currency in exchange for stored value. For example, a person is a dealer in foreign exchange if the person: (1)  Accepts foreign currency, or other monetary instruments, funds, or other instruments (other than stored value) denominated in foreign currency, and provides a stored value product in return; or (2) accepts stored value and provides in return foreign currency, or other monetary instruments, funds, or other instruments (other than stored value) denominated in foreign currency.

The final rule includes the phrase “of one or more other countries”  39 in the definition, underscoring FinCEN's policy that a person is not a dealer in foreign exchange based on exchanges that involve currency or instruments denominated exclusively in the currency of one country. Assuming all other conditions under the BSA rules are met, a dealer in foreign exchange is a person that converts the currency, other monetary instruments, funds, or other instruments denominated in one currency for the currency, other monetary instruments, funds, or other instruments denominated in a different currency.

FinCEN received one comment in support of this proposal, and two comments in opposition. One commenter argued that when a person accepts instruments denominated in the currency of one country in exchange for currency of the same country, where the currency is not U.S. dollars, the exchange may technically require an intermediate transaction involving U.S. dollars. FinCEN, however, is concerned with the customer transaction and what currency the customer begins with and ends with, not any exchanges or recording that take place in the back office of the merchant. The other commenter opposing the proposal argued that the activity of exchanging bills within the same currency should be covered under the MSB rules because certain criminals convert denominations of cash exclusively within the currency of one country. Both of these comments, however, in essence propose to include activities within the category that are not commonly understood to be “foreign exchange.” Therefore, FinCEN believes the proposed change better comports with the common understanding of the foreign exchange business.

The final rule includes the phrase “for any other person” to explicitly reflect FinCEN's longstanding position that a person is not a dealer in foreign exchange to the extent the person exchanges their own money on their own behalf. 40

The final rule includes the phrase “whether or not for same-day delivery” to account for the potential time difference between the date on which the exchange rate is agreed and the date of the exchange. Common settlement terms in foreign exchange markets include: (1) Same-day or cash—where the parties both agree to an exchange of currency and conclude the exchange on the same working day; (2) spot—where the parties agree to an exchange of currency on one date, with the exchange taking place two working days thereafter; (3) cash forward—where the parties agree to an exchange of currency on one date, with the exchange of currency deferred until an agreed-upon date in the future; and (4) future—where the parties agree to an exchange of currency on one date, with settlement to occur in an agreed upon delivery period in the future, typically by payment of an amount reflecting the change in the foreign currency rate between the time of the agreement and delivery. A contract for future delivery of currency may also be settled with the delivery of currency, resulting in the exchange of the currencies underlying the futures contract.

One commenter expressed concern that this change will create confusion regarding the $1,000 threshold where the dealer in foreign exchange is instructed to make multiple disbursements of exchanged currency over time. The use of the phrase “whether or not for same day delivery” is intended to capture such activity and to make clear that the date of the payment by the customer to the dealer in foreign exchange, not the date of any subsequent disbursements, is the date relevant to the calculation of the $1,000 threshold.

Persons registered with and functionally regulated or examined by the CFTC including retail foreign exchange dealers are excluded from the definition of dealer in foreign exchange. As noted above, FinCEN is consulting with the CFTC regarding retail foreign exchange dealers. 41

FinCEN proposed to amend 31 CFR 1010.100(ff)(2) (formerly 31 CFR 103.11(uu)(2)) to clarify the meaning of the term “check cashing” by splitting the existing regulatory definition into two paragraphs: one paragraph to define check cashing activity; another paragraph to exclude certain activity from that definition.

In the Notice, FinCEN proposed several changes to the definition of “check casher” to more accurately describe which activities are covered by or excluded from the definition. Nine commenters addressed various issues related to the definition of “check casher.” Most commenters generally supported the proposed changes. As a result, the final rule adopts most of them without change with one exception, related to stored value, discussed below regarding activities not subject to the “check casher” definition.

“In return” was added to the definition to more accurately describe the activity that occurs when cashing a check or redeeming a monetary instrument. The Uniform Commercial Code references were added to provide a clear definition of “check.” A reference to the definition of “monetary instruments” was also provided. “Other instruments” is intended to capture those types of payment instruments that do not fall precisely into one of the other categories. The term “other instruments” is meant to capture those instruments that are readily recognizable as payment instruments without capturing goods or services that may be purchased with a check or monetary instrument.

The definition incorporates the redeeming of monetary instruments into the definition of “check casher.” Given its similarity to check cashing, it is unnecessary to treat this activity separately from check cashing. 42 Accordingly, a person engaged in redeeming monetary instruments (including traveler's checks and money orders) is a check casher if it redeems checks for currency or a combination of currency and monetary or other instruments. This revision does not capture activity that is tantamount to merely exchanging one monetary instrument for another monetary or other instrument and accordingly requires currency to be included in the redeeming. All of the commenters that addressed this proposal were supportive. As a result, the final rule adopts this proposal without change.

