Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of this rule. The Departments also invite comments that relate to the economic, environmental, or federalism effects that might result from this rule. Comments must be submitted in English, or an English translation must be provided. To provide the most assistance to the Departments, comments should reference a specific portion of the rule; explain the reason for any recommended change; and include data, information, or authority that support the recommended change.

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Asylum is a discretionary immigration benefit that generally can be sought by eligible aliens who are physically present or arriving in the United States, irrespective of their status, as provided in section 208 of the Immigration and Nationality Act (“INA”), 8 U.S.C. 1158. Congress, however, has provided that certain categories of aliens cannot receive asylum and has further delegated to the Attorney General and the Secretary of Homeland Security (“Secretary”) the authority to promulgate regulations establishing additional bars on eligibility to the extent consistent with the asylum statute, as well as the authority to establish “any other conditions or limitations on the consideration of an application for asylum” that are consistent with the INA. See INA 208(b)(2)(C), (d)(5)(B), 8 U.S.C. 1158(b)(2)(C), (d)(5)(B). This proposed rule will limit aliens' eligibility for this discretionary benefit if they fall within certain categories related to criminal behavior. The proposed rule will also eliminate a regulation concerning the automatic reconsideration of discretionary denials of asylum applications.

The Attorney General and the Acting Secretary of Homeland Security publish this joint notice of proposed rulemaking in the exercise of their respective authorities concerning asylum determinations.

The Homeland Security Act of 2002, Public Law 107-296, as amended (“the Act” or “the HSA”), transferred many functions related to the execution of federal immigration law to the newly created Department of Homeland Security (“DHS”). The Act charges the Secretary “with the administration and enforcement of this chapter and all other laws relating to the immigration and naturalization of aliens,” 8 U.S.C. 1103(a)(1), and grants the Secretary the power to take all actions “necessary for carrying out” the provisions of the immigration and nationality laws, id. 1103(a)(3). The Act also transferred to U.S. Citizenship and Immigration Services (“USCIS”) responsibility for affirmative asylum applications, i.e., applications for asylum made outside the removal context. See 6 U.S.C. 271(b)(3). If an alien is not in removal proceedings or is an unaccompanied alien child, DHS asylum officers determine in the first instance whether an alien's asylum application should be granted. See 8 CFR 208.9.

At the same time, the Act retained for the Attorney General authority over certain individual immigration adjudications, including those related to asylum. These proceedings are conducted by the Department of Justice through the Executive Office for Immigration Review (“EOIR”), subject to the direction and regulation of the Attorney General. See 6 U.S.C. 521; 8 U.S.C. 1103(g). Accordingly, immigration judges within the Department of Justice continue to adjudicate all defensive asylum applications made by aliens during the removal process and review affirmative asylum applications referred by USCIS to the immigration courts. See 8 U.S.C. 1101(b)(4); 8 CFR 1208.2. See generally Dhakal v. Sessions, 895 F.3d 532, 536-37 (7th Cir. 2018) (describing affirmative and defensive asylum processes). The Board of Immigration Appeals within the Department of Justice, in turn, hears appeals from immigration judges' decisions. 8 CFR 1003.1. In addition, the HSA amended the INA to mandate “[t]hat determination and ruling by the Attorney General with respect to all questions of law shall be controlling.” 8 U.S.C. 1103(a)(1). This broad division of functions and authorities informs the background of this proposed rule.

Asylum is a form of discretionary relief under section 208 of the INA, 8 U.S.C. 1158, that precludes an alien from being subject to removal, creates a path to lawful permanent resident status and citizenship, and affords a variety of other ancillary benefits, such as allowing certain alien family members to obtain lawful immigration status derivatively. See R-S-C v. Sessions, 869 F.3d 1176, 1180 (10th Cir. 2017); see also, e.g., INA 208(c)(1)(A), (C), 8 U.S.C. 1158(c)(1)(A), (C) (asylees cannot be removed and can travel abroad without prior consent); INA 208(b)(3), 8 U.S.C. 1158(b)(3) (allowing derivative asylum for asylee's spouse and unmarried children); INA 209(b), 8 U.S.C. 1159(b) (allowing the Attorney General or Secretary to adjust the status of an asylee to that of a lawful permanent resident); INA 316(a), 8 U.S.C. 1427(a) (describing requirements for naturalization of lawful permanent residents). Aliens who are granted asylum are authorized to work in the United States and to receive certain financial assistance from the Federal Government. See INA 208(c)(1)(B), (d)(2), 8 U.S.C. 1158(c)(1)(B), (d)(2); 8 U.S.C. 1612(a)(2)(A), (b)(2)(A); 8 U.S.C. 1613(b)(1); 8 CFR 274a.12(a)(5); see also 8 CFR 274a.12(c)(8) (providing that asylum applicants may seek employment authorization 150 days after filing a complete application for asylum).

In 1980, the Attorney General, in his discretion, established several mandatory bars to asylum eligibility. See 8 CFR 208.8(f) (1980); Aliens and Nationality; Refugee and Asylum Procedures, 45 FR 37392, 37392 (June 2, 1980). In 1990, the Attorney General substantially amended the asylum regulations, but exercised his discretion to retain the mandatory bars to asylum eligibility related to persecution of others on account of a protected ground, conviction of a particularly serious crime in the United States, firm resettlement in another country, and the existence of reasonable grounds to regard the alien as a danger to the security of the United States. See Aliens and Nationality; Asylum and Withholding of Deportation Procedures, 55 FR 30674-01, 30678, 30683 (July 27, 1990); see also Yang v. INS, 79 F.3d 932, 936-39 (9th Cir. 1996) (upholding firm resettlement bar); Komarenko v. INS, 35 F.3d 432, 436 (9th Cir. 1994) (upholding particularly serious crime bar), abrogated on other grounds by Abebe v. Mukasey, 554 F.3d 1203 (9th Cir. 2009) (en banc). In 1990, Congress added another mandatory bar for those with aggravated felony convictions. Immigration Act of 1990, Public Law 101-649, sec. 515, 104 Stat. 4987.

With the passage of the Illegal Immigration Reform and Immigrant Responsibility Act (“IIRIRA”) in 1996, Congress added three more categorical bars on the ability to apply for asylum, for: (1) Aliens who can be removed to a safe third country pursuant to a bilateral or multilateral agreement; (2) aliens who failed to apply for asylum within one year of arriving in the United States; and (3) aliens who have previously applied for asylum and had the application denied. Public Law 104-208, div. C, sec. 604. Congress also adopted six mandatory bars to asylum eligibility that largely reflected the pre-existing, discretionary bars set forth in the Attorney General's existing asylum regulations. These bars cover (1) aliens who “ordered, incited, or otherwise participated” in the persecution of others; (2) aliens convicted of a “particularly serious crime” in the United States; (3) aliens who committed a “serious nonpolitical crime outside the United States” before arriving in the United States; (4) aliens who are a “danger to the security of the United States;” (5) aliens who are inadmissible or removable under a set of specified grounds relating to terrorist activity; and (6) aliens who were “firmly resettled” in another country prior to arriving in the United States. Id. (codified at 8 U.S.C. 1158(b)(2) (1997)). Congress further added that aggravated felonies, defined in 8 U.S.C. 1101(a)(43), would be considered “particularly serious crime[s].” Id. (codified at 8 U.S.C. 1158(b)(2)(B)(i) (1997)).

Although Congress has enacted specific asylum eligibility bars, that statutory list is not exhaustive. Congress, in IIRIRA, further provided the Attorney General with the authority to establish by regulation “any other conditions or limitations on the consideration of an application for asylum,” so long as those limitations are “not inconsistent with this chapter.” INA 208(d)(5)(B), 8 U.S.C. 1158(d)(5)(B); see also INA 208(b)(2)(C), 8 U.S.C. 1158(b)(2)(C). Aliens who apply for asylum must satisfy two criteria. They must establish that they (1) are statutorily eligible for asylum; and (2) merit a favorable exercise of discretion. INA 208(b)(1)(A), 240(c)(4)(A), 8 U.S.C. 1158(b)(1)(A), 1229a(c)(4)(A); Matter of A-B-, 27 I&N Dec. 316, 345 n.12 (A.G. 2018), abrogated on other grounds by Grace v. Whitaker, 344 F. Supp. 3d 96, 140 (D.D.C. 2018); see also, e.g., Fisenko v. Lynch, 826 F.3d 287, 291 (6th Cir. 2016); Kouljinski v. Keisler, 505 F.3d 534, 541-42 (6th Cir. 2007); Gulla v. Gonzales, 498 F.3d 911, 915 (9th Cir. 2007); Dankam v. Gonzales, 495 F.3d 113, 120 (4th Cir. 2007); Krastev v. INS, 292 F.3d 1268, 1270 (10th Cir. 2002). As the Attorney General recently observed, “[a]sylum is a discretionary form of relief from removal, and an applicant bears the burden of proving not only statutory eligibility for asylum but that he also merits asylum as a matter of discretion.” Matter of A-B-, 27 I&N Dec. at 345 n.12; see also Moncrieffe v. Holder, 569 U.S. 184, 187 (2013) (describing asylum as a form of “discretionary relief from removal”); Delgado v. Mukasey, 508 F.3d 702, 705 (2d Cir. 2007) (“Asylum is a discretionary form of relief . . . . Once an applicant has established eligibility . . . , it remains within the Attorney General's discretion to deny asylum.”).

With respect to eligibility for asylum, section 208 of the INA provides that an applicant must (1) be “physically present” or “arrive[ ]” in the United States, INA 208(a)(1), 8 U.S.C. 1158(a)(1); (2) meet the statutory definition of a “refugee,” INA 208(b)(1)(A), 8 U.S.C. 1158(b)(1)(A); and (3) otherwise be eligible for asylum, INA 208(b)(2), 8 U.S.C. 1158(b)(2); 8 CFR 1240.8(d).

In general, a refugee is someone who is outside of his country of nationality and who is unable or unwilling to return to that country “because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion.” INA 101(a)(42)(A), 8 U.S.C. 1101(a)(42)(A). The alien bears the burden of proof to establish that he meets eligibility criteria, including that he qualifies as a refugee. INA 208(b)(1)(B)(i), 8 U.S.C. 1158(b)(1)(B)(i).

Aliens must also establish that they are otherwise eligible for asylum, meaning that they are not subject to one of the statutory bars to asylum or any “additional limitations and conditions . . . under which an alien shall be ineligible for asylum” established by regulation. See INA 208(b)(2)(C), 8 U.S.C. 1158(b)(2)(C). The INA currently bars from asylum eligibility any alien who (1) “ordered, incited, assisted, or otherwise participated in the persecution of any person on account of” a protected ground; (2) “having been convicted by a final judgment of a particularly serious crime, constitutes a danger to the community of the United States;” (3) “has committed a serious nonpolitical crime outside the United States” prior to arrival in the United States; (4) constitutes “a danger to the security of the United States;” (5) is described in the terrorism-related inadmissibility grounds, with limited exception; or (6) “was firmly resettled in another country prior to arriving in the United States.” INA 208(b)(2)(A)(i)-(vi), 8 U.S.C. 1158(b)(2)(A)(i)-(vi).

Aliens who fall within one of these bars are subject to mandatory denial of asylum. Where there is evidence that “one or more of the grounds for mandatory denial of the application for relief may apply,” the applicant in immigration court proceedings bears the burden of establishing that the bar at issue does not apply. 8 CFR 1240.8(d); see also, e.g., Rendon v. Mukasey, 520 F.3d 967, 973 (9th Cir. 2008) (applying 8 CFR 1240.8(d) in the context of the aggravated felony bar to asylum); Su Qing Chen v. U.S. Att'y Gen., 513 F.3d 1255, 1257 (11th Cir. 2008) (applying 8 CFR 1240.8 in the context of the persecutor bar); Xu Sheng Gao v. U.S. Att'y Gen., 500 F.3d 93, 98 (2d Cir. 2007) (same).

Because asylum is a discretionary benefit, aliens who are eligible for asylum are not automatically entitled to it. Rather, after demonstrating eligibility, aliens must further meet their burden of showing that the Attorney General or Secretary should exercise his or her discretion to grant asylum. See INA 208(b)(1)(A), 8 U.S.C. 1158(b)(1)(A) (the “Secretary of Homeland Security or the Attorney General may grant asylum to an alien” who applies in accordance with the required procedures and meets the definition of a refugee (emphasis added)); Matter of A-B-, 27 I&N Dec. at 345 n.12; Matter of Pula, 19 I&N Dec. 467, 474 (BIA 1987).

Additionally, aliens whose asylum applications are denied may nonetheless be able to obtain protection from removal under other provisions of the immigration laws. A defensive application for asylum that is submitted by an alien in removal proceedings is also automatically deemed an application for statutory withholding of removal under section 241(b)(3) of the INA, 8 U.S.C. 1231(b)(3). See 8 CFR 1208.3(b). An immigration judge may also consider an alien's eligibility for withholding and deferral of removal under regulations implementing U.S. obligations under Article 3 of the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (“CAT”), which were issued pursuant to section 2242 of the Foreign Affairs Reform and Restructuring Act of 1998, Public Law 105-277 (8 U.S.C. 1231 note). See 8 CFR 1208.13(c)(1); see also 8 CFR 1208.16(c) through 1208.18.

These forms of protection prohibit removal to any country where the alien would more likely than not be persecuted on account of a protected ground or tortured. Applying the relevant standard, if an alien proves that it is more likely than not that the alien's life or freedom would be threatened on account of a protected ground, but is denied asylum for some other reason—for instance, because of an eligibility bar or a discretionary denial of asylum—the alien may be entitled to statutory withholding of removal if not otherwise statutorily barred. INA 241(b)(3)(A), 8 U.S.C. 1231(b)(3)(A); 8 CFR 208.16, 1208.16; see also Garcia v. Sessions, 856 F.3d 27, 40 (1st Cir. 2017) (“[W]ithholding of removal has long been understood to be a mandatory protection that must be given to certain qualifying aliens, while asylum has never been so understood.”). Likewise, an alien who establishes that it is more likely than not that he or she would be tortured if removed to the proposed country of removal will qualify for CAT protection. See 8 CFR 1208.16(c) through 1208.18. But, unlike asylum, statutory withholding and CAT protection do not (1) prohibit the Government from removing the alien to a third country where the alien does not face persecution or torture, regardless of whether the country is a party to a bilateral or multilateral agreement specifically authorizing such removal, contra 8 U.S.C. 1158(a)(2)(A) (denying eligibility to apply for asylum “if the Attorney General determines that the alien may be removed, pursuant to a bilateral or multilateral agreement, to a [third] country”); (2) create a path to lawful permanent resident status and citizenship; or (3) afford the same ancillary benefits (such as derivative protection for family members). See R-S-C, 869 F.3d at 1180.

Eligibility for asylum has long been qualified both by statutory bars and by the discretion of the Attorney General and the Secretary to create additional bars. Those bars have developed over time in a back-and-forth process between Congress and the Attorney General. The original asylum provisions, as set out in the Refugee Act of 1980, Public Law 96-212, simply directed the Attorney General to “establish a procedure for an alien physically present in the United States or at a land border or port of entry, irrespective of such alien's status, to apply for asylum,” and provided that “the alien may be granted asylum in the discretion of the Attorney General if the Attorney General determines that such alien is a refugee” within the meaning of the title. 8 U.S.C. 1158(a) (1994); see also INS v. Cardoza-Fonseca, 480 U.S. 421, 427-29 (1987) (describing the 1980 provisions).

In the 1980 implementing regulations, the Attorney General, in his discretion, established several mandatory bars to asylum eligibility that were modeled on the mandatory bars to eligibility for withholding of deportation under the existing section 243(h) of the INA. See 8 CFR 208.8(f) (1980); 45 FR at 37392 (“The application will be denied if the alien does not come within the definition of refugee under the Act, is firmly resettled in a third country, or is within one of the undesirable groups described in section 243(h) of the Act, e.g., having been convicted of a serious crime, constitutes a danger to the United States.”). Those regulations required denial of an asylum application if it was determined that (1) the alien was not a refugee within the meaning of section 101(a)(42) of the INA; (2) the alien was firmly resettled in a foreign country before arriving in the United States; (3) the alien ordered, incited, assisted, or otherwise participated in the persecution of any person on account of race, religion, nationality, membership in a particular group, or political opinion; (4) the alien had been convicted by a final judgment of a particularly serious crime and therefore constituted a danger to the community of the United States; (5) there were serious reasons for considering that the alien has committed a serious non-political crime outside the United States prior to the arrival of the alien in the United States; or (6) there were reasonable grounds for regarding the alien as a danger to the security of the United States. 45 FR at 37394-95.

In 1990, the Attorney General substantially amended the asylum regulations, but exercised his discretion to retain the mandatory bars to asylum eligibility for persecution of others on account of a protected ground, conviction of a particularly serious crime in the United States, firm resettlement in another country, and reasonable grounds to regard the alien as a danger to the security of the United States. See 55 FR at 30683; see also Yang, 79 F.3d at 936-39 (upholding firm resettlement bar); Komarenko, 35 F.3d at 436 (upholding particularly serious crime bar). In the Immigration Act of 1990, Congress added an additional mandatory bar to eligibility to apply for or be granted asylum for “an[y] alien who has been convicted of an aggravated felony.” Public Law 101-649, sec. 515, 104 Stat. 4987.

In 1996, with the passage of IIRIRA and the Antiterrorism and Effective Death Penalty Act of 1996, Public Law 104-132, Congress amended the asylum provisions in section 208 of the INA, 8 U.S.C. 1158. Among other amendments, Congress created three categories of aliens who are barred from applying for asylum: (1) Aliens who can be removed to a safe third country pursuant to bilateral or multilateral agreement; (2) aliens who failed to apply for asylum within one year of arriving in the United States; and (3) aliens who have previously applied for asylum and had the application denied. Public Law 104-208, div. C, sec. 604.

Congress also adopted six mandatory bars to asylum eligibility that largely reflected the pre-existing, discretionary bars set forth in the Attorney General's existing asylum regulations. These bars cover (1) aliens who “ordered, incited, or otherwise participated” in the persecution of others; (2) aliens convicted of a “particularly serious crime” in the United States; (3) aliens who committed a “serious nonpolitical crime outside the United States” before arriving in the United States; (4) aliens who are a “danger to the security of the United States;” (5) aliens who are inadmissible or removable under a set of specified grounds relating to terrorist activity; and (6) aliens who were “firmly resettled” in another country prior to arriving in the United States. Id. (codified at 8 U.S.C. 1158(b)(2) (1997)). Congress further added that aggravated felonies, defined in 8 U.S.C. 1101(a)(43), would be considered “particularly serious crime[s].” Id. (codified at 8 U.S.C. 1158(b)(2)(B)(i) (1997)).