One commenter requested clarification regarding the cashing of checks or other instruments in exchange for both goods and services and currency. Entities that accept payment for goods or services with a check and return more than $1,000 in currency or a combination of currency and other monetary instruments fall under the definition of “check casher” regardless of the value of the goods or services. 43

The revision also clarifies what activities are not subject to the “check casher” definition. The definition, as proposed, exempted purchases of closed loop stored value with a check, monetary instrument, or other instrument. One commenter objected to this limitation, expressing concerns that it was too narrow and that sellers of open loop stored value in exchange for checks would be “check cashers” for purposes of this rule. As a result, this final rule exempts the purchase of any type of stored value with a check, monetary instrument, or other instrument from being an activity subject to the check casher definition. Stored value related issues generally will be dealt with in a separate rulemaking, as will be discussed subsequently. 44

The definition also exempts persons who cash checks for the verified maker of a check otherwise buying goods and services. One commenter was in favor of this proposal and one opposed. The commenter opposed to this proposal was concerned that retailers would not be able to verify the maker of a check. FinCEN does not believe that this will be a problem, however, because retailers can verify the identity of the maker of the check in any manner that comports with their internal policies. Retailers can verify the maker of a check by, for example, checking a driver's license or other form of identification at the time of purchase against the name of the maker of the check, already a common practice of some retailers who accept personal checks. The Notice asked for comment on other types of low risk check cashing that should be exempt, such as government or payroll checks. Several commenters agreed that cashing such low risk checks should be exempt, but two commenters disagreed, noting that fraud exists in such low risk checks as well and that such exemptions unnecessarily complicate due diligence. FinCEN may address other types of low risk check cashing in a future rulemaking after further study.

Finally, under the previous regulations, redeemers of traveler's checks and money orders had SAR obligations while check cashers did not. As these two categories of MSB have been combined, we will seek comment in a future rulemaking on whether or not to require check cashers to report suspicious activity to FinCEN under the BSA. Commenters to this rulemaking were largely in favor of a SAR requirement for check cashers, though two commenters disagreed, noting the high number of reports that would be generated and the burden on check cashing businesses. Issuers of traveler's checks and money orders will continue to have SAR reporting requirements with respect to the instruments that they issue.

This rule combines prior sections 1010.100(ff)(3) (formerly 103.11(uu)(3)), “issuer of traveler's checks, money orders, or stored value,” and 1010.100(ff)(4) (formerly 103.11(uu)(4)), “seller or redeemer of traveler's checks, money orders, or stored value,” into new section 1010.100(ff)(3), “issuer or seller of traveler's checks or money orders.” Issuance and sale of traveler's checks and money orders are similar activities in that they can be covered by a single definition. A new, separate category relating to stored value, renamed “Issuer, seller, or redeemer of stored value,” replaces 1010.100(ff)(4) and is discussed subsequently. 45

In the Notice, FinCEN proposed to clarify the definitions regarding activities related to traveler's checks and money orders by removing redundant language and specifying how to calculate the activity threshold for such activities. Five commenters addressed various issues related to the definition of “issuer or seller of traveler's checks or money orders.”

The rule eliminates the “redeemer” language that is contained in the previous definitions. Although the previous rules included those who “redeem” traveler's checks and money orders, traveler's checks typically are redeemed by their issuers, making a separate redemption category redundant in such circumstances. Moreover, redeeming a traveler's check or money order by a non-issuer has been incorporated into the definition of a check casher. 46 All of the commenters who addressed this proposal were supportive. As a result, the final rule adopts this proposal without change.

The rule defines an “issuer” by virtue of the amount at which its monetary instruments or traveler's checks are sold, as opposed to the amounts at which they are issued. For example, the amount of the sale includes the face value of the monetary instruments plus any fees. Because money orders are not issued in round dollar increments like traveler's checks, but are rather sold either directly by the issuer or by its agent to a customer who specifies the exact amount, a business must look at this activity to determine whether its transactions exceed the activity threshold per person per day. Similarly, although traveler's checks are usually issued in large round amounts ( e.g., $20, $50, or $100), the definition is linked to the aggregate amount at which those checks are sold, either directly by the issuer or at the agent level, to a customer in a single day. All of the commenters who addressed this proposal were supportive, though one commenter argued that issuers and sellers should only be responsible for aggregation based on the amount for which the instrument is sold to the extent that they have actual knowledge that the transactions involve the same person and exceed the threshold. However, changing the requirement from the face value of the instrument to the amount for which the instrument is sold does not change the aggregation requirement. Businesses have the same aggregation requirements as under the prior rule, only the determination of the amount has changed. The final rule adopts this proposal without change.

Under the prior rules, FinCEN addressed traveler's checks, money orders, and stored value under two separate definitions of providers of those products: (1) Issuers and (2) sellers or redeemers. The Notice proposed to group providers of stored value together, separately from issuers or sellers of traveler's checks and money orders. All of the commenters who addressed this proposal were supportive. The final rule adopts this proposal without change.

Several commenters noted that stored value is empirically similar to activity engaged in by persons defined as “money transmitters,” but the mechanisms for directing that the money be transmitted are different. Most commenters on this issue recommended treating stored value as a separate category of MSB. FinCEN agrees, and is therefore treating stored value as a distinct MSB activity, keeping it separate from the category established for money transmitters, while at the same time acknowledging that stored value should have more comprehensive anti-money laundering regulation.

In 1999, FinCEN issued a final rulemaking deferring certain requirements for the stored value industry based on the complexity of the industry and the desire to avoid unintended consequences with respect to an industry then in its infancy. In 2009, Congress passed the Credit CARD Act, which required FinCEN to issue regulations relating to stored value. On June 28, 2010, FinCEN issued Notice of Proposed Rule Making, Amendment to the Bank Secrecy Act Regulations—Definitions and Other Regulations Relating to Prepaid Access. 47 The proposed changes to stored value are generally not reflected in this rulemaking, but will be addressed in a separate Prepaid Access rule.

This rule revises the regulation interpreting 31 U.S.C. 5312(a)(2)(R), which includes money transmitters within the definition of “financial institution” under the BSA. The prior regulation contained a facts and circumstances limitation that excluded from the “money transmitter” definition persons that are engaged in the business of money transmission as an integral part of the execution and settlement of the transaction. The “integral” exception includes entities that could not engage in their businesses without engaging in the transmission of funds. This rule clarifies the language of these limitations.

This rule's definition of “money transmitter” is “a person who provides money transmission services.” This language is consistent with existing language in the BSA. 48 The definition removes the phrase “engages as a business” as FinCEN continues to regulate an MSB by its activity and the context in which the activity occurs and not by its status. The removal of “engages as a business” does not broaden the regulation beyond its present scope. 49 The commenters were generally supportive regarding this change, though one commenter argued that because the statute used the phrase “engages as a business” the regulation also must use the same phrase. The change to the regulation, however, does not alter the scope or meaning of the rule; the change only clarifies the rule's application. As a result, it is unnecessary to replicate the phrase and the final rule adopts this proposal without change.

The definition also removes the phrase “whether or not licensed or required to be licensed.” While this phrase reflects language in 31 U.S.C. 5312, FinCEN finds the phrase to be unnecessary because it does not add substantive value to the meaning of money transmitter.

The regulatory definition of “money transmission services” includes the phrase “or other value that substitutes for currency” to state that businesses that accept stored value or currency equivalents as a funding source and transmit that value are providing money transmission services. FinCEN has modified the final rule so that both references to “value” in the regulation are expressed as “value that substitutes for currency” to maintain consistency in the rule's language. The word “such” has also been removed from the final rule to eliminate the possibility of any misinterpretation that a person must receive and transmit the exact same currency, funds, or other value to be covered under the definition of “money transmitter.”

By including the transmission of value, the prior and current regulatory definitions of “money transmitter” are worded to include persons engaged in informal value transfer systems, including hawalas. 50 Such activity is money transmission, and the persons engaged in that activity are money transmitters subject to the requirements of the BSA. 51 To further emphasize the rule's applicability to these money transmitters, FinCEN has modified the final rule to include a specific reference to informal value transfer systems as a means of money transmission.

The regulatory definition of “money transmission services” also adds the phrase “to another location or person.” Although this phrase is not in the statutory definition of money transmitting service, it is implicit in the statutory definition's use of the word “transmitting.” Transactions involving the acceptance of currency from one person at one location and the return of that currency to that same person at the same location would not be considered a money transmission service. The addition of the phrase “to another location or person,” explicitly conveys this interpretation.

One commenter suggested that the phrase “the acceptance of currency * * * from one person AND the transmission * * * to another location or person,” indicated that acceptance by the money transmitter of funds had to precede any transmission to satisfy the definition. If this were the case, however, it would be easy—particularly in an electronic environment—to circumvent this definition by the simple expedient of transmitting funds a fraction of a second before accepting them. The activity of money transmitting, for the purposes of FinCEN regulations, involves both acceptance and transmission, but not necessarily in that order. FinCEN is concerned about the ability to circumvent regulation if it were to require that the acceptance of currency must always precede transmission. The final rule adopts the phrase without change.

The phrase “any means” is defined in the prior rule to include transmission “through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; or an electronic funds transfer network.” The final rule moves the phrase “any means” to a different part of the definition only to increase reader comprehension, and the change in placement of the phrase has no substantive effect on the meaning of the definition. The definition of “any means” in the final rule also includes a specific reference to informal value transfer systems. One commenter suggested adding the phrase “but is not limited to” following “`Any means' includes.” While FinCEN believes that this clarification is not technically necessary, as “any means,” by its own meaning, encompasses more than the listed examples in the regulation, we will adopt the change to avoid possible confusion.

The prior regulations also include in the definition, “(B) Any other person engaged as a business in the transfer of funds.”  52 This phrase was removed from the definition in the Notice. The final rule, however, includes this phrase to minimize any possible confusion regarding whether there has been a change to the scope of the definition of “money transmitter.” The scope of the definition of “money transmitter” in this final rule is the same as that of the prior regulatory definition.