Although Congress has enacted specific asylum eligibility bars, that statutory list is not exhaustive. Congress, in IIRIRA, expressly authorized the Attorney General to expand upon two bars to asylum eligibility—the bars for “particularly serious crimes” and “serious nonpolitical offenses.” See id. Although Congress prescribed that all aggravated felonies constitute particularly serious crimes, Congress further provided that the Attorney General may “designate by regulation offenses that will be considered” a “particularly serious crime,” by reason of which the offender “constitutes a danger to the community of the United States.” INA 208(b)(2)(A)(ii), (B)(ii), 8 U.S.C. 1158(b)(2)(A)(iii), (B)(ii). Courts and the Board of Immigration Appeals (“Board”) have long held that this grant of authority also authorizes the Board to identify additional particularly serious crimes (beyond aggravated felonies) through case-by-case adjudication. See, e.g., Delgado v. Holder, 648 F.3d 1095, 1106 (9th Cir. 2011) (en banc); Ali v. Achim, 468 F.3d 462, 468-69 (7th Cir. 2006). Congress likewise authorized the Attorney General to designate by regulation offenses that constitute “a serious nonpolitical crime outside the United States prior to the arrival of the alien in the United States.” INA 208(b)(2)(A)(iii), (B)(ii), 8 U.S.C. 1158(b)(2)(A)(iii), (B)(ii).1

In addition to authorizing the discretionary expansion of crimes that would constitute particularly serious crimes or serious nonpolitical offenses, Congress further provided the Attorney General with the authority to establish by regulation “any other conditions or limitations on the consideration of an application for asylum,” so long as those limitations are “not inconsistent with this chapter.” INA 208(d)(5)(B), 8 U.S.C. 1158(d)(5)(B); see also INA 208(b)(2)(C), 8 U.S.C. 1158(b)(2)(C) (allowing for the establishment by regulation of “additional limitations and conditions, consistent with this section, under which an alien shall be ineligible for asylum”). As the Tenth Circuit has recognized, “[t]his delegation of authority means that Congress was prepared to accept administrative dilution of the asylum guarantee in § 1158(a)(1),” given that “the statute clearly empowers” the Attorney General and the Secretary to “adopt[ ] further limitations” on asylum eligibility. R-S-C, 869 F.3d at 1187 & n.9. In providing for “additional limitations and conditions,” the statute gives the Attorney General and the Secretary broad authority in determining what the “limitations and conditions” should be—e.g., based on non-criminal or procedural grounds like the existing exceptions for firm resettlement, INA 208(b)(2)(A)(vi), 8 U.S.C. 1158(b)(2)(A)(vi), or based on filing time limits, INA 208(a)(2)(B), 8 U.S.C. 1158(a)(2)(B), or based on certain criminal activity, INA 208(b)(2)(A)(ii), 8 U.S.C. 1158(b)(2)(A)(ii). The additional limitations on eligibility must simply be established “by regulation,” and must be “consistent with” the rest of 8 U.S.C. 1158.

Thus, the Attorney General in the past has invoked section 208(b)(2)(C) of the INA to limit eligibility for asylum based on a “fundamental change in circumstances” and on the ability of an applicant to safely relocate internally within a country. See Asylum Procedures, 65 FR 76121, 76127 (Dec. 6, 2000) (codified at 8 CFR 208.13(b)(1)(i)(A) and (B)). The courts have also viewed this provision as a broad authority, and have suggested that ineligibility based on fraud would be authorized under it. See Nijjar v. Holder, 689 F.3d 1077, 1082 (9th Cir. 2012) (noting that fraud can be “one of the `additional limitations . . . under which an alien shall be ineligible for asylum' that the Attorney General is authorized to establish by regulation”).

The current statutory framework accordingly leaves the Attorney General (and, after the HSA, the Secretary) significant discretion to adopt additional bars to asylum eligibility. Congress has expressly identified one class of particularly serious crimes—aggravated felonies—so that aliens who commit such offenses are categorically ineligible for asylum and there is no discretion to grant such aliens asylum under any circumstances. Congress has left the task of further defining particularly serious crimes or serious nonpolitical offenses to the discretion of the Attorney General and the Secretary.2 And Congress has provided the Attorney General and Secretary with additional discretion to establish by regulation additional limitations or conditions on eligibility for asylum. Those limitations may involve other types of crimes or non-criminal conduct, so long as the limitations are consistent with other aspects of the asylum statute.

The proposed rule is consistent with U.S. obligations under the 1967 Protocol relating to the Status of Refugees (“Refugee Protocol”) (incorporating Articles 2 through 34 of the 1951 Convention relating to the Status of Refugees (“Refugee Convention”)) and the CAT. Neither the 1967 Refugee Protocol nor the CAT is self-executing. See Khan v. Holder, 584 F.3d 773, 783 (9th Cir. 2009) (`[T]he [1967 Refugee] Protocol is not self-executing.”); Auguste v. Ridge, 395 F.3d 123, 132 (3d Cir. 2005) (the CAT “was not self-executing”). Therefore, these treaties are not directly enforceable in U.S. law, but some of the obligations they contain have been implemented by domestic legislation. For example, the United States has implemented the non-refoulement provisions of these treaties—i.e., provisions prohibiting the return of an individual to a country where he or she would face persecution or torture—through the withholding of removal provisions at section 241(b)(3) of the INA and the CAT regulations, not through the asylum provisions at section 208 of the INA. See Cardoza-Fonseca, 480 U.S. at 440-41. The proposed rule is consistent with those obligations because it affects only eligibility for asylum. It does not affect grants of the statutory withholding of removal or protection under the CAT regulations. See R-S-C, 869 F.3d at 1188 n. 11; Cazun v. Att'y Gen., 856 F.3d 249, 257 (3d Cir. 2017); Ramirez-Mejia v. Lynch, 813 F.3d 240, 241 (5th Cir. 2016).

Limitations on eligibility for asylum are also consistent with Article 34 of the 1951 Refugee Convention, concerning assimilation of refugees, as implemented by 8 U.S.C. 1158. Section 1158 reflects that Article 34 is precatory and not mandatory, and accordingly does not provide that all refugees shall receive asylum. See Cardoza-Fonseca, 480 U.S. at 441; R-S-C, 869 F.3d at 1188; Mejia v. Sessions, 866 F.3d 573, 588 (4th Cir. 2017); Garcia, 856 F.3d at 42; Cazun, 856 F.3d at 257 & n.16; Ramirez-Mejia, 813 F.3d at 241. Moreover, the state parties to the Refugee Convention sought to “deny admission to their territories of criminals who would present a danger to security and public order.” United Nations High Comm'r for Refugees, Handbook on Procedures and Criteria for Determining Refugee Status under the 1951 Convention and the 1967 Protocol relating to the Status of Refugees ¶ 148 (1979) (edited Jan. 1992). Accordingly, the Refugee Convention incorporated exclusion clauses, including a bar to refugee status for those who committed serious nonpolitical crimes outside the country of refuge prior to their entry into the country of refuge that sought “to protect the community of a receiving country from the danger of admitting a refugee who has committed a serious common crime.” Id. ¶ 151. As noted above, Congress has long recognized this principle in U.S. law by imposing various statutory bars to eligibility for asylum and by authorizing the creation of new bars to eligibility through regulation.3

The Departments now propose to (1) establish additional bars to eligibility for asylum for aliens with certain criminal convictions; (2) clarify the effect of criminal convictions; and (3) remove the regulations regarding reconsideration of discretionary denials of asylum.

The Attorney General possesses general authority under section 103(g)(2) of the INA, 8 U.S.C. 1103(g)(2), to “establish such regulations . . . as the Attorney General determines to be necessary for carrying out this section.” See Tamenut v. Mukasey, 521 F.3d 1000, 1004 (8th Cir. 2008) (en banc) (per curiam) (describing section 1103(g)(2) as “a general grant of regulatory authority”). Similarly, Congress has conferred upon the Secretary the authority to “establish such regulations . . . as he deems necessary for carrying out his authority under the provisions of [the INA].” INA 103(a)(1), (3), 8 U.S.C. 1103(a)(1), (3).

Additionally, the Attorney General and the Secretary have authority to promulgate this proposed rule under sections 208(b)(2)(B)(ii) and (C) of the INA, 8 U.S.C. 1158(b)(2)(B)(ii) and (C). Under section 208(b)(2)(B)(ii), “[t]he Attorney General may designate by regulation offenses that will be considered to be a “particularly serious crime” under INA 208(b)(2)(A)(ii), 8 U.S.C. 1158(b)(2)(A)(ii), or a “serious nonpolitical crime” under INA 208(b)(2)(A)(iii), 8 U.S.C. 1158(b)(2)(A)(iii). Under INA 208(b)(2)(C), 8 U.S.C. 1158(b)(2)(C), the Attorney General may “by regulation establish additional limitations and conditions, consistent with [8 U.S.C. 1158], under which an alien shall be ineligible for asylum under” INA 208(b)(1).

The Departments propose to revise 8 CFR 208.13 and 1208.13 by adding paragraphs (c)(6) through (8) to add bars on eligibility for asylum for certain aliens. First, the regulations would add bars on eligibility for asylum for aliens who commit certain offenses in the United States after entering the country. Those bars would apply to aliens who are convicted of (1) a felony under federal or state law; (2) an offense under 8 U.S.C. 1324(a)(1)(A) or 1324(a)(1)(2) (Alien Smuggling or Harboring); (3) an offense under 8 U.S.C. 1326 (Illegal Reentry); (4) a federal, state, tribal, or local crime involving criminal street gang activity; (5) certain federal, state, tribal, or local offenses concerning the operation of a motor vehicle while under the influence of an intoxicant; (6) a federal, state, tribal, or local domestic violence offense, or who are found by an adjudicator to have engaged in acts of battery or extreme cruelty in a domestic context, even if no conviction resulted; and (7) certain misdemeanors under federal or state law for offenses related to false identification; the unlawful receipt of public benefits from a federal, state, tribal, or local entity; or the possession or trafficking of a controlled substance or controlled-substance paraphernalia. The Departments intend that the criminal ineligibility bars would be limited only to aliens with convictions and—with a narrow exception in the domestic violence context 4 —not based only on criminal conduct for which the alien has not been convicted. In addition, although 8 U.S.C. 1101(a)(43) provides for the application of the aggravated felony definition to offenses in violation of the law of a foreign country for which the term of imprisonment was completed within the previous 15 years, this proposal is not intended to cover such foreign convictions.

The Departments are proposing to implement a new bar on eligibility for asylum for felony convictions. See 8 U.S.C. 1158(b)(2)(B)(ii) and (C). Felonies are defined in the proposed rule as crimes designated as felonies by the relevant jurisdiction or crimes punishable by more than one year's imprisonment.

In the first instance, the Attorney General and the Secretary could reasonably exercise their discretion to classify felony offenses as particularly serious crimes for purposes of 8 U.S.C. 1158(b)(2)(B)(ii). Congress defined “particularly serious crimes” in the asylum statute to expressly encompass all aggravated felonies. See INA 208(b)(2)(B)(i), 8 U.S.C. 1158(b)(2)(B)(i). At present, the INA defines an aggravated felony by reference to an enumerated list of 21 types of convictions. INA 101(a)(43), 8 U.S.C. 1101(a)(43). But Congress did not limit the definition of particularly serious crimes to aggravated felonies. Rather, Congress expressly authorized the Attorney General to designate additional particularly serious crimes through regulation or by case-by-case adjudication. INA 208(b)(2)(B)(ii), 8 U.S.C. 1158(b)(2)(B)(ii); Delgado, 648 F.3d at 1106 (“[t]here is little question that [the asylum] provision permits the Attorney General, by regulation, to make particular crimes categorically particularly serious” (emphasis omitted)); Gao v. Holder, 595 F.3d 549, 556 (4th Cir. 2010) (“we think that [s]ection 1158(b)(2)(B)(ii) . . . empowers the Attorney General to designate offenses which, like aggravated felonies, will be considered per se particularly serious”). By defining “particularly serious crimes” to include all “aggravated felonies,” but then giving the Attorney General the discretion to “designate by regulation offenses that will be considered” a “particularly serious crime,” Congress made clear that the bar on asylum eligibility for particularly serious crimes necessarily includes, but is not limited to, aggravated felonies. See INA 208(b)(2)(A)(ii), (B)(ii), 8 U.S.C. 1158(b)(2)(A)(ii), (B)(ii); Delgado, 648 F.3d at 1105-06 (explaining that the asylum statute specifies two categories of crimes that are per se particularly serious—aggravated felonies, and those that the Attorney General designates by regulation).

To date, the Attorney General has not used the above-described authority to promulgate regulations identifying additional categories of particularly serious crimes. The Board has engaged in case-by-case adjudication to identify some particularly serious crimes, but this approach imposes significant interpretive difficulties and costs, while producing unpredictable results. The Supreme Court has employed the so-called “categorical” approach, established in Taylor v. United States, 495 U.S. 575 (1990), and its progeny such as Mathis v. United States, 136 S. Ct. 2243 (2016), and Descamps v. United States, 133 S. Ct. 2276 (2013), to determine when an offense constitutes an aggravated felony. Under that approach, courts must compare the elements of the statutory crime for which an alien was convicted with the generic elements of the specified federal aggravated felony. As a general matter, any mismatch between the elements means that the crime of conviction is not an aggravated felony (unless the statute of conviction is divisible and the alien was convicted of a particular offense within the statute that would satisfy the generic definition of the relevant aggravated felony).

Courts, however, have repeatedly expressed frustration with the complexity of applying this approach. See, e.g., United States v. Aguila-Montes de Oca, 655 F.3d 915, 917 (9th Cir. 2011), overruled by Descamps, 570 U.S. 254 (“In the twenty years since Taylor, we have struggled to understand the contours of the Supreme Court's framework. Indeed, over the past decade, perhaps no other area of the law has demanded more of our resources.”); see also Quarles v. United States, 139 S. Ct. 1872, 1880 (2019) (Thomas, J., concurring); Williams v. United States, 927 F.3d 427, 446 (6th Cir. 2019) (Merritt, J., concurring); Lowe v. United States, 920 F.3d 414, 420 (6th Cir. 2019) (Thapar, J., concurring) (“in the categorical-approach world, we cannot call rape what it is . . . . [I]t is time for Congress to revisit the categorical approach so we do not have to live in a fictional world where we call a violent rape non-violent”); United States v. Evans, 924 F.3d 21, 31 (2d Cir. 2019) (observing that, although the court may resolve only an actual case or controversy, “the categorical approach paradoxically instructs courts resolving such cases to embark on an intellectual enterprise grounded in the facts of other cases not before them, or even imagined scenarios” (emphases in original)); United States v. Chapman, 866 F.3d 129, 136-39 (3d Cir. 2017) (Jordan, J., concurring); United States v. Faust, 853 F.3d 39, 60-61 (1st Cir. 2017) (Lynch, J., concurring).

Application of the categorical approach has resulted in anomalous decisions in which aliens convicted of a serious criminal offense have been found not to have been convicted of an aggravated felony. See, e.g., Harbin v. Sessions, 860 F.3d 58 (2d Cir. 2017) (holding that a New York controlled substance law was not written in a way that allowed it to be used as the basis for establishing that a convicted alien was removable under the INA for drug trafficking); Larios-Reyes v. Lynch, 843 F.3d 146, 149-50 (4th Cir. 2016) (alien's conviction under Maryland law for sexual abuse of a victim under the age of 14 did not amount to the aggravated felony of “sexual abuse of a minor”). The Board has rectified some anomalies by determining that certain crimes, though not aggravated felonies, are of a sufficiently pernicious nature that they should facially constitute particularly serious crimes that would disqualify aliens from eligibility for asylum or withholding of removal. See Sopo v. U.S. Att'y Gen., 739 F. App'x 554, 558 (11th Cir. 2018) (the Board and immigration judges “may focus solely on the elements of the offense” to determine whether an offense is a “particularly serious crime”); In re N-A-M-, 24 I&N Dec. 336, 343 (BIA 2007) (explaining that “the proper focus for determining whether a crime is particularly serious is on the nature of the crime,” and that its elements alone may be dispositive); see also, e.g., Ahmetovic v. INS, 62 F.3d 48, 52 (2d Cir. 1995) (upholding the Board's determination that first-degree manslaughter, while not an aggravated felony, is per se “particularly serious” for asylum purposes). Furthermore, the Board has looked at the individual circumstances of a crime to conclude that an even wider range of offenses can be considered particularly serious crimes on an as-applied basis. See, e.g., Vaskovska v. Lynch, 655 F. App'x 880, 884 (2d Cir. 2016) (the Board did not err in its individualized determination that an alien's conviction for drug possession was a particularly serious crime); Arbid v. Holder, 700 F.3d 379, 381 (9th Cir. 2012) (the Board did not err in determining that an alien's mail fraud conviction was particularly serious even if not an aggravated felony). Even in the withholding context—where an alien is deemed to have committed a particularly serious crime if he has been convicted of an aggravated felony (or felonies) for which the sentence was an aggregate term of imprisonment of at least 5 years, see 8 U.S.C. 1231(b)(3)(B)—courts have routinely concluded that crimes that are not aggravated felonies may be particularly serious. See, e.g., Valerio-Ramirez v. Sessions, 882 F.3d 289, 291, 296 (1st Cir. 2018) (the Board did not err in determining that an alien's identity theft conviction was particularly serious even though it was not an aggravated felony); Hamama v. INS, 78 F.3d 233, 240 (6th Cir. 1996) (the Board had power to declare certain firearm possession crimes “facially” particularly serious without an individualized evaluation of the alien's case, even if such crimes are not always aggravated felonies); In re N-A-M-, 24 I&N Dec. at 338-39 (felony menacing is a particularly serious crime based on its elements, though not an aggravated felony).

Nonetheless, this mix of case-by-case adjudication and per se rules is an inefficient means of identifying categories of offenses that should constitute particularly serious crimes. The Board has only rarely exercised its authority to designate categories of offenses as facially or per se particularly serious, and instead typically looks to a wide and variable range of evidence in making an individualized determination of a crime's seriousness. See In re N-A-M-, 24 I&N Dec. at 343-44; Matter of L-S-, 22 I&N Dec. 645, 651 (BIA 1999). This case-by-case adjudication means that aliens convicted of the exact same offense can receive different asylum treatment. For certain crimes—i.e., those described in this notice of proposed rulemaking—the Attorney General and the Secretary have determined that the possibility of such inconsistency is not desirable and that a rule-based approach is instead warranted in this specific context.

The proposed rule would eliminate the inefficiencies described above by providing that all felonies would constitute particularly serious crimes. The determination of whether a crime would be a felony for purposes of asylum eligibility would depend on whether the relevant jurisdiction defines the crime as a felony or whether the statute of conviction allows for a sentence of more than one year. Convictions for which sentences are longer tend to be associated with crimes of a more consequential nature. For example, an offender's “criminal history category” for the purposes of sentencing for federal crimes “serves as [a] proxy for the need to protect the public from further crimes of the defendant.” United States v. Hayes, 762 F.3d 1300, 1314 n.8 (11th Cir. 2014); see also id. (“In other words, it is a proxy for recidivism.”). And the criminal history category, in turn, is “based on the maximum term imposed in previous sentences rather than on other measures, such as whether the conviction was designated a felony or misdemeanor.” U.S. Sentencing Guidelines Manual § 4A1.2 cmt. background (U.S. Sentencing Comm'n 2018). This calculation thus reflects a recognition that crimes with the potential for longer sentences tend to indicate that the offenders who commit such crimes are greater dangers to the community.