As mentioned above, the prior regulation contained limitations regarding the definition of a “money transmitter.”  53 The Notice also contained additional limitations that incorporate existing interpretations of the prior limitation by adding explicit language reflecting policy developed through administrative ruling letters and guidance. The limitation language reads, “whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term `money transmitter' shall not include a person that only * * *” engages in the following activity:

“(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services. * * *” Institutions that are used by money transmitters solely for the purpose of providing a medium of communication or transportation of information between money services businesses and their agents, financial institutions, or service providers are not deemed “money transmitters.” No commenters addressed this issue, and the final rule adopts this proposal without change.

“(B) Acts as a payment processor to facilitate the purchase or payment of a bill for a good or service through a clearance and settlement system by agreement with the creditor or seller. * * *” Although payment processors may provide a money transmission service, the service is ancillary to their primary business of coordinating payments either from a debtor to a creditor or, if operating at the point of sale, from a purchaser to a merchant. 54 A payment processor could not provide the primary service of coordination without providing ancillary money transmission services, but because the money transmission services are ancillary, and because they are generally low risk, it is appropriate for entities engaged in this activity to be excluded from the definition. Note, however, that this limitation only applies to transmission services by payment processors on behalf of the creditor or seller and not the debtor or buyer. A contractual agreement for transmission services between the creditor or seller and the money transmitter is a relatively controlled flow of money that poses little money laundering risk, provided that the funds are transmitted only to the creditor or seller with whom the payment processor has contracted and not to another location or person. The final rule adopts this proposal with only a change of punctuation needed for clarity.

“(C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions. This includes but would not be limited to the Fedwire system, electronic funds transfer networks, certain registered clearing agencies regulated by the SEC, and derivatives clearing organizations, or other clearinghouse arrangements established by a financial agency or institution. * * *” Persons who solely provide a clearance and settlement system or act as intermediaries between BSA regulated institutions and do not provide other types of money transmission services are mere instrumentalities that the financial institutions use to process their transfers. Therefore, these instrumentalities, such as the credit card networks, are not included in the definition of “money transmitter.” The final rule adopts this proposal without change.

“(D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person engaged in such business from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided that the person engaged in physical transportation has no more than a custodial interest in the currency, other monetary instruments, other commercial papers, or other value at any point during the transportation.”

This limitation encompasses past armored car rulings. The final rule slightly modifies the proposed language to make this connection explicit, by including a specific reference to armored cars, and by limiting the applicability of the limitation to persons that, like the armored car companies that requested rulings from FinCEN, were primarily engaged in providing armored car services. FinCEN previously ruled that although armored car services may fall within the definition of a “money transmitter,” to the extent that they transport currency on behalf of BSA regulated institutions, they should not be treated as money transmitters. 55 FinCEN additionally determined that an armored car is not a money transmitter when it moves currency on behalf of a private party to an account or another location of the same party without taking a financial stake in the transaction. 56

To take advantage of this limitation, the person engaged in physical transportation cannot have more than a custodial interest in what is being moved at any point during the transportation. 57 The exclusion does not apply to such a person if it deposits currency or monetary instruments that it is transporting into its own operating account at a bank, regardless of the identity of the ultimate recipient of the funds represented by the currency or monetary instruments.

One commenter suggested adding “a bailment” as an example of “no more than a custodial interest.” FinCEN does not believe that it is necessary to add this example in the text of the regulation, but does agree that such a status may not confer more than a custodial interest. Another commenter suggested clarifying “custodial interest” by adding the phrase “without beneficial ownership.” While the addition of “without beneficial ownership” might clarify some cases, FinCEN believes that it could lead to confusion given its meaning and use in other money laundering contexts. Our intent with “custodial interest” is to convey that such an entity has no economic stake (beyond payment for its transportation services) in any transaction involving currency, value that substitutes for currency, or other monetary instruments being transported. Based on that interpretation of the phrase, FinCEN adopts the proposed language.

This exclusion applies to transport initiated by any person other than certain BSA-regulated institutions. Specifically, when transport is initiated by a bank, a broker-dealer or other SEC-regulated financial institution, or a futures commission merchant or other CFTC-regulated institution, a transport business such as an armored car is not a money transmitter, regardless of whether the transport is to another location or person.

Except as indicated above, the final rule adopts this proposal without change.

“(E) Provides stored value.” A person who provides stored value is also excluded from the definition of “money transmitter,” whether the stored value is open or closed loop. Furthermore, by “provides” FinCEN intends that both entities involved in the sale and management of stored value programs be excluded. For example, a department store that offers gift cards that only may be used at that department store, a convenience store that sells network branded cards that may be used anywhere like a credit card, or a program manager who organizes a stored value program and facilitates loading the stored value device are not subject to the MSB rules as money transmitters.

FinCEN previously determined that a person solely issuing, selling, or redeeming closed loop stored value is not an “issuer, seller or redeemer of stored value” and was therefore not subject to BSA regulation as an MSB under that MSB category. 58 This limited exclusion, however, did not imply that all persons who provided open loop stored value were money transmitters. In part, this is because a significant amount of the open loop stored value issued within the United States is issued by or through a depository institution, a category of financial institution that expressly is excluded from the definition of MSB by statute and regulation. 59 The Notice proposed only excluding “providers of closed loop stored value” from the definition. In light of the Prepaid Access NPRM, which addresses stored value issues as a separate category of MSB, FinCEN is excluding stored value in any form from being considered a form of money transmission.

Many of the commenters to the Notice regarding stored value were in favor of treating open and closed loop stored value differently under the regulations. While FinCEN agrees that the two forms of stored value have different risks and vulnerabilities, we believe it is appropriate to exclude both forms from the definition of “money transmission.” These issues are further addressed by the Prepaid Access NPRM. Additionally, one commenter noted that the distinctions between open and closed loop stored value are being removed as some closed loop systems can now be international, involve multiple retailers, and be reloadable. The commenter argued that the distinction should be based on whether the stored value product has cash access or not. FinCEN agrees that cash access is one aspect of a stored value product that is significant in assessing the product's risk, along with reloadability, the breadth of retailer acceptance of the product, and whether the product can be used internationally. These issues were addressed in the Prepaid Access NPRM. 60 The final rule adopts the above described expanded limitation to the definition of “money transmitter.”

“(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.”

Similar to circumstance (B), persons that sell goods or provide services other than money transmission services, and only transmit funds as an integral part of that sale of goods or provision of services, are not money transmitters. For example, brokering the sale of securities, commodity contracts, or similar instruments is not money transmission notwithstanding the fact that the person brokering the sale may move funds back and forth between the buyer and seller to effect the transaction. Similarly, this limitation would apply to a debt management company that made payments to creditors as the conduit for a negotiated schedule of payments from the debtor to its creditors. 61 The person who is accepting and transmitting the funds is offering a service other than money transmission services which could not be provided without transmitting funds. No commenters addressed this issue and the final rule adopts this proposal without change.

There currently is no provision within 31 CFR Chapter X that requires foreign-located MSBs to designate an agent to accept service of legal process in the United States. To enhance the ability of U.S. law enforcement and regulatory agencies to reach these MSB registrants, FinCEN proposed to add the following language to 31 CFR 1022.380 (formerly 31 CFR 103.41): “(a)(2) Foreign-located Money Services Business. Each foreign-located person engaged in activities in the United States as a money services business shall designate the name and address of a person who resides in the United States and is authorized, and has agreed, to be an agent to accept service of legal process with respect to compliance with this part and shall identify the address of the location within the United States for records pertaining to paragraph (b)(1)(iii) of this section.” FinCEN received three supportive comments on this issue. Accordingly, FinCEN adopts the proposal without change, except insofar as the language was changed slightly to reflect the corresponding language in the definition of MSB, which was changed from the Notice, discussed above.

Compliance with the designation of an agent for service of process provision, however, will require a change to FinCEN Form 107, Registration of Money Services Business. The current form does not contain a field in which such an agent can be designated. FinCEN will soon publish a new proposed form for notice and comment which makes a number of conforming changes to reflect this final rule, including adding a checkbox to indicate whether an MSB is foreign located and allowing for designation of an agent for service of process. Accordingly, this rule provides that compliance with 31 CFR 1022.380 is not required until six months after the date of publication of this final rule in the Federal Register , by which time the revised FinCEN Form 107, Registration of Money Services Business, will be final and available.

Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), FinCEN certifies that these regulation revisions will not have a significant economic impact on a substantial number of small entities. Because most MSBs are small entities, this rule will affect a substantial number of small entities. Although a substantial number of small entities are affected, the economic impact of this rulemaking is not significant. This rulemaking imposes no new recordkeeping or reporting requirements on MSBs, with the possible exception of foreign-located MSBs. In fact, some commenters noted that this rule will have a modest reduction in reporting burden.

In large part, the rule updates the MSB definitions to integrate past guidance and rulings into the regulatory text. Incorporating existing interpretations into the regulatory text would have no impact on small entities that have been aware of these interpretations for years. Even if an MSB was unfamiliar with the existing guidance and rulings, these regulatory changes will not impose a significant economic impact. First, this final rule is limited to revising the MSB definitions to make clearer what activities subject a person to the BSA rules pertaining to MSBs. This change provides additional certainty without adding additional burden. Second, as previously stated, the rule clarifies that certain foreign-located MSBs with a U.S. presence, such as having U.S. customers or recipients, are subject to the BSA rules. Finally, the rule makes minimal nomenclature changes with respect to certain MSB categories to help clarify distinctions.

In addition, the rulemaking combines all of stored value into one category, without substantively changing the existing definition. This structural change will not affect small entities. Accordingly, a regulatory flexibility analysis is not required.