In addition, defining a felony to include such offenses would also be consistent with the definition of felonies in other federal statutes. For instance, convictions for crimes that states designated as felonies may serve as predicate “prior felony conviction[s]” under the federal career offender statute. See United States v. Beasley, 12 F.3d 280, 282-84 (1st Cir. 1993); United States v. Rivera, 996 F.2d 993, 994-97 (9th Cir. 1993).

Furthermore, defining felonies to include crimes that involve a possible sentence of more than one year in prison would be generally consistent with the way that federal law defines felonies. See, e.g., 5 U.S.C. 7313(b) (“For the purposes of this section, `felony' means any offense for which imprisonment is authorized for a term exceeding one year”); cf. U.S.S.G. 2L1.2 cmt. n.2 (“ `Felony' means any federal, state, or local offense punishable by imprisonment for a term exceeding one year.”). The Model Penal Code and most states likewise define a felony as a crime with a possible sentence in “excess of one year.” Model Penal Code § 1.04(2); see 1 Wharton's Criminal Law § 19 & n.23 (15th ed.) (surveying state laws). Finally, relying on the possibility of a sentence in excess of one year—rather than on the actual sentence imposed—would be consistent with Board precedents adjudicating whether a crime qualifies as “particularly serious” for purposes of asylum or withholding eligibility. In that context, “the sentence imposed is not a dominant factor in determining whether a conviction is for a particularly serious crime” because the sentence actually imposed often depends on factors such as offender characteristics that “may operate to reduce a sentence but do not diminish the gravity of [the] crime.” In re N-A-M-, 24 I&N Dec. at 343.

Relying on the possibility of a sentence of over one year to define a felony would capture crimes of a particularly serious nature because the offenders who commit such crimes are—as a general matter—more likely to be dangerous to the community than those offenders whose crimes are punishable by shorter sentences. See 8 U.S.C. 1158(b)(2)(A)(ii) (tying the “particularly serious crime” determination to “danger[ousness] to the community”). In addition, by encompassing all crimes with a sentence of more than one year, regardless of whether the crimes are defined felonies by the relevant jurisdiction, the definition would create greater uniformity by accounting for possible variations in how different jurisdictions may label the same offense. Such a definition would also avoid anomalies in the asylum context that arise from the definition of “aggravated felonies” under 8 U.S.C. 1101(a)(43), which defines some qualifying offenses with reference to the length of the actual sentence ordered. See United States v. Pacheco, 225 F.3d 148, 153-54 (2d Cir. 2000) (agreeing that ordinarily the touchstone in the aggravated felony definition's reference to sentences is the actual term of imprisonment imposed). The proposed definition of a felony would also obviate the need for immigration adjudicators and courts to apply the categorical approach with respect to aggravated felonies. This proposal thus would offer a more streamlined and predictable approach to be applied in the asylum context.5

In addition to their authority under section 208(b)(2)(B)(ii) of the INA, 8 U.S.C. 1158(b)(2)(B)(ii), the Attorney General and the Secretary further propose relying on their respective authorities under section 208(b)(2)(C) of the INA, 8 U.S.C. 1158(b)(2)(C), to make all felony convictions disqualifying for purposes of asylum eligibility. Federal, state, tribal, or local felony convictions already carry a number of serious repercussions over and above the sentence imposed. Felons, including those who are U.S. citizens, may lose certain privileges, including the ability to apply for Government grants and live in public housing. See Estep v. United States, 327 U.S. 114, 122 & n.13 (1946) (explaining that “[a] felon customarily suffers the loss of substantial rights”); see also, e.g., Dist. of Columbia v. Heller, 554 U.S. 570, 626-27 (2008) (the Second Amendment does not prohibit laws disallowing the possession of firearms by felons). Treating a felony conviction as disqualifying for purposes of obtaining the discretionary benefit of asylum would be consistent with the disabilities arising from felony convictions in these other contexts and would reflect the serious social cost of such crimes.

The Departments also seek public comment on whether (and, if so, how) to differentiate among crimes designated as felonies and among crimes punishable by more than one year of imprisonment. For example, are there crimes that are currently designated as felonies in one or more relevant jurisdictions in the United States that should not be categorical bars to asylum eligibility? Are there crimes that are currently punishable by more than one year's imprisonment in one or more relevant jurisdictions in the United States that should not be categorical bars to asylum? Should the definition of a felony depend instead on the term of imprisonment that was ordered by the court of jurisdiction? In addition to seeking public comment on whether the definition of felony in the proposed rule might be over-inclusive, the Departments also seek comment on whether it might be under-inclusive—i.e., are there crimes that would not fall under the definition of felony in the proposed rule, and that do not otherwise constitute categorical bars to asylum eligibility, that should be made categorical bars? In sum, the Departments seek input on how the proposed definition of a felony might be modified. Further, the Departments seek comment on what measures, if any, are necessary to ensure that aliens who are victims of human trafficking, but also have convictions caused by or incident to victimization, are not subject to this bar. For instance, victims of severe forms of human trafficking may nevertheless receive a waiver of criminal grounds for inadmissibility in order to qualify for T nonimmigrant status pursuant to 8 CFR 212.16. See INA 101(a)(15)(T), 212(d)(13)(B), 8 U.S.C. 1101(a)(15)(T), 1182(d)(13)(B).

Regardless of whether the rule encompasses all felony convictions or some subset of such convictions, the Departments have identified specific types of offenses below that are proposed in this rule as grounds for ineligibility for asylum.

The Attorney General and the Secretary propose to designate all offenses involving the federal crimes of bringing in or harboring certain aliens pursuant to sections 274(a)(1)(A) and (2) of the INA, 8 U.S.C. 1324(a)(1)(A), (2), as particularly serious crimes and, in all events, as discrete bases for ineligibility. See INA 208(b)(2)(B)(ii), (C), 8 U.S.C. 1158(b)(2)(B)(ii), (C). To convict a person of harboring an alien under sections 274(a)(1)(A) or (2) of the INA, the Government must establish that the defendant concealed, harbored, shielded from detection, or transported an alien, or attempted to do so. INA 274(a)(1)(A), (2), 8 U.S.C. 1324(a)(1)(A), (2). Penalties differ depending on whether the act was for commercial advantage or financial gain and on whether serious bodily injury or death occurred. INA 274(a)(1)(B), (2)(B), 8 U.S.C. 1324(a)(1)(B), (2)(B). Most of the prohibited acts carry a penalty of possible imprisonment of at least five years, INA 274(a)(1)(B)(i)-(iii), 8 U.S.C. 1324(a)(1)(B)(i)-(iii), and committing those acts in circumstances resulting in the death of another person can be punished by a sentence of death or life imprisonment, INA 274(a)(1)(B)(iv), 8 U.S.C. 1324(a)(1)(B)(iv). The only exception is for certain instances of the offense of bringing or attempting to bring in an alien who lacks official authorization to enter under section 274(a)(2) of the INA, 8 U.S.C. 1324(a)(2), which carries a possible penalty of imprisonment up to one year, INA 274(a)(2)(A), 8 U.S.C. 274(a)(2)(A).

Convictions under section 1324 are often aggravated felonies under section 101(a)(43)(N) of the INA, 8 U.S.C. 1101(a)(43)(N), which defines an aggravated felony as including “an offense described in [INA 274(a)(1)(A) or (2)], except in the case of a first offense for which the alien has affirmatively shown that the alien committed the offense for the purpose of assisting, abetting, or aiding only the alien's spouse, child, or parent.” See Matter of Ruiz-Romero, 22 I&N Dec. 486, 488, 492-93 (BIA 1999) (holding that an alien convicted of transporting an illegal alien committed an aggravated felony under section 101(a)(43)(N) of the INA and was thus deportable); see also Patel v. Ashcroft, 294 F.3d 465 (3d Cir. 2002) (holding that harboring an alien constitutes an aggravated felony); Gavilan-Cuate v. Yetter, 276 F.3d 418, 419-20 (8th Cir. 2002) (dismissing an appeal for lack of jurisdiction because the court had already determined on the petitioner's direct appeal that he had been convicted of the aggravated felony of transporting and harboring aliens); United States v. Galindo-Gallegos, 244 F.3d 728, 733-34 (9th Cir. 2001) (holding that transporting aliens under 8 U.S.C. 1324(a)(1)(A)(ii) is an aggravated felony for purposes of section 101(a)(43)(N) of the INA). Aliens convicted of such aggravated felonies would already be ineligible for asylum under section 208(b)(2)(B)(i) of the INA.

The proposed rule would broaden this bar so that first-time offenders who engage in illegal smuggling or harboring to aid certain family members, in violation of section 1324(a)(1)(A) or (2), are deemed to have committed particularly serious crimes. The mens rea required for a section 1324 conviction under subsection (a)(1)(A) is “knowing,” and under (a)(2) is “knowing or in reckless disregard,” meaning such a conviction displays a serious disregard for U.S. immigration law. In all events, conviction of a smuggling offense under section 1324(a)(1)(A) or (2) should also be disqualifying under section 1158(b)(2)(C), which gives the Attorney General and the Secretary additional discretion to identify grounds for ineligibility. Even first-time alien smuggling offenses involving immediate family members display a serious disregard for U.S. immigration law and pose a potential hazard to smuggled family members, which often include a vulnerable child or spouse. See Arizona v. United States, 567 U.S. 387, 396 (noting the “danger” posed by “alien smugglers or aliens who commit a serious crime”); United States v. Miguel, 368 F.3d 1150, 1157 (9th Cir. 2004), overruled on other grounds by United States v. Gasca-Ruiz, 852 F.3d 1167 (9th Cir. 2017) (noting that “young children [are] more susceptible to the criminal conduct because they [do] not fully appreciate the danger involved in illegal smuggling”).

The Attorney General and the Secretary further propose to exercise their authority under sections 208(b)(2)(B)(ii) and 208(b)(2)(C) of the INA, 8 U.S.C. 1158(b)(2)(B)(ii) and (C), to designate a conviction for the federal crime of illegal reentry pursuant to section 276 of the INA, 8 U.S.C. 1326, as precluding asylum eligibility.

Under section 1326(a), aliens who were previously removed and reenter the United States are subject to fines and to a term of imprisonment of two years or less. 8 U.S.C. 1326(a). Section 1326(b) prescribes significantly higher penalties for certain removed aliens who reenter, such as aliens who were removed after being convicted for aggravated felonies and then reenter. 8 U.S.C. 1326(b) (authorizing sentences of imprisonment up to 20 years as possible penalties).

Some convictions under section 1326 already qualify as aggravated felonies under section 101(a)(43)(O) of the INA, 8 U.S.C. 1101(a)(43)(O), which defines an aggravated felony as including “an offense described in section . . . 1326 . . . committed by an alien who was previously deported on the basis of a conviction for an [aggravated felony].” Aliens who commit such offenses are thus already ineligible for asylum under section 208(b)(2)(B)(i) of the INA, 8 U.S.C. 1158(b)(2)(B)(i).

The proposed rule would broaden this bar so that all aliens convicted of illegal reentry under section 1326 would be considered to have committed an offense that disqualifies them from asylum eligibility. It would also harmonize the treatment of most aliens who have illegally reentered the United States after being removed, as such aliens who have a prior order of removal reinstated are already precluded from asylum eligibility. Section 1326 makes clear that all offenses relating to illegal reentry are quite serious; even the most basic illegal reentry offense is punishable by fine and by up to two years' imprisonment. 8 U.S.C. 1326(a). Illegal reentry also reflects a willingness to repeatedly disregard the immigration laws despite alternative means of presenting a claim of persecution. An alien seeking protection, even one who has previously been removed from the United States, may present himself or herself at a port of entry without illegally reentering the United States. An alien who chooses instead to again enter illegally has repeatedly chosen to flout immigration laws, and such recidivism suggests that the offense should be treated more severely. The fact that the alien has repeatedly engaged in criminal conduct suggests a tendency to engage in such conduct in the future, thus warranting a conclusion that the alien poses a danger to the community that makes the alien's crime particularly serious. See Mariel Alper et al., 2018 Update on Prisoner Recidivism: A 9-Year Follow-up Period (2005-2014) 17 (2018) (“Overall, excluding probation and parole violations, 82.4% of prisoners released in 30 states in 2005 were arrested within 9 years.”); U.S. Sentencing Comm'n, The Past Predicts the Future: Criminal History and Recidivism of Federal Offenders 14 (2017) (“Overall, an offender's total criminal history score is a strong predictor of recidivism. Rearrest rates range from a low of 30.2 percent of offenders with zero criminal history points to a high of 85.7 percent for offenders with 15 or more criminal history points. Each additional criminal history point is generally associated with a greater likelihood of recidivism.”); Nick Tilley, Analyzing and Responding to Repeat Offending 11 (2013) (“Once criminal careers are established and offenders are processed by the criminal justice system, recidivism rates become very high: Up to two-thirds of those who are incarcerated will reoffend within a few years.”).

Moreover, Congress, as noted above, has already designated certain crimes related to illegal reentry as aggravated felonies. See 8 U.S.C. 1101(a)(43)(O). This designation reflects a congressional decision that aliens who commit these crimes are dangers to the community, see 8 U.S.C. 1158(b)(2)(A)(ii) (tying the “particularly serious crime” determination to “danger[ousness] to the community”), so aliens who commit similar crimes related to reentry are also likely be dangers to the community. Further, 63% of those convicted of illegal reentry had a prior criminal history, again suggesting that the offenders who commit these crimes pose an ongoing danger to others. See U.S. Sentencing Comm'n, Quick Facts: Illegal Reentry Offenses 1 (2019), https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/Illegal_Reentry_FY18.pdf.

As a separate basis for this aspect of the proposed rule, the Attorney General and the Secretary propose making illegal reentry a ground for ineligibility under section 208(b)(2)(C) of the INA, 8 U.S.C. 1158(b)(2)(C). A regulation providing for the mandatory ineligibility for asylum based on convictions for illegal reentry of removed aliens, see INA 276, 8 U.S.C. 1326, would bear a close relationship to the statutory bar on applying for asylum when a previous order of removal is reinstated, see INA 241(a)(5), 8 U.S.C. 1231(a)(5). An alien subject to reinstatement of a prior removal order is not eligible to apply for any relief from removal, but may seek protection such as statutory withholding of removal and protection pursuant to the CAT regulations. See, e.g., Cazun, 856 F.3d at 254. The statutory bar on applying for asylum and other forms of relief when an order of removal is reinstated has been upheld by every circuit to consider the question. See Garcia v. Sessions, 873 F.3d 553, 557 (7th Cir. 2017), cert. denied, 138 S. Ct. 2648 (2018); R-S-C, 869 F.3d at 1189; Mejia, 866 F.3d at 587; Garcia, 856 F.3d at 30; Cazun, 856 F.3d at 260; Perez-Guzman v. Lynch, 835 F.3d 1066, 1082 (9th Cir. 2016); Jimenez-Morales v. U.S. Att'y Gen., 821 F.3d 1307, 1310 (11th Cir. 2016); Ramirez-Mejia v. Lynch, 794 F.3d 485, 489-90 (5th Cir. 2015); Herrera-Molina v. Holder, 597 F.3d 128, 137-38 (2d Cir. 2010). That bar reflects legislators' apparent concerns that aliens who re-cross the border illegally after having been removed once should not be rewarded with benefits that the United States is not obliged to offer them. See R-S-C, 869 F.3d at 1179 & n.2; H.R. Rep. No. 104-469, pt. 1, at 155 (1996) (“[T]he ability to cross into the United States over and over with no consequences undermines the credibility of our efforts to secure the border.”); H.R. Rep. No. 104-469, pt. 1, 113 (“One seemingly intractable problem is repeat border-crossings.”).

The existing statutory bar for reinstated removal orders and the proposed bar for aliens convicted of illegal reentry after being previously removed are not coterminous because not all persons with a conviction under section 276 of the INA, 8 U.S.C. 1326, have orders of removal reinstated. See Lara-Aguilar v. Sessions, 889 F.3d 134, 144 (4th Cir. 2018) (reinstatement of a prior removal order is neither automatic nor obligatory). Furthermore, not all persons with reinstated removal orders have been convicted under section 276 of the INA, 8 U.S.C 1326. However, the Departments believe that similar policy considerations support the barring of aliens convicted of illegal reentry under section 276 of the INA, 8 U.S.C. 1326, from eligibility for asylum.

Furthermore, although this proposed bar would render ineligible for asylum an alien whose threat of persecution arose after the initial removal and illegal reentry, such an alien could still seek other forms of protection, such as statutory withholding of removal and withholding or deferral of removal under the regulations implementing the CAT. The proposed rule is consistent, therefore, with U.S. treaty obligations under the Refugee Protocol (which incorporates Articles 2 through 34 of the Refugee Convention) and the CAT. U.S. asylum law implements Article 34 of the Refugee Convention, concerning assimilation of refugees, which is precatory and not mandatory. See Cardoza-Fonseca, 480 U.S. at 441. In accordance with the non-mandatory nature of Article 34, the asylum statute, INA 208, 8 U.S.C. 1158, was drawn to be discretionary; it does not require asylum to be granted to all refugees. Id. For the reasons outlined above, limitations like the ones proposed here do not violate Article 34. See Garcia, 856 F.3d at 42; R-S-C, 869 F.3d at 1188; Mejia, 866 F.3d at 588; Cazun , 856 F.3d at 257 & n.16; Ramirez-Mejia, 813 F.3d at 241. In contrast, the United States' non-refoulement obligations under Article 33(1) of the Refugee Convention and Article 3 of the CAT are mandatory to the extent provided by domestic law. They are implemented by statutory withholding of removal, a mandatory provision, and withholding or deferral of removal under the CAT regulations. Because the new limitations adopted here do not affect the availability of statutory withholding of removal, INA 241(b)(3)(A), 8 U.S.C. 1231(b)(3)(A), or protection under the regulations implementing the CAT, 8 CFR 1208.16(c) through 1208.18, the rule does not affect U.S. compliance with its obligations under Article 33(1) of the Refugee Convention or Article 3 of the CAT. See R-S-C, 869 F.3d at 1188 n.11; Cazun, 856 F.3d at 257; Ramirez-Mejia, 813 F.3d at 241.