The collection of information contained in this final rule has been approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control numbers 1506-0004, 1506-0013, 1506-0015, 1506-0020, 1506-0052. Based on comments received, the clarification of the definitions in 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)) will likely reduce the reporting burden for most MSBs. Certain foreign-located MSBs conducting business in the United States may see an increase in their obligation to collect and report information. However, any such potential must be weighed against the reduction in burden to be achieved by clarifying the exceptions we have made explicit regarding the type of business activity that would make a business an MSB. With the exception of foreign-located MSBs, this rulemaking does not impose any new reporting or recordkeeping requirements. Instead, it merely clarifies the current scope of the existing MSB definitions and related rules. To the extent that we have eliminated any uncertainty or ambiguities with this rule and to the extent that we have narrowed the scope of businesses subject to reporting or recordkeeping requirements, we have not in the aggregate expanded, and may in fact have in the aggregate reduced, regulatory obligations. 62

Description of Affected Financial Institutions: Money Services Businesses as defined in 31 CFR 1010.100(ff) (formerly 31 CFR 103.11(uu)).

Estimated Number of Affected Financial Institutions: 42,000.

Estimated Average Annual Burden Hours per Affected Financial Institution: The estimated average decrease in burden associated with the recordkeeping requirements in this final rule is one hour per affected financial institution.

Estimated Total Annual Burden: Minus 42,000 hours from OMB control number 1506-0052.

In the Notice, FinCEN invited comment on: Whether the proposed collection of information was necessary for the proper performance of FinCEN's mission; the accuracy of the estimated burden associated with the proposed collection of information; how the quality, utility, and clarity of the information to be collected may be enhanced; and how the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology. 63 Commenters did not address these issues specifically. However, commenters stated that clarifying the definitions will reduce the reporting burden on MSBs.

Under the Paperwork Reduction Act, an agency may not conduct or sponsor a collection of information, and a person is not required to respond to a collection of information, unless it displays a valid OMB control number.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action” although not economically significant, under section 3(f) of Executive Order 12866. Accordingly, the rule has been reviewed by the Office of Management and Budget.

Section 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), Public Law 104-4 (March 22, 1995), requires that an agency prepare a budgetary impact statement before promulgating a rule that may result in expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 202 of the Unfunded Mandates Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. FinCEN has determined that it is not required to prepare a written statement under section 202 and has concluded that on balance this rulemaking provides the most cost-effective and least burdensome alternative to achieve the objectives of the rule.

For the reasons set forth above, FinCEN is amending 31 CFR Parts 1010, 1021 and 1022 as follows:

The LA 77 bridge across the Lower Grand River, mile 47.0 (Alternate Route) at Grosse Tete, Iberville Parish, Louisiana, has a vertical clearance of 2 feet above high water in the closed-to-navigation position and unlimited clearance in the open-to-navigation position. Navigation on the waterway consists mainly of tows with barges and some recreational craft. Coastal Bridge Company, on behalf of the Louisiana Department of Transportation and Development requested a temporary deviation from the normal operation of the bridge in order to effect repairs to the bridge.

This deviation allows the draw of the LA 77 swing drawbridge across the Lower Grand River, mile 47.0 (Alternate Route), at Grosse Tete, Iberville Parish, Louisiana, to remain in the closed-to-navigation position from 7 a.m. until 5 p.m. on Wednesday, July 20, 2011. Presently, the draw of the LA 77 bridge, mile 47.0 (Alternate Route) at Grosse Tete, shall open on signal; except that, from about August 15 to about June 5 (the school year), the draw need not be opened from 6 a.m. to 8 a.m. and from 2:30 p.m. to 4:30 p.m., Monday through Friday except Federal holidays. The draw shall open on signal at any time for an emergency aboard a vessel.

The closure is necessary in order to install angles on the main girder and weld a crack on the bridge. The contractor has indicated that they may be able to operate the bridge during the closure and may be able to move their equipment out of the channel but the movement of the equipment may require several hours to complete immediate work and move equipment. This maintenance is essential for the continued operation of the bridge. Notices will be published in the Eighth Coast Guard District Local Notice to Mariners and will be broadcast via the Coast Guard Broadcast Notice to Mariners System.

No alternate routes are available for the passage of vessels; however, the closure was coordinated with waterway interests who have indicated that they will be able to adjust their operations around the proposed work schedule.

Due to prior experience and coordination with waterway users, it has been determined that this closure will not have a significant effect on vessels that use the waterway.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

Throughout this document “we,” “us,” or “our” refer to EPA. This section provides additional information by addressing the following questions:

EPA is approving an April 20, 2011, request from the State of Missouri to exempt sources of NO X in the Missouri portion of the St. Louis (MO-IL) metropolitan 8-hour ozone nonattainment area from the CAA requirements for NO X RACT for purposes of attaining the 1997 8-hour ozone NAAQS. 1 The St. Louis (MO-IL) metropolitan 8-hour ozone nonattainment (hereafter referred to as the “St. Louis Area” or “Area”) includes the counties of Franklin, Jefferson, St. Charles, and St. Louis as well as St. Louis City in Missouri; and the counties of Madison, Monroe, St. Clair, and Jersey in Illinois. The State's NO X RACT waiver request is based on the most recent three years of complete, quality-assured ozone monitoring data, which demonstrate that additional reduction of NO X emissions in the Missouri portion of the St. Louis ozone nonattainment area would not contribute to attainment of the 1997 8-hour ozone NAAQS in this ozone nonattainment areas. See 76 FR 33647 (June 9, 2011) for more information about this monitoring data.

EPA is publishing this rule without prior proposal because we view this as a noncontroversial action and anticipate no relevant adverse comments. EPA notes that the technical basis for this rule was its previous final determination on June 9, 2011 (76 FR 33647) that the St. Louis (MO-IL) metropolitan 1997 8-hour ozone nonattainment area has attained the 1997 8-hour ozone NAAQS. EPA received no comments during that particular rulemaking. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the SIP revision if relevant adverse comments are received. This rule will be effective on September 19, 2011 without further notice unless EPA receives adverse comments by August 22, 2011. If we receive relevant adverse comments, we will publish a timely withdrawal in the Federal Register informing the public that the rule will not take effect. We will address all public comments in a subsequent final rule based on the proposed rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so now. Please note that if we receive adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, we may adopt as final those provisions of the rule that are not the subject of an adverse comment.

On April 20, 2011, Missouri Department of Natural Resources (MDNR) submitted a request for a NO X RACT waiver for the St. Louis metropolitan ozone nonattainment area. This NO X RACT waiver was requested for the 1997 8-hour ozone NAAQS. MDNR based its NO X RACT waiver request on quality-assured ozone air quality data for 2008-2010, which demonstrate that the 1997 8-hour ozone NAAQS has been attained in the St. Louis (MO-IL) metropolitan area without the implementation of additional NO X RACT controls in the Missouri portion of the area.

An area may be considered in attainment with the 1997 8-hour ozone NAAQS if there are no violations of the NAAQS, as determined in accordance with 40 CFR 50.10 and appendix I, based on the most recent three years of complete, quality-assured air quality monitoring data. To attain this standard, the average of the annual fourth-highest daily maximum 8-hour average ozone concentrations are measured and recorded at each monitoring site over the most recent 3-year period (the monitoring site's ozone design value) must not exceed the ozone standard. Based on an ozone data rounding convention described in 40 CFR part 50, appendix I, the 1997 8-hour ozone standard is attained if the area's ozone design value is 0.084 parts per million (ppm) or less. The data must be collected and quality-assured in accordance with 40 CFR part 58, and must be recorded in EPA's Air Quality System. The monitoring network collecting the data must meet the applicable requirements of 40 CFR part 58. The data supporting attainment of the standard must meet the minimum data completeness requirements in 40 CFR part 50, appendix I.

The monitors and design values are displayed in Table 1. The table summarizes the annual fourth-highest daily maximum 8-hour ozone concentrations and their 3-year (2008-2010) averages for all monitors in the St. Louis (MO-IL) metropolitan area. These data reflect peak ozone concentrations quality assured and reported by the States of Illinois and Missouri.

Review of the 2008-2010 ozone concentrations and site-specific ozone design values (3-year averages) shows that all of the monitoring sites were attaining the 1997 8-hour ozone NAAQS during this period. Therefore, based on the most recent three years of complete, quality assured ozone monitoring data, the 1997 8-hour ozone standard has been attained in the area. Review of preliminary data from the 2011 ozone season indicates that the area continues to attain the 8-hour ozone NAAQS. See 76 FR 33647. 2

EPA's guidance document, “Guidance on Limiting Nitrogen Oxides (NO X ) Requirements Related to 8-Hour Ozone Implementation,” sets forth the criteria for demonstrating that further NO X emission reductions in an ozone nonattainment area will not contribute to ozone NAAQS attainment. 3 The guidance provides that three consecutive years of monitoring data documenting ozone levels attaining the ozone NAAQS in areas in which a state has not implemented certain NO X emission controls is adequate to demonstrate that the additional NO X emission reductions will not aid in achieving attainment of the ozone NAAQS. As described in the guidance document, approval of the NO X emission control exemption is granted by EPA on a contingent basis. The NO X emission control exemption continues only as long as the state's monitoring data continues to demonstrate attainment of the ozone NAAQS. 4 If, prior to redesignation of the area to attainment of the ozone NAAQS, the area violates the 1997 8-hour ozone NAAQS, as defined at 40 CFR 50.10 and appendix I, EPA will undertake rulemaking to withdraw the NO X emission control exemption, and the area would once again be subject to the NO X emission control requirements under section 182(f) of the CAA. 5

EPA's review of the ozone monitoring data and Missouri's NO X emission control exemption request shows that Missouri has complied with the requirements for a NO X RACT exemption in the State's 8-hour ozone nonattainment area under section 182(f) of the CAA consistent with the guidelines contained in EPA's January 14, 2005, guidance document. Therefore, EPA has determined that the State of Missouri qualifies for exemption from the NO X RACT requirements for the Missouri portion of the St. Louis (MO-IL) metropolitan ozone nonattainment area for the purposes of attaining the 1997 8-hour ozone NAAQS.

The section 182(f) NO X RACT exemption is based on a finding by EPA that additional reductions of NO X would not contribute to attainment of the 1997 8-hour ozone NAAQS in the St. Louis (MO-IL) metropolitan nonattainment area. The Area has three consecutive years of ozone levels attaining the ozone standard, and preliminary 2011 ozone data show that the 1997 8-hour ozone standard continues to be attained in the area.