Moreover, in rejecting any argument that the Refugee Convention and Refugee Protocol require that the U.S. must grant asylum to anyone who qualifies as a “refugee,” the Departments note that the Refugee Convention and Refugee Protocol are not self-executing. Rather, Congress implemented relevant U.S. obligations under the Refugee Protocol through the Refugee Act. Matter of D-J-, 23 I&N Dec. 572, 584 n.8 (A.G. 2003). The Refugee Act made asylum discretionary, meaning that Congress did not consider it obligatory to grant asylum to every refugee who qualifies. Public Law 96-212, sec. 208(a), 94 Stat. 102. Moreover, as noted earlier in footnote 3, courts have rejected arguments that other provisions of the Refugee Convention require every refugee to receive asylum. Courts have held, in the context of upholding the bar on eligibility for asylum in reinstatement proceedings under section 241(a)(5) of the INA, 8 U.S.C. 1231(a)(5), that limiting the ability to apply for asylum does not constitute a prohibited “penalty” under Article 31(1) of the Refugee Convention. Mejia, 866 F.3d at 588; Cazun, 856 F.3d at 257 n.16. Courts have also rejected the argument that Article 28 of the Refugee Convention, governing issuance of international travel documents for refugees “lawfully staying” in a country's territory, mandates that every person who might qualify for withholding must also be granted asylum. Garcia, 856 F.3d at 42; R-S-C, 869 F.3d at 1188. Thus, the Attorney General may render aliens ineligible for asylum if they enter illegally and are then convicted of unlawfully entering the country, and still remain faithful to U.S. obligations under the Refugee Protocol.

The Departments are proposing to bar from asylum all those who are convicted of a crime involving criminal street gangs, regardless of whether that crime qualifies as a felony or as a misdemeanor. One approach the Attorney General and the Secretary are considering is to exercise their discretionary authority under sections 208(b)(2)(B)(ii) and (C) of the INA, 8 U.S.C. 1158(b)(2)(B)(ii) and (C), to exclude individuals convicted of federal, state, tribal, or local crimes committed in support, promotion, or furtherance of a criminal street gang as that term is defined in the convicting jurisdiction or under 18 U.S.C. 521(a). Specifically, the proposed rule would cover individuals convicted of federal, state, tribal, or local crimes in cases in which the adjudicator knows or has reason to believe the crime was committed in furtherance of criminal street gang activity.6 The “reason to believe” standard is used elsewhere in the INA, see 8 U.S.C. 1182(a)(2)(C), and would allow for consideration of all reliable evidence, including any penalty enhancements, to determine whether the crime was committed for or related to criminal gang activities, see Garces v. U.S. Att'y Gen., 611 F.3d 1337, 1350 (11th Cir. 2010); Matter of Rico, 16 I&N Dec. 181, 185-86 (BIA 1977). In addition, the Departments have concluded that it is appropriate to allow the adjudicator to determine whether a crime was in fact committed “in furtherance” of gang-related activity. The states, as noted above, have enacted numerous laws that address gang-related crimes, but they have not enacted a uniform definition of what constitutes activity taken “in furtherance” of a gang-related crime. It thus appropriately falls to immigration judges in the first instance to determine whether a person committed the type of crime that warrants withholding of the benefit of legal presence in our communities. Moreover, to the extent that allowing the adjudicator to undertake such an inquiry might raise concerns about inconsistent application of the proposed bar, the Departments note that the Board is capable of ensuring a uniform approach to the gang-related crimes inquiry. See, e.g., 8 CFR 1003.1(e)(6)(i) (allowing for referral of cases to a three-member panel of the Board “to settle inconsistencies among the rulings of different immigration judges”).

Some of the relevant criminal street gang-related offenses may already constitute aggravated felonies, such that aliens convicted of such offenses would already be ineligible for asylum. The most common criminal street gang crimes “are street-level drug trafficking, assault, threats and intimidation, robbery, and large-scale drug trafficking.” National Gang Intelligence Center, 2015 National Gang Report 12 (2015). Many convictions for such offenses could qualify as aggravated felonies. See, e.g., 8 U.S.C. 1101(a)(43)(B) (defining drug trafficking crimes as aggravated felonies); id. 1101(a)(43)(F) (defining crimes of violence punishable by at least one year in prison as aggravated felonies).

Regardless, criminal street gang-related offenses—whether felonies or misdemeanors—could reasonably be designated as “particularly serious crimes” pursuant to 8 U.S.C. 1158(b)(2)(B)(ii). All criminal street gang-related offenses appear to be particularly serious because they are strong indicators of recidivism and ongoing, organized criminality within a community, thus implying that aliens who commit such crimes are likely to pose an ongoing danger to that community. For example, research suggests that criminal street gang members are responsible for 48 percent of violent crime in most U.S. jurisdictions. See National Gang Intelligence Center, National Gang Threat Assessment 15 (2011). Criminal street gang members are also more likely than nonmembers to be involved in selling drugs. See Dana Peterson, et al., Gang Membership and Violent Victimization 21 Just. Q. 793, 798 (2004). And the Federal Bureau of Investigation reports that more than 96 criminal street gangs conduct cross-border crimes such as cross-border drug trafficking. National Gang Intelligence Center, 2015 National Gang Report 9-10 (2015); see also J.C. Barnes et al., Estimating the Effect of Gang Membership on Nonviolent and Violent Delinquency: A Counterfactual Analysis, 36 Aggressive Behav. 437, 438 (2010) (studying the link between gang membership and crime, and reporting that gang members account for 86 percent of all “serious delinquent acts”). In light of this well-documented link between gang membership and a range of crimes, the Departments believe that aliens who enter the United States and proceed to be convicted of crimes involving criminal street gang-related activity should be deemed to have committed particularly serious crimes that render them ineligible for asylum.

Further, some of the crimes in which gangs frequently engage—such as drug trafficking—are similar to the kinds of crimes that Congress has already classified as aggravated felonies. See, e.g., 8 U.S.C. 1101(a)(43)(B) (defining aggravated felonies to include “illicit trafficking in a controlled substance”). This classification reflects a congressional determination that such crimes pose a danger to the community, see 8 U.S.C. 1158(b)(2)(A)(ii), (b)(2)(B)(i), such that aliens involved in similar, gang-related crimes are also likely to pose a danger to the community. Indeed, the perpetrators of crimes that further gang activity are, by the very nature of the acts they commit, displaying a disregard for basic societal structures in preference of criminal activities that place other members of the community—even other gang members—in danger. Existing law in some cases thus already treats gang-related offenders more harshly than other offenders, see, e.g., U.S. Sentencing Guidelines Manual § 5K2.18 (U.S. Sentencing Comm'n 2018) (allowing for upward departures “to enhance the sentences of defendants who participate in groups, clubs, organizations, or associations that use violence to further their ends”), thereby confirming that these offenders are more likely to be dangerous to the community.

Moreover, even if 8 U.S.C. 1158(b)(2)(B)(ii) did not authorize the proposed bar, the Attorney General and the Secretary would propose designating criminal gang-related offenses as disqualifying under 8 U.S.C. 1158(b)(2)(C). Criminal gangs of all types—including local, regional, or national street gangs; outlaw motorcycle gangs; and prison gangs—are a significant threat to the security and safety of the American public. See, e.g., National Gang Intelligence Center, 2015 National Gang Report 8 (2015) (explaining that “each gang type poses a unique threat to the nation”). Transnational organized crime has also expanded in size, scope, and impact over the past several years.7 In Executive Order 13773, Enforcing Federal Law With Respect to Transnational Criminal Organizations and Preventing International Trafficking, 82 FR 10691 (Feb. 9, 2017), the President emphasized the scourge of transnational criminal organizations and directed federal agencies to “pursue and support additional efforts to prevent the operational success of transnational criminal organizations and subsidiary organizations within and beyond the United States.” Aliens involved in gang-related criminal activity accordingly represent a threat to the safety and security of the United States, and barring aliens convicted of such activity from receiving the discretionary benefit of asylum is “consistent with” the asylum statute's current provisions specifying that aliens posing such a threat are not eligible for asylum. See 8 U.S.C. 1158(b)(2)(A)(ii), (iv).

Finally, the Departments solicit public comments on:

(1) What should be considered a sufficient link between an alien's underlying conviction and the gang-related activity in order to trigger the application of the proposed bar; and

(2) any other regulatory approaches to defining the type of gang-related activities that should render aliens ineligible for asylum.

The Attorney General and Secretary further propose that, pursuant to their authorities under 8 U.S.C. 1158(b)(2)(B)(ii) and (C), aliens convicted under federal, state, tribal, or local law of certain offenses involving driving while intoxicated or impaired (also known as driving under the influence (“DUI”)) should be ineligible for asylum. Specifically, aliens should be ineligible for asylum if they are convicted under federal, state, tribal, or local law of a second or subsequent offense of driving while intoxicated or impaired, or for a single such offense resulting in death or serious bodily injury. Whether a conviction involves driving while intoxicated or impaired would depend on the definition that the jurisdiction of conviction gives those terms. Such convictions would be disqualifying regardless of whether they constituted felonies or misdemeanors in the jurisdiction of conviction.

An alien convicted of DUI may remain eligible for asylum under current law, even when it is an alien's second or subsequent such conviction or when the DUI offense results in death or serious injury. Not all DUI offenses constitute aggravated felonies within the meaning of section 101(a)(43) of the INA, 8 U.S.C. 1101(a)(43), and thus these offenses may not automatically constitute “particularly serious crimes” for purposes of 8 U.S.C. 1158(b)(2)(B)(i). Cf. Leocal v. Ashcroft, 543 U.S. 1, 13 (2004) (noting that DUI offenses in states whose relevant statutes “do not require any mental state” are not aggravated felony crimes of violence). However, the Board in the withholding of removal context has concluded that a number of DUI-related offenses involving death or serious injury constitute particularly serious crimes, and courts have upheld those determinations. See, e.g., Avendano-Hernandez v. Lynch, 800 F.3d 1072, 1076, 1076-78 (9th Cir. 2015) (affirming the Board's determination that a felony DUI conviction involving injury to another was a particularly serious crime for purposes of withholding of removal given the inherently dangerous nature of the offense, even though the alien was sentenced to less than one year's imprisonment); Anaya-Ortiz v. Holder, 594 F.3d 673, 675, 679-80 (9th Cir. 2010) (the Board applied the correct standard to conclude that an alien's actions in crashing “into a house while driving drunk . . . [and] caus[ing] part of the house's sheetrock wall to collapse on an elderly woman who lived inside” constituted a particularly serious crime); Ursu v. INS, 20 F. App'x 702, 705 (9th Cir. 2001) (upholding the Board's conclusion that a specific DUI offense was a particularly serious crime for withholding purposes because the alien “caused the death of another human being” while severely impaired). These holdings indicate that DUI offenses often have grave consequences, thus supporting a conclusion that they can reasonably be considered “particularly serious” for purposes of asylum eligibility. DUI laws exist, in part, to protect unknowing persons who are transiting through their communities from the dangerous persons who choose to willingly disregard common knowledge that their criminal acts endanger others.

As noted above, however, existing law does not clearly or categorically limit asylum eligibility for aliens convicted of serious DUI offenses, including those resulting in death or serious bodily injury. Establishing such a bar would be consistent with the Attorney General and the Secretary's statutory authority to designate by regulation “particularly serious crimes” that constitute a danger to the community and, thus, render aliens ineligible for asylum. INA 208(b)(2)(A)(ii), (B)(ii), 8 U.S.C. 1158(b)(2)(A)(ii), (B)(ii); Delgado, 648 F.3d at 1105-06; Gao, 595 F.3d at 555-56; see also Matter of Carballe, 19 I&N Dec. 357, 360 (BIA 1986) (an alien convicted of a particularly serious crime constitutes a danger to the community of the United States). The Fifth Circuit has noted that “the very nature of the crime of [driving while intoxicated] presents a `serious risk of physical injury' to others.” United States v. DeSantiago-Gonzalez, 207 F.3d 261, 264 (5th Cir. 2000). These decisions in the withholding context underscore that DUI offenses involving serious bodily harm or death are routinely deemed “particularly serious crimes” in that context, and section 101(h)(3) of the INA, 8 U.S.C. 1101(h)(3), classifies driving under the influence as a “serious criminal offense” for purposes of the ground of inadmissibility at section 1182(a)(2)(E). Classifying DUI offenses that involve serious bodily harm or death as particularly serious crimes as a categorical matter would be reasonable given that all such offenses by definition involve a serious danger to the community. Likewise, categorically classifying repeat DUI offenses as particularly serious crimes would be a reasonable exercise of the Attorney General and the Secretary's discretion to designate particularly serious crimes because repeat offenders have already exhibited disregard for the safety of others as well as a likelihood of continuing to engage in extremely dangerous conduct.

Even if some of the proposed DUI-related bars could not be characterized as “particularly serious crimes” for purposes of section 1158(b)(2)(B)(ii), such bars would be within the Attorney General and the Secretary's authority to establish under 8 U.S.C. 1158(b)(2)(C). As the Supreme Court has recognized, “[d]runk driving is an extremely dangerous crime” as a general matter. Begay v. United States, 553 U.S. 137, 141 (2008), abrogated on other grounds by Johnson v. United States, 135 S. Ct. 2551 (2015). It takes “a grisly toll on the Nation's roads, claiming thousands of lives, injuring many more victims, and inflicting billions of dollars in property damage every year.” Birchfield v. North Dakota, 136 S. Ct. 2160, 2166 (2016); see also Marmolejo-Campos v. Holder, 558 F.3d 903, 913 (9th Cir. 2009) (noting that “the dangers of drunk driving are well established”). Furthermore, federal courts have upheld the Board's determination that even if a particular DUI-related offense does not qualify as a “particularly serious crime,” such a conviction warrants a discretionary denial of asylum. See, e.g., Kouljinski v. Keisler, 505 F.3d 534, 543 (6th Cir. 2007) (holding that, regardless of whether driving under the influence of alcohol is a “particularly serious crime,” the immigration judge “did not abuse his discretion in this case by basing his discretionary denial of asylum on [the petitioner's] three drunk-driving convictions”). These cases are consistent with the notion that the Attorney General and Secretary could, in their discretion, identify a subset of DUI convictions reflecting particularly dangerous conduct as grounds to deny eligibility for asylum.

Relying on the authority under section 208(b)(2)(B)(ii) of the INA, the proposed regulation would also render aliens convicted of federal, state, tribal, or local offenses involving conduct amounting to domestic assault or battery, stalking, or child abuse in the domestic context ineligible for asylum, irrespective of whether those offenses qualify as felonies or misdemeanors. Relying solely on the Attorney General and the Secretary's authority under section 208(b)(2)(C) of the INA, the regulation would also render ineligible aliens who engaged in acts of battery and extreme cruelty in a domestic context in the United States, regardless of whether such conduct resulted in a criminal conviction. Notably, the asylum statute already contemplates that individuals who engage in certain harmful behavior will be ineligible, regardless of whether that behavior resulted in a conviction. 8 U.S.C. 1158(b)(2)(A)(i), (iii)-(v). Finally, the proposed regulation would except from the ineligibility bar aliens who have been battered or subjected to extreme cruelty and who were not the primary perpetrators of violence in their relationships.

Some of the offenses described above may already render an alien ineligible for asylum, to the extent that a particular conviction qualifies as an aggravated felony. For instance, aggravated felonies encompass “murder, rape, or sexual abuse of a minor,” 8 U.S.C. 1101(a)(43)(A), as well as any “crime of violence . . . for which the term of imprisonment [is] at least one year,” id. 1101(a)(43)(F). Convictions for such offenses automatically constitute “particularly serious crimes” for purposes of 8 U.S.C. 1158(b)(2)(A)(ii). See 8 U.S.C. 1158(b)(2)(B)(i). But, as noted, due to the application of the categorical approach, many state convictions that involve sexual abuse or domestic violence-related offenses may not qualify as aggravated felonies. E.g., Larios-Reyes, 843 F.3d at 149-50 (alien's conviction under Maryland law for sexual abuse of a victim under the age of 14 did not amount to the aggravated felony of “sexual abuse of a minor”); Ortega-Mendez v. Gonzales, 450 F.3d 1010, 1021 (9th Cir. 2006) (holding that a conviction for battery under California Penal Code section 242 is not a “crime of violence” within the meaning of 18 U.S.C. 16(a) and thus is not a “crime of domestic violence” within the meaning of 8 U.S.C. 1227(a)(2)(E)(i)); Tokatly v. Ashcroft, 371 F.3d 613, 624 (9th Cir. 2004) (“Applying Taylor, a court may not look beyond the record of conviction to determine whether an alien's crime was one of `violence,' or whether the violence was `domestic' within the meaning of the provision.”).

The Board has routinely deemed some of the identified domestic violence offenses as particularly serious crimes, and many of those decisions have been upheld on appeal. See Pervez v. Holder, 546 F. App'x 157, 159 (4th Cir. 2013) (attempted indecent liberties with a child constituted a particularly serious crime even where “no child was actually harmed”); Lara-Perez v. Holder, 517 F. App'x 255 (5th Cir. 2013) (lewd and lascivious acts with a child constituted particularly serious crime); Uzoka v. Att'y Gen., 489 F. App'x 595 (3d Cir. 2012) (endangering welfare of a child constituted a particularly serious crime); Sosa v. Holder, 457 F. App'x 691 (9th Cir. 2011) (willful infliction of corporal injury on a spouse or cohabitant constituted a particularly serious crime); Hernandez-Vasquez v. Holder, 430 F. App'x 448 (6th Cir. 2011) (child endangerment constituted a particularly serious crime); Matter of Singh, 25 I&N Dec. 670, 670 (BIA 2012) (stalking offense constituted a crime of violence). But the Board's case-by-case assessment of each domestic violence conviction does not cover all of the offenses identified above, and it would not cover domestic violence that does not result in a conviction, as the proposed rule would.

The Attorney General and the Secretary propose classifying domestic violence convictions as particularly serious crimes under section 208(b)(2)(B)(ii) of the INA, 8 U.S.C. 1158(b)(2)(B)(ii), because violent conduct, or conduct creating a substantial risk of violence against the person, generally constitutes a particularly serious offense rendering an alien ineligible for asylum or withholding of removal. Matter of E-A-, 26 I&N Dec. 1, 9 n.3 (BIA 2012) (a “serious” crime involves “a substantial risk of violence and harm to persons”); Matter of Frentescu, 18 I&N Dec. 244, 247 (BIA 1982) (“Crimes against persons are more likely to be categorized as `particularly serious crimes.' ”).

Even if all of the proposed domestic violence offenses would not qualify as particularly serious crimes, convictions for such offenses—as well as engaging in conduct involving domestic violence that does not result in a conviction—should be a basis for ineligibility for asylum under section 208(b)(2)(C) of the INA. Domestic violence is particularly reprehensible because the perpetrator takes advantage of an “especially vulnerable” victim. Carrillo v. Holder, 781 F.3d 1155, 1159 (9th Cir. 2015). Congress enacted grounds for removability for domestic violence offenses because “[w]hen someone is an alien and has already shown a predisposition toward violence against women and children, we should get rid of them the first time.” See 142 Cong. Rec. S4058-02, S4059 (daily ed. Apr. 24, 1996) (statement of Senator Dole on his amendment adding grounds for removability under subsection (E) to 8 U.S.C. 1227(a)(2)). Congress included stalking within the same statutory provision as domestic violence offenses that make an alien subject to removal because it is a “vicious act:” “Of all the women killed in the United States by husbands or boyfriends, 90 percent were stalked before being murdered.” Id. In addition, “[s]talking behavior often leads to violence which may result in the serious injury or death of stalking victims.” Id. Congress also included child abuse within the same statutory provision as domestic violence offenses, noting that child abuse includes a range of serious maltreatment, such as negligence, physical abuse, sexual abuse, emotional abuse, and medical negligence. See id. (statement of Senator Coverdale). “[American] society will not tolerate crimes against women and children.” Id. (statement of Senator Dole on his amendment to add subsection (E) to 8 U.S.C. 1227(a)(2)). The same rationale should render aliens who commit domestic violence in the United States ineligible for the discretionary benefit of asylum. Denying asylum eligibility to an alien who has engaged in domestic violence accords with the aim of “send[ing] a message that we will protect our citizens against [domestic] assaults” committed by aliens. Id.

The portions of the proposed regulation that require a conviction would permit the adjudicator to assess all reliable evidence in order to determine whether that conviction amounts to a domestic violence offense. In limited circumstances, a similar type of analysis already occurs in the removal context. Although the ground of removability at 8 U.S.C. 1227(a)(2)(E)(ii)—which applies to individuals who violate certain portions of a protective order—does not require a criminal conviction, it does require a judicial order. See Garcia-Hernandez v. Boente, 847 F.3d 869, 872 (7th Cir. 2017) (“The text of [8 U.S.C. 1227(a)(2)](E)(ii) does not depend on a criminal conviction but on what a court `determines' about the alien's conduct.”). That ground of removability requires the immigration judge to consider “the probative and reliable evidence regarding what a State court has determined about the alien's violation [of a protective order].” Matter of Medina-Jimenez, 27 I&N Dec. 399, 401 (BIA 2018). And, under 8 U.S.C. 1227(a)(2)(E)(i), which requires a conviction, the immigration judge may still apply a circumstance-specific approach to determine whether the “domestic relationship component” of that removability ground is met. Hernandez-Zavala v. Lynch, 806 F.3d 259, 266-67 (4th Cir. 2015); Matter of Estrada, 26 I&N Dec. 749, 752-53 (BIA 2016) (“[T]he circumstance-specific approach is properly applied in analyzing the domestic nature of a conviction to determine if it is for a crime of domestic violence.”). Because some states may not have separate offenses for the different types of conduct recognized in federal law as domestic violence offenses, relying on such a factual inquiry would “clos[e] the . . . loopholes” where aliens might otherwise escape the immigration consequences due to the vagaries of states' laws. 142 Cong. Rec. S4058-02, S4059 (statement of Senator Dole).

For similar reasons, the portions of the proposed rule at 8 CFR 208.13(c)(6)(vii) and 1208.13(c)(6)(vii), which would not require a conviction to trigger ineligibility, allow the adjudicator to consider what conduct the alien engaged in to determine if the conduct amounts to a covered act of battery or extreme cruelty. There is precedent for such a conduct-specific inquiry in the asylum statute, see INA 208(b)(2)(A)(i), 8 U.S.C. 1158(b)(2)(A)(i), as well as in the removability context, see INA 237(a)(1)(E), 8 U.S.C. 1227(a)(1)(E); see also Meng v. Holder, 770 F.3d 1071, 1076 (2d Cir. 2014) (reviewing the record evidence to determine whether it supported the agency's finding that the applicant's conduct triggered section 1158(b)(2)(A)(i)'s persecutor bar); Santiago-Rodriguez v. Holder, 657 F.3d 820, 829 (9th Cir. 2011) (explaining that a factual admission may be sufficient to satisfy the Government's burden of demonstrating removability under section 1227(a)(1)(E)(i)). Moreover, this conduct-specific inquiry is materially similar to the inquiry already undertaken in situations in which an alien seeks to obtain immigration benefits based on domestic violence actions that do not necessarily result in a conviction. See, e.g., 8 U.S.C. 1229b(b)(2)(A); 8 CFR 204.2(c)(1)(i)(E), (c)(1)(vi), (c)(2)(iv), (e)(1)(i)(E), (e)(1)(vi), and (e)(2)(iv).

Finally, the proposed regulation would exempt from the ineligibility bar aliens who have been battered or subjected to extreme cruelty and who were not the primary perpetrators of violence in their relationships. These aliens are generally described in section 237(a)(7)(A) of the INA, 8 U.S.C. 1227(a)(7)(A), which provides a waiver of the domestic violence and stalking removability ground when it is determined that the alien (1) was acting in self-defense; (2) was found to have violated a protection order intended to protect the alien; or (3) committed, was arrested for, was convicted of, or pled guilty to committing a crime that did not result in serious bodily injury and where there was a connection between the crime and the alien's having been battered or subjected to extreme cruelty. Although section 237(a)(7)(A) of the INA, 8 U.S.C. 1227(a)(7)(A), excepts such aliens from removability only if they are granted a discretionary waiver, the proposed rule would except all aliens who satisfy the above criteria from the proposed asylum bar. Asylum officers or immigration judges could thus make factual determinations regarding whether an alien fit into this category, making the exception more administrable and uniform in the asylum context. The Departments believe that this exception would provide important protections for domestic violence victims.

The proposed regulation would also make certain misdemeanor offenses bars to asylum based on the authority to create new grounds for ineligibility in section 208(b)(2)(C) of the INA, 8 U.S.C. 1158(b)(2)(C). Other provisions of the INA render aliens ineligible for other benefits based on convictions for certain misdemeanors. See, e.g., INA 244(c)(2)(B)(i), 8 U.S.C. 1254a(c)(2)(B)(i) (barring aliens from eligibility for temporary protected status if they have been convicted of two or more misdemeanors in the United States). The proposed rule would designate offenses involving the use of fraudulent documents, the receipt of public benefits under false pretenses, or the possession or trafficking of drugs as disqualifying for purposes of asylum, even if such offenses are misdemeanors rather than felonies. The proposed regulation would define a misdemeanor in this context as a crime defined as a misdemeanor by the jurisdiction of conviction, or that involves a potential penalty of one year or less in prison. Convictions for such misdemeanor offenses should be disqualifying because these offenses inherently undermine public safety or Government integrity.

The Departments also seek public comment on whether (and, if so, how) to differentiate among misdemeanor convictions that should warrant designation as grounds for ineligibility for asylum. Are there any additional misdemeanor convictions that should be bars to asylum eligibility? Conversely, should any of the below proposed misdemeanor bars be eliminated?

The Departments propose to make aliens ineligible for asylum when they are convicted of a federal, state, tribal, or local misdemeanor for the possession or use, without lawful authority, of an identification document, authentication feature, or false identification document as defined in 18 U.S.C. 1028(d). Aliens convicted of falsifying passports or other identity documents where the term of imprisonment is at least a year are already ineligible for asylum (unless the conduct was a first-time offense for purposes of aiding a specified family member) because such conduct constitutes an aggravated felony under 8 U.S.C. 1101(a)(43)(P). Other felonies relating to fraudulent document offenses would be encompassed within the proposed eligibility bar for felony convictions.

The Attorney General and the Secretary believe that fraudulent document offenses pose such a significant affront to government integrity that even misdemeanor fraudulent document offenses should disqualify aliens from eligibility for asylum. Proper identity documentation is critical in the immigration context. See Noriega-Perez v. United States, 179 F.3d 1166, 1173-74 (9th Cir. 1999). Furthermore, as Congress acknowledged when it passed the REAL ID Act of 2005, Public Law 109-13, preserving the integrity of identity documents is critical for general national security and public safety reasons. The United States has taken concrete steps to protect all Government-issued identification documents by making the process to obtain identification documents more rigorous. See, e.g., H.R. Rep. No. 109-72, at 179 (2005) (Conf. Rep.) (explaining that the REAL ID Act was passed in part to “correct the chronic weakness among many of the states in the verification of identity” for the purpose of issuing Government identification documents).

The use of fraudulent documents, especially involving the appropriation of someone else's identity, so strongly undermines government integrity that it would be inappropriate to allow an individual convicted of such an offense to obtain the discretionary benefit of asylum.

Despite the concerns articulated above, the proposed rule would provide an exception for the bar to asylum based on convictions for use or misuse of identification documents if the alien can show that the document was presented before boarding a common carrier for the purpose of coming to the United States, that the document relates to the alien's eligibility to enter the United States, that the alien used the document to depart a country in which the alien has claimed a fear of persecution, and that the alien claimed a fear of persecution without delay upon presenting himself or herself to an immigration officer upon arrival at a United States port of entry. This exception is consistent with distinctions regarding certain document-related offenses made in Matter of Pula, 19 I&N Dec. at 474-75, existing statutes, see INA 274C(a)(6) and (d)(7), 8 U.S.C. 1324c(a)(6) and (d)(7), and existing regulations, see 8 CFR 270.2(j) and 1270.2(j); see also Matter of Kasinga, 21 I&N Dec. 357, 368 (BIA 1996) (use of fraudulent passport to come to the United States was not a significant adverse factor where, upon arrival, applicant told the immigration inspector the truth). Other than this exception, aliens seeking to enter, remain, obtain employment, or obtain benefits and services who are convicted of using false or fraudulent documents should not be eligible for asylum.

Many aliens are legally entitled to receive certain categories of federal public benefits. 8 U.S.C. 1611, 1641. The unlawful receipt of public benefits, however, burdens taxpayers and drains a system intended to assist lawful beneficiaries. The inherently pernicious nature of such conduct has previously led the Government to prioritize enforcement of the immigration laws against such offenders, see Enhancing Public Safety in the Interior of the United States, Exec. Order No. 13768, 82 FR 8799 (Jan. 25, 2017), and this pernicious conduct warrants the use of the Attorney General and the Secretary's authority to bar convicted individuals from receiving the discretionary benefit of asylum.8

Relying on the authority in section 208(b)(2)(C) of the INA, 8 U.S.C. 1158(b)(2)(C), the Departments propose to make aliens ineligible for asylum when they are convicted of a federal, state, tribal, or local misdemeanor involving controlled-substances offenses. Specifically, the Departments propose that a conviction for possession or trafficking of a controlled substance or controlled-substance paraphernalia, other than a single offense involving possession for one's own use of 30 grams or less of marijuana, should disqualify an alien from eligibility for asylum.

Aliens who violate controlled substance laws may be removable, see INA 212(a)(2)(A)(i)(II), 237(a)(2)(B)(i), 8 U.S.C. 1182(a)(2)(A)(i)(II), 1227(a)(2)(B)(i), and they would already be barred from receiving asylum to the extent a controlled-substance offense constitutes an aggravated felony, see INA 208(b)(2)(B)(i), 8 U.S.C. 1158(b)(2)(B)(i); see also INA 101(a)(43)(B), 8 U.S.C. 1101(a)(43)(B); United States v. Valdivia-Flores, 876 F.3d 1201, 1206-07 (9th Cir. 2017) (controlled-substances offenses are aggravated felonies under the INA if they meet the definition of trafficking or involve state analogues to federal trafficking offenses). Furthermore, in cases that the courts of appeals have often upheld, the Board has concluded that various controlled-substances offenses can constitute particularly serious crimes even if they do not rise to the level of aggravated felonies. See, e.g., Herrera-Davila v. Sessions, 725 F. App'x 589, 590 (9th Cir. 2018) (the Board and immigration judge did not err in determining that an immigrant's conviction for drug possession constituted a particularly serious crime for both asylum and withholding of removal); Vaskovska v. Lynch, 655 F. App'x 880, 884 (2d Cir. 2016) (the Board did not err in determining that an alien's conviction for drug possession was “a particularly serious crime rendering her ineligible for asylum and withholding of removal”); Bertrand v. Holder, 448 F. App'x 744, 745 (9th Cir. 2011) (the Board did not err in determining that an alien's conviction for selling cannabis constituted a particularly serious crime for purposes of both asylum and withholding of removal). Additionally, drug paraphernalia possession can include certain equipment associated with the use, manufacture, packaging, or sale of illegal drugs. See, e.g., 21 U.S.C. 863(d). Under the proposed eligibility bar for felonies, all felony convictions relating to controlled substances would become a basis for ineligibility for asylum.

The Departments further propose to implement a new bar for asylum to include convictions for misdemeanors involving the trafficking or possession of controlled substances. Both possessors and traffickers of controlled substances pose a direct threat to the public health and safety interests of the United States, and they should not be entitled to the benefit of asylum. The harmful effects of controlled substance offenses have been recognized consistently by policymakers and courts. “[F]ar more people die from the misuse of opioids in the United States each year than from road traffic accidents or violence.” United Nations Office on Drugs and Crime, World Drug Report: Executive Summary, Conclusions, and Policy Implications 10 (2017). As Attorney General Ashcroft previously recognized in an immigration opinion, “[t]he harmful effect to society from drug offenses has consistently been recognized by Congress in the clear distinctions and disparate statutory treatment it has drawn between drug offenses and other crimes.” Matter of Y-L-, 23 I&N Dec. 270, 275 (A.G. 2002). He concluded that the “unfortunate situation” of drug abuse and related crime “has reached epidemic proportions and . . . tears the very fabric of American society.” Id. The federal courts have agreed that drug offenses are serious, and have noted that “immigration laws clearly reflect strong congressional policy against lenient treatment of drug offenders.” Ayala-Chavez v. U.S. INS, 944 F.2d 638 (9th Cir. 1991) (quoting Blackwood v. INS, 803 F.2d 1165, 1167 (11th Cir. 1988)); see also Hazzard v. INS, 951 F.2d 435, 438 (1st Cir. 1991); cf. Mason v. Brooks, 862 F.2d 190, 194 (9th Cir. 1988) (“Congress has forcefully expressed our national policy against persons who possess controlled substances by enacting laws . . . to exclude them from the United States if they are aliens.”).

For these reasons, the proposed bar on asylum eligibility is consistent with the INA's current treatment of controlled-substance offenses. Nevertheless, the Departments also propose a limited exception to the proposed bar for convictions involving a single offense involving possession for one's own use of 30 grams or less of marijuana. That exception would be consistent with an existing exception in the removability context: One who is convicted of a single offense of simple possession of marijuana is not automatically removable under the INA. See INA 237(a)(2)(B)(i), 8 U.S.C. 1227(a)(2)(B)(i). An alien with the same conviction would be inadmissible, but has a statutory right to request a waiver, which the Attorney General or the Secretary may grant in his or her discretion. See INA 212(a)(2)(A)(i)(II), (h), 8 U.S.C. 1182(a)(2)(A)(i)(II), (h); 8 CFR 212.7(d) and 1212.7(d); see also INA 103(a), 8 U.S.C. 1103(a).

The Departments seek public comment on how to differentiate among controlled substance offenses. Are there offenses that are currently designated as a controlled substance offense in one or more relevant jurisdictions in the United States that should not be categorical bars to asylum eligibility? In addition to seeking public comment on whether this proposed definition is over-inclusive, the Departments seek comment on whether it might be under-inclusive: Are there crimes that would not fall under this definition that should be made categorical bars?

The proposed regulations governing ineligibility for asylum would also set forth criteria for determining whether a vacated, expunged, or modified conviction or sentence should be recognized for purposes of determining whether an alien is eligible for asylum. The proposed rule would apply the same set of principles to federal, state, tribal, or local convictions that are relevant to the eligibility bars described above. The rule would not apply to convictions that exist prior to the effective date of the proposed regulation. For convictions or sentences imposed thereafter, the proposed rule would provide that (1) vacated or expunged convictions, or modified convictions or sentences, remain valid for purposes of ascertaining eligibility for asylum if courts took such action for rehabilitative or immigration purposes; (2) an immigration judge or other adjudicator may look to evidence other than the order itself to determine whether the order was issued for rehabilitative or immigration purposes; (3) the alien bears the burden of establishing that the vacatur, expungement, or sentence modification was not for rehabilitative or immigration purposes; (4) the alien must further establish that the court had jurisdiction and authority to alter the relevant order; and (5) there exists a rebuttable presumption against the effectiveness, for immigration purposes, of the order vacating, expunging, or modifying a conviction or sentence if either (i) the order was entered after the initiation of any removal proceeding; or (ii) the alien moved for the order more than one year after the date of the original order of conviction or sentencing. The rule would thus ensure that aliens do not have their convictions vacated or modified for purported rehabilitative purposes that are, in fact, for immigration purposes.

The authority of the Attorney General and the Secretary to promulgate this proposed rule derives from sections 208(b)(2)(B)(ii) and (C) of the INA, 8 U.S.C. 1158(b)(2)(B)(ii) and (C). Prescribing the effect to be given to vacated, expunged, or modified convictions or sentences is an ancillary aspect of prescribing which criminal convictions should constitute “particularly serious crimes” for purposes of asylum ineligibility, as well as prescribing additional limitations or conditions on asylum eligibility. Additionally, the Attorney General possesses general authority under section 103(g)(2) of the INA, 8 U.S.C. 1103(g)(2), to “establish such regulations . . . as the Attorney General determines to be necessary for carrying out this section.” See Tamenut, 521 F.3d at 1004 (describing section 1103(g)(2) as “a general grant of regulatory authority”).9 Similarly, Congress has conferred upon the Secretary the authority to “establish such regulations . . . as he deems necessary for carrying out his authority under the provisions of [the INA].” INA 103(a)(1), (3), 8 U.S.C. 1103(a)(1), (3).

First, regarding the immigration effect of expungements, vacaturs, or sentence modifications, the rule would codify the principle set forth in Matter of Thomas and Thompson, 27 I&N Dec. 674 (A.G. 2019), that, if the underlying reason for the vacatur, expungement, or modification was for “rehabilitation or immigration hardship,” the conviction remains effective for immigration purposes. Id. at 680; see also id. (distinguishing between convictions vacated on the basis of a procedural or substantive defect in the underlying proceeding and those vacated because of post-conviction events, such as rehabilitation or immigration hardships); Matter of Pickering, 23 I&N Dec. 621 (BIA 2003) (finding that a conviction remains valid for immigration purposes if the conviction is vacated for reasons unrelated to the merits of the underlying criminal proceedings), rev'd on other grounds by Pickering v. Gonzales, 465 F.3d 263, 267-70 (6th Cir. 2006).

Courts of appeals have repeatedly accepted this principle. The Second Circuit deemed it “reasonable” for the Board to conclude in Pickering that convictions vacated for rehabilitative reasons are still effective for purposes of immigration consequences. Saleh v. Gonzales, 495 F.3d 17, 24 (2d Cir. 2007). That interpretation is “entirely consistent with Congress's intent in enacting the 1996 amendments to broaden the definition of conviction and advances the two purposes earlier identified by the Board: It focuses on the original attachment of guilt (which only a vacatur based on some procedural or substantive defect would call into question) and imposes uniformity on the enforcement of immigration laws.” Id.; see also Pinho v. Gonzales, 432 F.3d 193, 215 (3d Cir. 2005) (applying Pickering to conclude that a conviction was vacated “based on a defect in the underlying criminal proceedings,” not for rehabilitative or immigration purposes); cf. Dickerson v. New Banner Inst., Inc., 460 U.S. 103, 120 (1983) (accepting that Congress need not “be bound by post-conviction state actions . . . that vary widely from State to State and that provide less than positive assurance that the person in question no longer poses an unacceptable risk of dangerousness”).

For similar reasons, the rule would provide that court orders modifying criminal sentences for rehabilitative purposes should also have no effect on the alien's eligibility for asylum. See Matter of Thomas and Thompson, 27 I&N Dec. at 680 (explaining that “the Pickering test should apply to state-court orders that modify, clarify, or otherwise alter the term of imprisonment or sentence associated with a state-court conviction”).

Second, to avoid gamesmanship and manipulation in the drafting of orders vacating a conviction or modifying a criminal sentence, the proposed regulations would allow an adjudicator to look beyond the face of the order to determine whether it was issued for rehabilitative or immigration purposes and to determine whether the other requirements of proposed 8 CFR 208.13(c)(7)(v) and 1208.13(c)(7)(v) have been met, notwithstanding the putative basis of the order on its face. This rule is largely consistent with existing precedent. See Rodriguez v. U.S. Att'y Gen., 844 F.3d 392, 396-97 (3d Cir. 2016) (applying this approach and looking to court records absent a clear explanation for the basis of the order in the order itself); see also Cruz v. Att'y Gen., 452 F.3d 240, 244, 248 (3d Cir. 2006) (holding that the Board could reasonably determine that a conviction was vacated to avoid immigration consequences where a state prosecutor's letter stipulating the terms of a settlement agreement explicitly stated that the petitioner's scheduled deportation was a reason for the state's support for vacating the conviction).

Third, the proposed rule would clarify that the alien bears the burden of establishing that the vacatur, expungement, or sentence modification was not for rehabilitative or immigration purposes. Therefore, if the record is inconclusive based on a standard of preponderance of the evidence, the order should not be given effect for immigration purposes. The burden of proof is on the alien because the INA places the overall burden to establish asylum eligibility on the alien. See INA 208(b)(1)(B)(i), 8 U.S.C. 1158(b)(1)(B)(i); Marikasi v. Lynch, 840 F.3d 281, 287 (6th Cir. 2016). Where there is evidence that “one or more of the grounds for mandatory denial of the application for relief may apply,” the applicant bears the burden of establishing that the bar at issue does not apply. 8 CFR 1240.8(d). Consistent with this principle, in an analogous context, the Eighth Circuit has held that, because the INA places the burden of proof on the alien to establish eligibility for cancellation of removal, a form of discretionary relief, the alien bears the burden to prove that he has no disqualifying convictions, including the burden to show that the vacatur of any disqualifying conviction was not for rehabilitative purposes. Andrade-Zamora v. Lynch, 814 F.3d 945, 949 (8th Cir. 2016).10 This allocation of the burden of proof makes sense because, as the Board and federal courts have noted, an alien is in the “best position” to present evidence on the issue. Id. at 950. The alien “was a direct party to the criminal proceeding leading to the vacation of his conviction and is therefore in the best position to know why the conviction was vacated and to offer evidence related to the record of conviction.” Matter of Chavez-Martinez, 24 I&N Dec. 272, 274 (BIA 2007); see also Rumierz v. Gonzales, 456 F.3d 31, 39 (1st Cir. 2006) (outlining several other reasons that placing the burden on the alien is rational, such as similar burden allocations in the context of criminal law and habeas petitions).

Fourth, the rule would provide that the alien must establish that the court issuing an order vacating or expunging a conviction or modifying a sentence had jurisdiction and authority to do so. This requirement would be consistent with Board precedent, which provides that facially valid orders can be disregarded based on a lack of jurisdiction. See, e.g., Matter of F-, 8 I&N Dec. 251 (BIA 1959) (“[T]he presumption of regularity and of jurisdiction [of a state court order] may be overcome by extrinsic evidence or by the record itself.”); cf. Adam v. Saenger, 303 U.S. 59, 62 (1938) (“If it appears on its face to be a record of a court of general jurisdiction, such jurisdiction over the cause and the parties is to be presumed unless disproved by extrinsic evidence, or by the record itself. . . . But in a suit upon the judgment of another state the jurisdiction of the court which rendered it is open to judicial inquiry . . . and when the matter of fact or law on which jurisdiction depends was not litigated in the original suit it is a matter to be adjudicated in the suit founded upon the judgment.” (citations omitted)). In short, an order purporting to vacate, expunge, or otherwise modify a conviction or sentence is inoperative for purposes of immigration law if the state court lacked jurisdiction over the subject matter or the parties to the action.

Jurisdictional defects in court orders might arise in a number of ways. For example, in United States v. Garza-Mendez, 735 F.3d 1284 (11th Cir. 2013), a criminal sentencing case, the Eleventh Circuit refused to recognize a clarification order issued by a state judge after the sentencing judge had ordered the defendant to serve 12 months of confinement. The Eleventh Circuit rejected the “subjective, interpretive clarification order,” noting that it was obtained from a different judge, long after entry of the original sentence, for the purpose of preventing enhancement of the defendant's sentence for unlawful reentry in federal court. Id. at 1289; cf. Herrera v. U.S. Att'y Gen., 811 F.3d 1298, 1299-1301 (11th Cir. 2016) (affirming a Board decision declining to give effect to orders clarifying that defendants were never sentenced to terms of confinement when the original sentencing orders clearly stated to the contrary). A jurisdictional defect could also arise where state law limits the court's authority to grant post-conviction relief in certain ways, such as by imposing a time limitation. See Matter of Estrada, 26 I&N Dec. at 756 (noting that section 17-10-1(f) of the Georgia Code Annotated imposes strict time limits with respect to a sentencing court's ability to change or “modify” a sentence).

Finally, the proposed rule creates a rebuttable presumption that the order vacating or expunging the conviction or modifying the sentence was issued for immigration purposes if either (1) the order was entered after the initiation of any proceeding to remove the alien from the United States; or (2) the alien moved for the order more than one year after the date of the original order of conviction or sentencing.

Precedents establish that the timing of such a process is relevant to whether the resulting order should be recognized for immigration purposes. The initiation of such a process after removal proceedings have commenced naturally raises an inference that the resulting order was issued for immigration or rehabilitative purposes. For instance, in Andrade-Zamora, the Eighth Circuit refused to credit a state court's vacatur of a conviction when the vacatur occurred two weeks after the Government commenced removal proceedings based on the conviction, and where the state court also modified the alien's sentence for a different conviction in an apparent attempt to fit the conviction within an exception to a criminal ground of removability. 814 F.3d at 949. The court affirmed the Board's refusal to recognize the vacatur and modification, reasoning: “The timing and effect of the order . . . raise an inference the state court did not vacate the conviction on a substantive or procedural ground, but rather to avoid the immigration consequences of the conviction.” Id. at 949-50.

Further, the rule would create a rebuttable presumption providing that if more than a year has passed between the original conviction and the alien's effort to seek a subsequent vacatur or expungement of a conviction, or the modification of sentence, the immigration adjudicator should weigh that fact against recognizing the vacatur or modification. It is reasonable to conclude that an alien who has a meritorious challenge to a criminal conviction based on a procedural or substantive defect is more likely to seek post-conviction relief sooner than an alien who is seeking relief on rehabilitative grounds, and who might delay such a challenge until DHS commences immigration proceedings or attempts to remove the alien. See Rumierz, 456 F.3d at 38 (affirming the Board's refusal to recognize a vacatur and the Board's reasoning that “Rumierz could easily have sought to vacate the January 1994 Vermont conviction and have presented the vacated conviction to the [Board] in the six years before the [Board's] 2000 order”). This rule promotes finality in immigration proceedings by encouraging an alien to act diligently if there is a legitimate basis to challenge a conviction or sentence.

The proposed rule would remove the automatic review of a discretionary denial of an alien's asylum application by removing and reserving paragraph (e) in 8 CFR 208.16 and 1208.16. The present regulation provides that the denial of asylum shall be reconsidered in the event that an applicant is denied asylum solely in the exercise of discretion, and the applicant is subsequently granted withholding of deportation or removal under this section, thereby effectively precluding admission of the applicant's spouse or minor children following to join him or her. Factors to be considered include the reasons for the denial and reasonable alternatives available to the applicant such as reunification with his or her spouse or minor children in a third country. This provision, however, has proved confusing, inefficient, and unnecessary.

The courts of appeals have expressed ongoing confusion related to this provision. For example, the regulation states that when an asylum application is denied in the exercise of discretion, but withholding of removal is granted, “the denial of asylum shall be reconsidered,” but the regulation does not say who shall reconsider the denial, when the reconsideration shall occur, or how the reconsideration is to be initiated. See Shantu v. Lynch, 654 F. App'x 608, 613-14 (4th Cir. 2016) (discussing these ambiguities); see also Huang v. INS, 436 F.3d 89, 93 (2d Cir. 2006). These ambiguities have not been “definitively resolved,” Shantu, 654 F. App'x at 614, and continued litigation on these questions would be an ongoing burden for applicants, the immigration system, and courts.

Further, mandating that the decision maker reevaluate the very issue just decided is an inefficient practice that, in the view of the Departments, grants insufficient deference to the original fact finding and exercise of discretion. The regulation also appears unnecessary given that other regulations provide multiple avenues to challenge or otherwise seek to change a discretionary denial of asylum coupled with a grant of withholding of removal.11 First, an immigration judge may reconsider that decision upon his or her own motion. 8 CFR 1003.23(b)(1). Second, the alien may file a motion to reconsider. Id. Third, the alien may also appeal the decision to the Board. 8 CFR 1003.38. The existence of at least three alternative processes for altering a discretionary denial of asylum obviates the need for a mandatory fourth. Moreover, the objective of facilitating family reunification, see Huang, 436 F.3d at 93 (describing 8 CFR 1208.16(e) as “manifestly a law designed to further family reunification”), can be fulfilled even in the absence of the existing reconsideration provision because the immigration judge (or other decision maker) already considers these factors when making a discretionary decision in the first instance, see Fisenko v. Lynch, 826 F.3d 287, 292 (6th Cir. 2016) (stating that “a `crucial factor in weighing asylum as a discretionary matter' is family reunification” (internal quotation marks and citation omitted)).

The Departments have reviewed this proposed rule in accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.)) and have determined that this rule will not have a significant economic impact on a substantial number of small entities. The rule would not regulate “small entities” as that term is defined in 5 U.S.C. 601(6). Only individuals, rather than entities, are eligible to apply for asylum, and only individuals are eligible to apply for asylum or are otherwise placed in immigration proceedings.

This proposed rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year, and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995. See 2 U.S.C. 1532(a).

The Office of Information and Regulatory Affairs has determined that this proposed rule is not a major rule as defined by section 804 of the Congressional Review Act. 5 U.S.C. 804(2). This rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.

The Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), has designated this rule a “significant regulatory action” under section 3(f)(4) of Executive Order 12866, but not an economically significant regulatory action. Accordingly, the rule has been submitted to OMB for review. The Departments certify that this rule has been drafted in accordance with the principles of Executive Order 12866, section 1(b), Executive Order 13563, and Executive Order 13771.

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 using the best available methods to quantify costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Similarly, Executive Order 13771 requires agencies to manage both the public and private costs of regulatory actions.

The proposed regulation would provide seven additional mandatory bars to eligibility for asylum pursuant to the Attorney General and the Secretary's authorities under sections 208(b)(2)(B)(ii), 208(b)(2)(C), and 208(d)(5) of the INA.12 The proposed rule would add bars on eligibility for aliens who commit certain offenses in the United States after entering the country. Those bars would apply to aliens who are convicted of (1) a felony under federal or state law; (2) an offense under 8 U.S.C. 1324(a)(1)(A) or 1324(a)(1)(2) (Alien Smuggling or Harboring); (3) an offense under 8 U.S.C. 1326 (Illegal Reentry); (4) a federal, state, tribal, or local crime involving criminal street gang activity; (5) certain federal, state, tribal, or local offenses concerning the operation of a motor vehicle while under the influence of an intoxicant; (6) a federal, state, tribal, or local domestic violence offense, or who are found by an adjudicator to have engaged in acts of battery or extreme cruelty in a domestic context, even if no conviction resulted; and (7) certain misdemeanors under federal or state law for offenses related to false identification; the unlawful receipt of public benefits from a federal, state, tribal, or local entity; or the possession or trafficking of a controlled substance or controlled-substance paraphernalia.

The seven proposed bars would be in addition to the existing mandatory bars relating to the persecution of others, convictions for particularly serious crimes, commission of serious nonpolitical crimes, security threats, terrorist activity, and firm resettlement in another country that are currently contained in the INA and its implementing regulations. See INA 208(b)(2); 8 CFR 208.13 and 1208.13. Under the current statutory and regulatory framework, asylum officers and immigration judges consider the applicability of mandatory bars to the relief of asylum in every proceeding involving an alien who has submitted an I-589 application for asylum. Although the proposed regulation would expand the mandatory bars to asylum, the proposed regulation does not change the nature or scope of the role of an immigration judge or an asylum officer during proceedings for consideration of asylum applications. Immigration judges and asylum officers are already trained to consider both an alien's previous conduct and criminal record to determine whether any immigration consequences result, and the proposed rule does not propose any adjudications that are more challenging than those that are already conducted. For example, immigration judges already consider the documentation of an alien's criminal record that is filed by the alien, the alien's representative, or the DHS representative in order to determine whether one of the mandatory bars applies and whether the alien warrants asylum as a matter of discretion. Because the proposed bars all relate to an alien's criminal convictions or other criminal conduct, adjudicators will conduct the same analysis to determine the applicability of the bars proposed by the rule.13 The Departments do not expect the proposed additional mandatory bars to increase the adjudication time for immigration court proceedings involving asylum applications.

The Departments note that the proposed expansion of the mandatory bars for asylum would likely result in fewer asylum grants annually; 14 however, because asylum applications are inherently fact-specific, and because there may be multiple bases for denying an asylum application, neither the Department of Justice (“DOJ”) nor DHS can quantify precisely the expected decrease. An alien who would be barred from asylum as a result of the proposed rule may still be eligible to apply for the protection of withholding of removal under section 241(b)(3) of the INA or withholding of removal or deferral of removal under regulations implementing U.S. obligations under Article 3 of the CAT. See INA 241(b)(3), 8 U.S.C. 1231(b)(3); 8 CFR 208.16, 208.17 through 18, 1208.16, and 1208.17 through 18. For those aliens barred from asylum under this rule who would otherwise be positively adjudicated for asylum, it is possible they would qualify for withholding (provided a bar to withholding did not apply separate and apart from this rule).15 To the extent there are any impacts of this rule, they would almost exclusively fall on that population.16

The full extent of the impacts on this population is unclear and would depend on the specific circumstances and personal characteristics of each alien, and neither DHS nor DOJ collects such data at such a level of granularity. Both asylum applicants and those who receive withholding of removal may obtain work authorization in the United States. Although asylees may apply for lawful permanent resident status and later citizenship, they are not required to do so, and some do not. Further, although asylees may bring certain family members to the United States, not all asylees have family members or family members that wish to leave their home countries. Moreover, family members of aliens granted withholding of removal may have valid asylum claims in their own right, which would provide them with a potential path to the United States as well. The only clear impact is that aliens granted withholding of removal generally may not travel outside the United States without executing their underlying order of removal and, thus, may not be allowed to return to the United States; however, even in that situation—depending on the destination of their travel—they may have a prima facie case for another grant of withholding of removal should they attempt to reenter. In short, there is no precise quantification available for the impact, if any, of this rule beyond the general notion that it will likely result in fewer grants of asylum on the whole.

Applications for withholding of removal typically require a similar amount of in-court time to complete as an asylum application due to a similar nucleus of facts. 8 CFR 1208.3(b) (an asylum application is deemed to be an application for withholding of removal). In addition, this proposed rule would not affect the eligibility of applicants for the employment authorization documents available to recipients of those protections and during the pendency of the consideration of the application in accordance with the current regulations and agency procedures. See 8 CFR 274a.12(c)(8) and (18), 208.7, and 1208.7.

The proposed rule would also remove the provision at 8 CFR 208.16(e) and 1208.16(e) regarding reconsideration of discretionary denials of asylum. This change would have no impact on DHS adjudicative operations because DHS does not adjudicate withholding requests. DOJ estimates that immigration judges nationwide must apply 8 CFR 1208.16(e) in approximately 800 cases per year on average.17 The removal of the requirement to reconsider a discretionary denial would increase immigration court efficiencies and reduce any cost from the increased adjudication time by no longer requiring a second review of the same application by the same immigration judge. This impact, however, would likely be minor because of the small number of affected cases. Accordingly, DOJ assesses that removal of paragraphs 8 CFR 208.16(e) and 1208.16(e) would not increase any EOIR costs or operations, and would, if anything, result in a small increase in efficiency. The Departments note that removal of 8 CFR 208.16(e) and 1208.16(e) may have a marginal cost for aliens in immigration court proceedings by removing one avenue for an alien who would otherwise be denied asylum as a matter of discretion to be granted that relief. DOJ notes, however, that of the average of 800 aliens situated as such each year during the last ten years, an average of fewer than 150, or 0.4%, of the average 38,000 total asylum completions 18 each year filed an appeal in their case, so the affected population is very small and the overall impact would be nominal at most.19 Moreover, such aliens would retain the ability to file a motion to reconsider in such a situation and, thus, would not actually lose the opportunity for reconsideration of a discretionary denial.

For the reasons explained above, the expected costs of this proposed rule are likely to be de minimis. This proposed rule is accordingly exempt from Executive Order 13771. See Office of Mgmt. & Budget, Guidance Implementing Executive Order 13771, Titled “Reducing Regulation and Controlling Regulatory Costs” (2017).

This rule will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with section 6 of Executive Order 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement.

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

This rule does not propose new or revisions to existing “collection[s] of information” as that term is defined under the Paperwork Reduction Act of 1995, Public Law 104-13, 44 U.S.C. 3501 et seq., and its implementing regulations, 5 CFR part 1320.

Accordingly, for the reasons set forth in the preamble, the Acting Secretary of Homeland Security is proposing to amend 8 CFR part 208 as follows:

Accordingly, for the reasons set forth in the preamble, the Attorney General proposes to amend 8 CFR part 1208 as follows:

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2019-0985; Product Identifier 2019-NM-183-AD” at the beginning of your comments. The FAA specifically invites comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. The FAA will consider all comments received by the closing date and may amend this NPRM based on those comments.

The FAA will post all comments, without change, to https://www.regulations.gov, including any personal information you provide. The FAA will also post a report summarizing each substantive verbal contact the agency receives about this NPRM.

The EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2019-0262, dated October 22, 2019 (“EASA AD 2019-0262”) (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain ATR-GIE Avions de Transport Régional Model ATR42-500 airplanes.

This proposed AD was prompted by a report of interference between bonding braid screws and pitch tab control rods on the ATR final assembly line. The FAA is proposing this AD to address interference between bonding braid screws and pitch tab control rods, which could lead to failure of the rods and tab disconnection, possibly resulting in reduced control of the airplane. See the MCAI for additional background information.

EASA AD 2019-0262 describes procedures for inspecting the bonding braid screws for proper installation, doing a detailed inspection for damage of the pitch tab control rods, and replacing the pitch tab control rods.

This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the State of Design Authority, the FAA has been notified of the unsafe condition described in the MCAI referenced above. The FAA is proposing this AD because the FAA evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2019-0262 described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA initially worked with Airbus and EASA to develop a process to use certain EASA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has since coordinated with other manufacturers and civil aviation authorities (CAAs) to use this process. As a result, EASA AD 2019-0262 will be incorporated by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2019-0262 in its entirety, through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in the EASA AD does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in the EASA AD. Service information specified in EASA AD 2019-0262 that is required for compliance with EASA AD 2019-0262 will be available on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2019-0985 after the FAA final rule is published.

The FAA estimates that this proposed AD affects 3 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

The FAA estimates the following costs to do any necessary on-condition actions that would be required based on the results of any required actions. The FAA has no way of determining the number of aircraft that might need these on-condition actions:

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

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

This proposed AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes and associated appliances to the Director of the System Oversight Division.

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

For the reasons discussed above, I certify this proposed regulation:

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

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

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

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

I. Background

Section 731 of the Dodd-Frank Act 2 amended the CEA 3 by adding section 4s(e), which requires the Commission to adopt rules establishing capital requirements for SDs and MSPs to help ensure their safety and soundness.4 Section 4s(e) applies a bifurcated approach requiring each SD and MSP subject to the capital requirements of a prudential regulator to meet the capital requirements adopted by the applicable prudential regulator, and requiring each SD and MSP that is not subject to the capital requirements of a prudential regulator to meet the capital requirements adopted by the Commission.5 Accordingly, SDs and MSPs that are not banking entities, including nonbank subsidiaries of bank holding companies regulated by the Federal Reserve Board, are subject to the Commission's capital requirements.6 Further, Section 764 of the Dodd-Frank Act provides that the Securities and Exchange Commission (“SEC”) shall prescribe capital and margin requirements for security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”), and Section 4s(e)(3)(D) of the CEA provides that the CFTC, SEC, and prudential regulators shall, to the maximum extent practicable, establish and maintain comparable minimum capital requirements for SDs and MSPs.

In 2011, the Commission proposed capital and financial reporting requirements for SDs and MSPs, and proposed amendments to the capital requirements for FCMs to explicitly address swap and SBS transactions.7 The Commission, however, elected to defer consideration of final capital and financial reporting rules until after the Commission adopted final margin rules for uncleared swaps, which were adopted in 2015.8

In 2016, the Commission re-proposed the capital and financial reporting requirements for SDs and MSPs, and re-proposed amendments to the existing capital requirements for FCMs.9 The Commission drew on existing CFTC, prudential regulator, and SEC capital rules in developing the 2016 Capital Proposal. Specifically, the 2016 Capital Proposal, depending on the characteristics of the registered entity, would permit: (i) SDs to elect a capital requirement that is based on existing bank holding company capital rules adopted by the Federal Reserve Board (the “Bank-Based Capital Approach”); (ii) SDs to elect a capital requirement that is based on the existing CFTC FCM capital rule, the existing SEC broker-dealer (“BD”) capital rule, and the SEC's proposed capital requirements for SBSDs, (the “Net Liquid Assets Capital Approach”); or (iii) SDs that meet defined conditions designed to ensure that they are predominantly engaged in non-financial activities to compute their minimum regulatory capital based upon the firms' tangible net worth (the “Tangible Net Worth Capital Approach”).

The Commission received comments from a broad spectrum of market participants, industry representatives, and other interested parties in response to the 2016 Capital Proposal. The commenters raised several topics in the 2016 Capital Proposal including the use of models by SDs and MSPs for computing market risk and credit risk capital charges, the need for the harmonization of the Commission's rules and requirements with the rules and the requirements of the prudential regulators and the SEC, and a desire for an additional opportunity to comment on the 2016 Capital Proposal once the SEC finalized its SBSD and MSBSP capital and financial reporting requirements.

Since the 2016 Capital Proposal was published in the Federal Register, the SEC in 2018 reopened its comment period and solicited further comment on its proposed capital, margin, and segregation requirements for BDs, SBSDs, and MSBSPs.10 The SEC finalized these capital, margin, and segregation requirements in 2019.11 The SEC also finalized its financial reporting requirements for SBSDs and MSBSPs in 2019.12

The Commission has carefully considered the comment letters to the 2016 Capital Proposal and believes it is in the public interest to provide an additional opportunity for comment on the proposed capital and financial reporting rules. The Commission believes that it is particularly appropriate to reopen the comment period in light of the SEC Comment Reopening and the SEC Final Capital Rule, and in recognition that the 2016 Capital Proposal includes significant components of the SEC's SBSD capital rules that were recently adopted as final in the SEC's Final Capital Rule. In addition, the Commission believes the public should have the opportunity to provide comment on the potential economic effects of the 2016 Capital Proposal in light of regulatory and market developments since the Proposal was published. Accordingly, the Commission is reopening the comment period for 75 days and is seeking comment on all aspects of the 2016 Capital Proposal. The Commission also is seeking specific comment on certain aspects of the 2016 Capital Proposal where further information would be particularly helpful to the Commission. In particular, the Commission is seeking comment on potential modifications contemplated in light of previously received comments as discussed herein and the SEC Final Capital Rule, and potential rule language that would modify rule text that was included in the 2016 Capital Proposal. The modified rule language would be included in: Regulation 1.17(c)(5)(iii)(A), (B) and (C)(2); Regulation 23.102(c), (d) and (e); and, Regulation 23.105(d)(3) and (p)(2). Comment letters received by the Commission in response to the 2016 Capital Proposal previously need not be re-submitted as they will continue to be a part of the public comment file for this rulemaking and considered by the Commission.

The Commission renews its request for comment on all aspects of the 2016 Capital Proposal and on the specific topics identified below. Commenters are requested to provide empirical data in support of any arguments and analyses. The Commission notes that comments are of the greatest assistance to rulemaking initiatives when accompanied by supporting data and analysis, and, if appropriate, accompanied by alternative approaches and suggested rule text language.

The Commission also requests comments and data on how the baseline of the economic analyses has changed since the publication of the 2016 Capital Proposal. The swap market activity has experienced significant changes, in part due to the fact that participants in this market are now subject to various new rules. For example, the 2015 uncleared margin rules adopted by the prudential regulators and the Commission, which requires SDs to exchange variation margin, and in many cases initial margin, with financial end users and other SDs against uncleared swap positions, has been phased in for a significant number but not all participants. To comply with these margin rules, these entities in the uncleared swap markets have been exchanging margin. Additionally, as noted above the SEC has finalized capital, margin and segregation requirements for the SBSDs. Moreover, swap market participants also may be subject to other regulatory regimes, including foreign regulatory authorities. The Commission requests comments on how those changes in the baseline would impact the potential benefits and costs of capital requirements.

The 2016 Capital Proposal included proposed minimum capital requirements for SDs and MSPs, and proposed amendments to the minimum capital requirements for FCMs. Proposed Regulation 23.101(a)(1)(i) would require an SD electing the Bank-Based Capital Approach 13 to maintain regulatory capital equal to or in excess of the highest of the following:

(1) Common equity tier 1 capital (“CET1 Capital”) of $20 million; 14

(2) CET1 Capital equal to or greater than 8% of the SD's risk weighted assets; 15

(3) CET1 Capital equal to or greater than 8% of the sum of:

(a) The amount of uncleared swap margin 16 for each uncleared swap position open on the books of the SD, computed on a counterparty by counterparty basis pursuant to the Commission's margin rules for uncleared swap transactions (CFTC Regulation 23.154);

(b) The amount of initial margin that would be required for each uncleared SBS position open on the books of the SD, computed on a counterparty by counterparty basis pursuant to SEC Rule 18a-3(c)(1)(i)(B) (17 CFR 240.18a-3(c)(1)(i)(B)) without regard to any initial margin exemptions or exclusions that the SEC rules may provide to such SBS positions; and

(c) The amount of initial margin required by clearing organizations for cleared proprietary futures, foreign futures, swaps, and SBS positions open on the books of the swap dealer; or,

(4) The amount of capital required by a registered futures association of which the SD is a member.17

Proposed Regulation 23.101(a)(1)(ii) would require an SD electing the Net Liquid Asset Capital Approach to maintain regulatory net capital equal to or in excess of the highest of the following:

(1) $20 million (and for SDs approved to use internal capital models, $100 million of tentative net capital and $20 million of net capital);

(2) Eight percent of the sum of:

(a) The amount of uncleared swap margin for each uncleared swap position open on the books of the SD, computed on a counterparty by counterparty basis pursuant to CFTC Regulation 23.154;

(b) The amount of initial margin that would be required for each uncleared SBS position open on the books of the SD, computed on a counterparty by counterparty basis pursuant to SEC Rule 18a-3(c)(1)(i)(B) (17 CFR 240.18a-3(c)(1)(i)(B)) without regard to any initial margin exemptions or exclusions that the rules of the SEC may provide to such SBS positions;

(c) The amount of “risk margin”, as defined in Regulation 1.17(b)(8), required by a clearing organization for proprietary futures, swaps, and foreign futures positions open on the books of the SD; and

(d) The amount of initial margin required by a clearing organization for proprietary SBS open on the books of the SD; or

(3) The amount of capital required by a registered futures association of which the SD is a member.

The 2016 Capital Proposal also included proposed amendments to the existing capital requirements applicable to FCMs that engage in swap and SBS transactions, and also would be applicable to entities dually-registered with the Commission as SDs and FCMs. The minimum capital requirements for FCMs and entities dually-registered as SDs and FCMs were proposed to be amended to require each entity to maintain adjusted net capital equal to or greater than the highest of the following;

(1) $20 million (and for FCMs, including entities dually-registered as FCM/SDs, approved to use internal capital models, $100 million of net capital and $20 million of adjusted net capital);

(2) The FCMs risk-based capital requirement, computed as 8% of the sum of:

(a) The FCM's or FCM/SD's total “risk margin” 18 requirement for cleared swap, futures and foreign futures positions carried by the FCM or FCM/SD in customer and noncustomer accounts;

(b) The total initial margin that the FCM or FCM/SD is required to post with a clearing agency or broker for cleared SBS positions carried in customer and noncustomer accounts;

(c) The total “uncleared swaps margin”, as defined in Commission Regulation 23.100;

(d) The total initial margin that the FCM or FCM/SD is required to post with a broker or clearing organization for all proprietary cleared swaps positions carried by the FCM or FCM/SD;

(e) The total initial margin computed pursuant to SEC Rule 18a-3(c)(1)(i)(B) (17 CFR 240.18a-3(c)(1)(i)(B)) for all uncleared security-based swap positions carried by the FCM or FCM/SD without regard to any initial margin exemptions or exclusions that the SEC rules may provide to such SBS positions; and,

(f) The total initial margin that the FCM or FCM/SD is required to post with a broker or clearing agency for proprietary cleared SBS;

(3) The amount of adjusted net capital required by a registered futures association of which the FCM is a member; or

(4) For FCMs, including FCMs registered as SDs, that are registered with the SEC as securities brokers and dealers, the amount of net capital required by Rule 15c3-1(a) of the Securities and Exchange Commission (17 CFR 240.15c3-1(a)).

The proposed SD capital requirement would require an SD to maintain regulatory capital equal to or greater than 8% of the initial margin associated with the SD's proprietary cleared and uncleared futures, foreign futures, swap, and SBS positions (i.e., the “risk margin amount”). The proposed minimum capital requirement was drawn from the Commission's experience with the “risk-based” capital requirements currently imposed on FCMs.19 Under the existing FCM “risk-based” capital model, an FCM is required to maintain adjusted net capital equal to or greater than 8% of the aggregate of each customer's and non-customer's initial margin requirements associated with their respective portfolio of futures, foreign futures and cleared swaps positions.20 Accordingly, an FCM's minimum capital requirement increases/decreases as the total initial margin for its customers' and noncustomers' portfolios increases/decreases.21

The SD 8% capital component of the 2016 Capital Proposal also is consistent with the approach adopted by the SEC for BDs and SBSDs. The SEC Final Capital Rule established a minimum net capital requirement for BDs and SBSDs that incorporates a component based upon a percentage of the margin associated with a BD's or SBSD's customer cleared and uncleared SBS positions.22 The SEC Final Capital Rule implemented this financial ratio as a lower percentage, with the possibility of a scalable requirement to be implemented and increased over a number of years, beginning with a 2% requirement, and possibly under SEC orders increasing to a 4% requirement and ultimately to a 8% percent requirement.23

One commenter strongly supported the 2016 Capital Proposal's 8% risk margin amount threshold on a comprehensive basis, noting concern that basing capital requirements on models could be manipulated, and that the 8% floor based on all calculated initial margin was therefore appropriate as a counterbalance to ensure internal modelling does not reduce loss absorbency.24

Several commenters, however, raised concerns with the 8% risk margin amount contained in the Bank-Based Capital Approach and the Net Liquid Asset Capital Approach.25 These commenters generally stated that the 8% risk margin amount was both too high of a percentage and over-inclusive of the various types of business activities engaged in by SDs.26 Several of the commenters also stated that the proposed risk margin amount has a limited relationship to the actual risk of the SD's risk from swaps, SBS, futures, and foreign futures transactions.27 Commenters also generally noted that under the 2016 Capital Proposal the risk margin amount is computed on a counterparty-by-counterparty basis and not on the aggregate of all of the SD's positions across all counterparties, which may overstate the SD's risk by not taking into account offsetting positions across multiple counterparties, including hedging positions.28

A commenter also noted that the risk margin amount did not reflect the actual risk of a SD's proprietary cleared swap, SBS, futures and foreign futures positions as the risk margin amount is required to be computed on a clearing organization-by-clearing organization basis and, therefore, does not recognize hedging and risk-reducing portfolio margin across multiple clearing organizations.29 Commenters further noted that under the Net Liquid Assets Capital Approach requiring net capital to exceed 8% of margin double counts the risks of various positions as these risks are counted once in the market and credit risk charges used to compute net capital and then again in computing the risk margin amount.30

Other commenters took exception to the inclusion of the 8% risk margin amount computation for SDs electing the Bank-Based Capital Approach in proposed Regulation 23.101(a)(1)(i). Commenters noted that the current bank holding company capital rules adopted by the Federal Reserve Board, and incorporated as one of the components of the Commission's proposed minimum capital requirements for SDs electing the Bank-Based Capital Approach, does not include the 8% risk margin amount requirement. One of the commenters stated that the inclusion of the 8% risk margin amount would exaggerate the actual risk of the SD's transactions, and would place the SD at a competitive disadvantage to a SD subject to the capital rules of a prudential regulator, which are not subject to the 8% risk margin amount.31

One commenter suggested that the Commission consider limiting the 8% risk margin amount solely to uncleared swaps subject to the uncleared margin rules 32 and another asked the Commission to reconsider the application of the 8% risk margin threshold to cleared swaps.33

Several commenters also requested that if the Commission were to retain a minimum capital requirement for SDs based upon a percentage of the risk margin amount as defined in the 2016 Capital Proposal, that the Commission adjust the 8% to a lower multiplier, such as 2%, for a period of time to allow the Commission to gather empirical data in order to determine an appropriate level.34

As noted in the 2016 Capital Proposal, capital serves as an overall financial resource for the SD and is intended to cover potential risks that are not adequately covered by other risk management programs (i.e., “residual risk”) including margin on uncleared swaps.35 Therefore, the Proposal expanded the types of financial instruments included in the computation of the risk margin amount to include an SD's futures, foreign futures, swaps, and SBS positions, which is a more expansive list than the SEC imposed on SBSDs, as the Commission believed that it was appropriate for SDs to maintain a minimum level of capital that reflects the extent of the risks and activities posed by the full, broad range of the SD's proprietary positions.36

Commenters, however, have identified significant issues and raised important questions regarding the effect that the 8% risk margin amount may have on driving the minimum requirement and consequentially the funding and business activities of each SD. Therefore, the Commission is seeking further comments on the following areas in an attempt to ensure that the 8% risk margin amount is appropriately calibrated and consistent with the statutory mandate of helping to ensure the safety and soundness of the SDs subject to the Commission's capital requirements, or if another percentage or approach is more appropriate.37 In this regard, the Commission invites comments on all aspects of the proposed risk margin amount, including comments regarding the possible increase or decrease of the risk margin percentage in coordination with the inclusion or exclusion of certain products in order to establish the most optimal capital requirement.

1-a. The Commission requests comment and supporting data on the quantification of the potential minimum capital requirements that would be required of SDs electing the Bank-Based Capital Approach, the Net Liquid Assets Capital Approach, or the Tangible Net Worth Capital Approach as a result of the proposed 8% risk margin amount threshold. How would the amount of potential minimum capital based upon the 8% risk margin requirement compare with the amount of capital currently maintained by entities that are provisionally registered as SDs? How would such amounts compare with the amounts of capital required of SBSDs under the SEC Final Capital Rule? Please provide data in support of comments provided.

1-b. The Commission requests comment on whether the proposed 8% risk margin amount should be modified for SDs electing the Bank-Based Capital Approach, the Net Liquid Assets Capital Approach, or the Tangible Net Worth Capital Approach to a lower percentage requirement, such as 4%. If so, is 4% risk margin properly calibrated to the inherent risk of an SD and the activities that it engages in? If not 4%, what percentage of the risk margin should the Commission consider including in the regulations, and why is the percentage an appropriate percentage properly calibrated to the inherent risk of an SD and the activities that it engages in? Please quantify the difference in the amount of capital that would be required of an SD pursuant to the proposed 8% risk margin amount and 4% or any other suggested lower percentage of risk margin amount. To the extent it is possible to model the impact of different percentages of risk margin on the minimum capital requirements for an actual or hypothetical portfolio of positions, please provide such information. How would the suggested modified risk margin amount percentage be appropriate and consistent with the statutory objective of establishing capital requirements designed to help ensure the safety and soundness of the SD? Are there differences in the products, size and activities between SDs subject to the CFTC's proposed capital rule, SDs subject to the prudential regulators' capital rules, and SBSDs subject to the SEC's capital rule, (such as trading strategies or market share) that lead to practical differences in the CFTC's capital rule? Please provide data and analysis in support of any suggested modified percentage of the risk margin amount.

1-c. The Commission requests comment on whether the proposed 8% risk margin amount should be modified to be harmonized with the approach adopted by the SEC for SBSDs in the SEC Final Capital Rule. Specifically, should the Commission modify the regulation to lower the risk margin amount percentage from 8% to 2%, and further modify the regulation to authorize the Commission by order to increase the risk margin amount percentage in stages from 2% to 4% or less, and from 4% to 8% or less based upon the Commission's future experience with SD capital levels after the implementation of the final regulations? In responding to this question, please address the significant differences in the size, complexity and scope of the swap products and markets as compared to the SBS products and markets.

1-d. The Commission requests comment on whether the types of derivatives positions included in the computation of the risk margin amount threshold for SDs should be modified. Should the Commission exclude any particular asset classes or positions from the computation of the risk margin amount? For example, should the Commission exclude cleared transactions from the risk margin amount? If so, explain why such asset classes or positions should be excluded, how such exclusion is consistent with the statutory objective of the safety and soundness of the SD, and quantify the impact on the proposed minimum capital requirement of excluding such asset classes or positions and the overall risk to the financial system. Should the Commission consider modifying a combination of the percentage of the risk margin amount and the products that are included in the computation? If so, please suggest how the Commission may determine an appropriate balance between products and the risk margin percentage. Please provide data in support of any modified list of asset classes or positions included in the risk margin amount computation and the possible costs and benefits that may result in such a change.

1-e. If the Commission modifies the capital requirements by, for example, lowering the 8% risk margin amount to a lower level or by removing certain transactions from the risk margin amount computation, the Commission believes that this may result in a lower amount of required capital for SDs, which may increase the level of risk at some SDs. The Commission requests comment as to whether lowering the percentage of risk margin to a 4% level, the SEC's 2% level or a different level, or removing transactions from the risk margin amount computation would result in an SD not holding a sufficient level of capital to help ensure its safety and soundness. Specifically, given the size, breadth and complexity of the swaps market, does a 2% or 4% capital level serve the intended goals as established in the CEA? Alternatively, what percentage of risk margin would result in capital levels that were so high that certain current swaps and futures activities of the SD would become uneconomic? How does the capital requirement impact that ability of an SD to service certain types of clients, to provide liquidity to the marketplace, or otherwise impact the efficiency and competitiveness of the swaps market? The Commission further invites comments on the general costs and benefits of modifying the risk margin amount as discussed above. Please provide data with any comment or analysis.

1-f. The Commission requests comment on whether Regulation 23.101 should be modified by removing the minimum capital requirement based upon the 8% of risk margin amount calculation from the Bank-Based Capital Approach and the Net Liquid Assets Capital Approach. If the Commission were to modify Regulation 23.101 to remove the 8% risk margin amount from the Net Liquid Assets Capital Approach, SDs electing that capital approach would be required to maintain net capital equal to or in excess of $20 million and, if approved to use capital models, $100 million of tentative net capital and $20 million of net capital. Does this level of minimum regulatory capital provide adequate assurance that an SD can meet its obligations and is it consistent with the objective of helping to ensure that safety and soundness of the SD?

1-g. The 2016 Capital Proposal did not include a leverage ratio requirement. The Commission requests comment on whether it would be appropriate, at a future date after notice and comment, to revise the capital requirements by adopting a leverage ratio for SDs in lieu of the proposed percentage of the risk margin amount if adopted as final. To assist the Commission in its assessment of this possible future action, the Commission requests comment on the cost, if any, in terms of additional required capital under each of the proposed capital methods and how the adoption of a leverage ratio requirement would affect the efficiency, competitiveness, integrity, safety and soundness, and price discovery of swap markets. Please provide any supporting data with your comment.

The 2016 Capital Proposal included a proposed revision to the FCM net capital requirement to require an FCM (or dually-registered FCM/SD) to include in its minimum capital requirement eight percent of the uncleared swaps margin for uncleared swaps and eight percent of the initial margin for uncleared SBS for which the FCM or FCM/SD was a counterparty, as well as eight percent of the total initial margin that the FCM or FCM/SD was required to post with a broker or clearing organization for all proprietary cleared swaps and proprietary cleared SBS. These proposals were contained at a proposed revised Regulation 1.17(a)(1)(i)(B). The Commission's general rationale for proposing such revisions was that an FCM's or FCM/SD's capital should reflect exposures to all swap counterparties, in order to promote safety and soundness.38

Several commenters focused their comments on the impact on FCMs. Several commenters stated that the proposed inclusion of an FCM's or FCM/SD's proprietary cleared swaps and SBS positions in the 8% risk margin amount would place an unnecessary financial burden on FCMs and would not properly recognize that the same proprietary positions are subject to an existing net capital charge based upon exchange or clearinghouse margin requirements under Regulation 1.17(c)(5)(x).39 One commenter referred specifically to this as duplicative, and argued it would unnecessarily increase the amount of adjusted net capital an FCM would hold for swaps and SBS exposures which could burden smaller SD FCMs which are not BDs and threaten their ability to provide clearing services for swaps.40 This commenter noted that the Commission had noted that such types of FCMs were often ones that may be willing to provide swaps markets in commodities to agricultural firms and smaller commercial end-users, and this commenter suggested that overburdening smaller SD FCMs in this manner could further exacerbate the concentration of clearing among larger FCMs. Considering these comments, specifically that existing net capital charges already apply to proprietary cleared swaps and SBS in Regulation 1.17, and that the Commission also proposed additional net capital market risk charges applicable to swaps and SBS in other parts of Regulation 1.17, the Commission is reconsidering the proposed FCM amendments to Regulation 1.17(a)(1)(i)(B) contained within the 2016 Capital Proposal.

2-a. The Commission requests additional comment on the advisability of deleting the proposed changes to Regulation 1.17(a)(1)(i)(B) to the net capital requirement for all FCMs and dually-registered FCM/SDs, which would leave such section as currently in effect, instead of adopting the changes proposed within the 2016 Capital Proposal. 41 The Commission would rely on net capital charges proposed and applicable to proprietary cleared and uncleared swaps and SBS to reflect the risks to FCMs (and dually-registered FCM/SDs) from swaps and SBS business, without any add-on minimum capital requirement for swap dealing, other than the higher minimum dollar threshold of $20 million, which the Commission still would retain from the 2016 Capital Proposal. If the Commission adopts this change, the Commission believes that this would lower the amount of required capital under this Proposal; however, FCMs would still be required to deduct market risk charges for cleared and uncleared proprietary positions in computing their net capital and adjusted net capital, which is intended to provide a capital cushion to protect against future adverse price movements in the positions. Please provide comment on how this change would affect the overall costs and benefits of the Proposal and the efficiency, competitiveness, financial integrity, and price discovery of the swaps market?

The 2016 Capital Proposal would require SDs electing the Bank-Based Capital Approach to maintain a minimum level of regulatory capital of CET1 Capital equal to or in excess of the highest of: (1) $20 Million; (2) 8% of the SD's risk-weighted assets; or (3) 8% of the SD's risk margin amount.42 For purposes of the Proposal, CET1 Capital is defined by rules of the Federal Reserve Board, and generally represents the sum of a bank holding company's common stock instruments and any related surpluses, retained earnings, and accumulated other comprehensive income.43 The 2016 Capital Proposal also would require an SD to file a notice with the Commission if its net capital was below 120% of the SD's minimum capital requirement (“Early Warning Notice”).44

As noted in the 2016 Capital Proposal, the Commission proposed to limit the forms of capital that a SD electing the Bank-Based Capital Approach could recognize to CET1 capital as such capital is a more conservative form of capital than Additional Tier 1 capital or Tier 2 capital, particularly as it relates to the permanence of the capital and its availability to absorb unexpected losses.45 Moreover, the Commission believed that limiting the capital to CET1 Capital was appropriate as the Commission did not propose to include several capital add-ons maintained in the rules of the Federal Reserve Board, including, for instance, the capital conservation buffer and the countercyclical capital buffer.46

The Commission received comments regarding the proposed requirement to limit regulatory capital to only CET1 Capital. One commenter supported the proposed requirement that an SD electing the Bank-Based Capital Approach must satisfy its capital requirement with only CET1 Capital.47 This commenter stated that the more conservative CET1 Capital requirement is appropriate given that the 2016 Capital Proposal does not contain all of the add-ons and supervisory safeguards that are set forth in the prudential regulators' capital framework.48

Other commenters stated that the proposed minimum capital requirement of CET1 Capital equal to or greater than 8% of risk-weighted assets would impose a capital requirement on SDs that is materially higher and more restrictive than the prudential regulators' capital requirement for banks and bank holding companies.49 These commenters noted that the prudential regulators' minimum capital requirements provide that an entity is “adequately capitalized” if its CET1 Capital is equal to or greater than 4.5% of the SD's risk-weighted assets, and is “well capitalized” if its CET1 Capital is at least 6.5% of its risk-weighted assets.50 These commenters further stated that the proposed Early Warning Notice requirement would effectively require SDs to maintain CET1 Capital equal to at least 9.6% (120% × 8%) of risk-weighted assets as entities subject to the Early Warning Notice requirements generally ensure that regulatory capital exceeds such requirements.51 Another commenter stated that the Proposal may make it difficult for SDs subject to the CFTC capital rule to compete with SDs subject to the capital rules of a prudential regulator, and more generally would deviate from the more tailored risk-based approach taken by the prudential regulators.52

In addition, a commenter requested that the Commission revise its Bank-Based Capital Approach to recognize subordinated debt as capital in meeting the 8% of risk-weighted assets capital ratio.53 This commenter noted that prudential regulators' capital requirements permit a bank or bank holding company to recognize certain subordinated debt as capital in meeting the 8% of risk-weighted assets capital ratio requirement.54

The Commission continues to support the concept of aligning, as appropriate, the requirements of the proposed Bank-Based Capital Approach with the capital requirements imposed on SDs subject to the prudential regulators' jurisdiction. Consistency between the Bank-Based Capital Approach requirements and the prudential regulators' requirements satisfies the Commission's objective of providing capital alternatives that are based upon existing bank requirements, while also providing market participants with greater certainty as to the operation of the capital requirements and regulations, and should assist in addressing potential competitive disadvantages that SDs subject to the CFTC Bank-Based Capital Approach may be subject to relative to prudentially regulated SDs. Accordingly, the Commission is considering adjusting the CET1 Capital approach based on comments received, particularly those which identified a possible competitive disadvantage to a SD under the CFTC's jurisdiction relative to a SD subject to the capital requirements of a prudential regulator.

3-a. The Commission requests comment on whether Regulation 23.101(a)(1)(i)(B) should be modified to permit SDs electing the Bank-Based Capital Approach to recognize capital other than CET1 Capital in meeting the 8% of risk-weighted assets ratio requirement. Should the proposed Regulation be modified to permit an SD to recognize Additional Tier 1 capital and/or Tier 2 capital (as such terms are defined in 12 CFR 217.20) in meeting its 8% of risk-weighted assets capital ratio requirement? If so, are there particular elements of Additional Tier 1 capital or Tier 2 capital that the Commission should prohibit or otherwise limit an SD from recognizing in meeting the 8% of risk-weighted assets capital ratio?

3-b. The Commission requests comment on whether Regulation 23.101(a)(1)(i)(B) should be modified such that an SD is required to maintain a CET1 Capital ratio of at least 6.5% of risk-weighted assets, with an additional 1.5% of risk-weighted assets permitted to be held in the form of Additional Tier 1 capital or Tier 2 capital? Should the Commission place any restrictions or conditions on the type of instruments that would qualify as Additional Tier 1 capital or Tier 2 capital in meeting the capital ratio?

3-c. The Commission requests comment on whether Regulation 23.101(a)(1)(i)(B) should be modified such that an SD is required to maintain a CET1 Capital ratio of 4.5% of risk-weighted assets, with the remaining 3.5% of risk-weighted assets permitted to be held in the form of Additional Tier 1 capital or Tier 2 capital? Should the Commission place any restrictions or conditions on the type of instruments that would qualify as Additional Tier 1 capital or Tier 2 capital?

3-d. The Commission recognizes that an FCM is permitted to exclude subordinated debt that complies with the conditions set forth in Regulation 1.17 from its liabilities in computing its adjusted net capital.55 In addition, an SD that elects the Net Liquid Assets Capital Approach also would be permitted to exclude subordinated debt that satisfies the conditions specified in SEC Rule 18a-1d (17 CFR 240.18a-1d) from its liabilities in computing its net capital.56 The Commission requests comment on whether an SD that elects the Bank-Based Capital Approach should be permitted to include subordinated debt in computing the amount of capital available to meet the 8% of risk-weighted assets ratio requirement? If so, should the subordinated debt be subject to the same conditions as set forth in Regulation 1.17(h) and/or SEC Rule 18a-1d (17 CFR 240.18a-1d) for Satisfactory Subordination Agreements? Should the subordinated debt be classified as Tier 2 capital in the modified rule? Please suggest rule language to effect any modification to the Regulation.

3-e. The Commission requests comments and supporting data on how the various modifications to the CET1 discussed in questions 3-a through 3-d above would affect the capital adequacy of an SD. Would such modifications encourage regulatory arbitrage between SDs subject to the capital rules of a prudential regulator and SDS subject to the capital rules of the CFTC? What impact would the proposed modifications have on an SD's cost of capital. How would the various modifications affect efficiency, competitiveness, financial integrity, and price discovery of swaps market?

The 2016 Capital Proposal contained standardized market risk capital charges for uncleared swaps and uncleared SBS for FCMs and SDs not approved to use internal models.57 The standardized market risk capital charges for swaps and SBS for FCMs and dually-registered FCM/SDs were proposed in revised Regulation 1.17(c)(5)(iii) and (iv), respectively.58 The standardized capital charges for SDs that are not dually-registered as FCMs (i.e., “Standalone SDs”) are set forth in proposed Regulation 23.101(a)(1). Proposed Regulation 23.101(a)(1)(i)(B) sets forth the standardized capital charges for Standalone SDs that elect the Bank-Based Capital Approach and effectively imposes the same standardized capital charges as set forth in Regulation 1.17(c)(5)(iii) for FCMs and dually-registered FCM/SDs. Proposed Regulation 23.101(a)(1)(ii)(A) sets forth the standardized capital charges for Standalone SDs electing the Net Liquid Assets Capital Approach, and effectively imposes the same standardized capital charges as set forth in the SEC's Final Capital Rule for SBSDs.59

FCMs and SDs must maintain capital to cover the market risk of their swap portfolios. Standardized capital charges provide an option for FCMs and SDs to calculate the amount of capital necessary to cover the risk of their portfolios. Using standardized charges to measure risk capital is relatively easy and cheap to implement, compared to using internal models. Therefore, standardized charges reduce the operational cost of being an SD and potentially encourage more firms to enter the swap dealing business. However, simple standardized haircuts are less risk-sensitive than model-based charges and less likely to recognize appropriate netting for different portfolios. Netting is critical in managing risk of derivative portfolios and needs to account appropriately for different portfolios. Without a netting provision, standardized charges can be too high, particularly for uncleared swap portfolios made of long and short positions simultaneously, therefore netting/offsetting provisions are critical when standardized charges are used to measure risk capital for the swap dealing book. Due to these reasons, sometimes standardized charges may not be tailored appropriately to the risk of the relevant positions. To be a viable alternative to models for calculating risk capital for FCMs and SDs, the Commission recognizes that standardized charges need to recognize netting benefits and must be subject to recalibration and refinement.

Proposed Regulation 1.17(c)(5)(iii) sets forth the standardized market risk charges for uncleared credit default swaps (“CDS”) referencing broad-based securities indices, interest rate swaps, currency swaps, commodity swaps, and SBS. The standardized market risk charges for uncleared CDS referencing broad-based securities indices generally would be determined by multiplying the notional amount of the swap by a fixed percentage based upon the remaining length of the time to maturity of the swap and the current basis point spread of the swap. The proposed regulation would further provide for certain netting or offsetting of long and short uncleared CDS positions.60

The proposed standardized market risk charge for uncleared interest rate swap positions would be determined by multiplying the notional amount of the swap by a fixed percentage based upon the remaining term of the swap. The FCM or dually-registered FCM/SD also would be permitted to net or offset long and short uncleared interest rate swap positions that are in the same time to maturity groupings or categories, provided that the market risk capital charge deduction may not be less than 0.5% of the amount of the long positions netted against the short positions in each individual categories with a maturity of three months or more.61

Proposed Regulation 1.17(c)(5)(iii) would further require an FCM or dually-registered FCM/SD to incur standardized market risk charges for uncleared currency swaps and commodity swaps. The standardized market risk capital charges for uncleared currency swaps would be based upon a fixed percentage of the notional amount of the currency swaps.62 The standardized market risk capital charge for uncleared commodity swaps would be based upon a fixed 20% of the market value of the commodity underlying the commodity swaps. Proposed Regulation 1.17(c)(5)(iii), however, did not include a provision that would provide for any netting or offsetting of the uncleared currency or uncleared commodity swaps positions in computing the standardized market risk charges. Proposed Regulation 1.17(c)(5)(iii) would require a standardized market risk charge equal to the sum of the standardized charge applicable to each long and short uncleared currency swap and each long and short uncleared commodity swap position.

The SEC Final Capital Rule included similar standardized market risk charges for uncleared swaps for BDs and SBSDs, however the SEC adopted a netting proviso applicable to both BDs and SBSDs, permitting a reduction of the resulting capital charge by an amount equal to any reduction recognized for a comparable long or short position in the reference asset or interest rate under Regulation 1.17 or SEC Rule 15c3-1 (17 CFR 240.15c3-1). This netting proviso is adopted in the SEC Final Capital Rule at Rule 15c3-1b(b)(2)(ii)(B) (17 CFR 240.15c3-1b(b)(2)(ii)(B) and Rule 18a-1b(b)(2)(ii)(B) (17 CFR 240.18a-1b(b)(2)(ii)(B)). The Commission intends to maintain consistency with the SEC Final Capital Rule with respect to the applicability of the standardized market risk charges for uncleared currency and commodity swaps, and therefore requests comment on including the same netting proviso appended to the proposed Regulation 1.17(c)(5)(iii)(C), which would provide that the deduction under Regulation 1.17(c)(5)(iii)(C)(1) may be reduced by an amount equal to any reduction recognized for a comparable long or short position in the reference asset under § 1.17 or 17 CFR 240.15c3-1.

4-a. The Commission requests comment and supporting data on the potential modification to the standardized market risk charges as proposed, through new rule text that would be appended to the proposed Regulation 1.17(c)(5)(iii)(C), that would provide for the netting or offsetting of currency swaps and commodity swaps as discussed above. How would various changes regarding netting or offsetting provisions affect an FCM's or SD's risk management, liquidity provision, and capacity to serve end users in commodity swap and currency swap markets? How would various changes affect efficiency, competitiveness, integrity, and price discovery in commodity swap and currency swap markets?

4-b. Would rule language as described above affect this potential modification to the rule text in the 2016 Capital Proposal? If not, please explain why and suggest alternative rule language