While EPA is waiving the requirements to control NO X emissions through additional NO X RACT controls in the Missouri portion of the St. Louis nonattaiment area, EPA recognizes that there are other benefits to controlling NO X emissions. These benefits include reducing acid deposition, reducing nitrogen deposition in sensitive wetlands, estuaries, and their watersheds, and mitigating ozone transport to downwind ozone nonattainment areas. Missouri will continue to be required to control NO X emissions from certain NO X sources under other CAA programs, such as the Acid Rain program in title IV of the CAA, for purposes of achieving these environmental benefits. This NO X RACT waiver will not affect other existing and pending NO X emission control requirements for Missouri that are needed to achieve these environmental benefits. In addition, as noted above, this action does not affect the NO X RACT controls in the St. Louis area previously approved by EPA relating to the 1-hour ozone standard.

In addition, EPA notes that an approval of this waiver request is solely for purposes of the CAA requirements to meet the 1997 8-hour ozone NAAQS. The waiver would not apply for purposes of the ozone NAAQS promulgated in 2008 (March 27, 2008, 73 FR 16435) or for purposes of any future ozone NAAQS EPA may promulgate. To the extent that section 182(f) may apply to the St. Louis area for purposes of the 2008 or any future ozone NAAQS, the State would need to submit a NO X RACT SIP or would need to demonstrate that a waiver is appropriate for purposes of that different ozone NAAQS.

EPA is approving Missouri's request to exempt the Missouri portion of the St. Louis 8-hour ozone nonattainment area from the section 182(f) NO X RACT requirement. This approval is based on EPA's review of the data showing that the requirements of section 182(f)(1)(A), as elaborated upon in EPA's guidance for section 182(f) exemptions, have been met for the St. Louis (MO-IL) metropolitan ozone nonattainment area. If EPA subsequently determines through notice-and-comment rulemaking that the Area has violated the 1997 8-hour ozone standard, the basis for this exemption would no longer exist, and the area would thereafter have to address the pertinent requirements.

In reviewing a request from the State to exempt sources of NO X in the Missouri portion of the St. Louis (MO-IL) metropolitan 8-hour ozone nonattainment area from the CAA requirements for NO X RACT for purposes of attaining the 1997 8-hour ozone NAAQS, EPA's role is to approve state choices, provided they meet the criteria of the CAA. Accordingly, this action does not impose additional requirements beyond those imposed by state law. Therefore, 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 CAA; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, this exemption 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 in 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by March 16, 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).)

40 CFR part 52 is amended as follows:

The modified BFEs are not listed for each community in this interim rule. However, the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection is provided.

Any request for reconsideration must be based on knowledge of changed conditions or new scientific or technical data.

The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq., and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required either to adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. The changes in BFEs are in accordance with 44 CFR 65.4.

National Environmental Policy Act. This interim rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

Regulatory Classification. This interim rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

Executive Order 13132, Federalism. This interim rule involves no policies that have federalism implications under Executive Order 13132, Federalism.

Executive Order 12988, Civil Justice Reform. This interim rule meets the applicable standards of Executive Order 12988.

Accordingly, 44 CFR part 65 is amended to read as follows:

The Federal Emergency Management Agency (FEMA) makes the final determinations listed below of the modified BFEs for each community listed. These modified BFEs have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Deputy Federal Insurance and Mitigation Administrator has resolved any appeals resulting from this notification.

The modified BFEs are not listed for each community in this notice. However, this final rule includes the address of the Chief Executive Officer of the community where the modified BFE determinations are available for inspection.

The modified BFEs are made pursuant to section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq., and with 44 CFR part 65.

For rating purposes, the currently effective community number is shown and must be used for all new policies and renewals.

The modified BFEs are the basis for the floodplain management measures that the community is required either to adopt or to show evidence of being already in effect in order to qualify or to remain qualified for participation in the National Flood Insurance Program (NFIP).

These modified BFEs, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities.

These modified BFEs are used to meet the floodplain management requirements of the NFIP and also are used to calculate the appropriate flood insurance premium rates for new buildings built after these elevations are made final, and for the contents in those buildings. The changes in BFEs are in accordance with 44 CFR 65.4.

National Environmental Policy Act. This final rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

Regulatory Classification. This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

Executive Order 13132, Federalism. This final rule involves no policies that have federalism implications under Executive Order 13132, Federalism.

Executive Order 12988, Civil Justice Reform. This final rule meets the applicable standards of Executive Order 12988.

Accordingly, 44 CFR part 65 is amended to read as follows:

In FR Doc. 2011-10778, published in the Federal Register of May 5, 2011, PHMSA published a final rule titled “Pipeline Safety: Applying Safety Regulations to All Rural Onshore Hazardous Liquid Low-Stress Lines.” This final rule published with an error on page 25587 which incorrectly identified July 1, 2011, as the compliance deadline for identification of Category 3 low-stress lines. This correction changes that date to July 1, 2012.

In FR Doc. 2011-10778 appearing on page 25576 in the Federal Register of Thursday, May 23, 2011, the following correction is made: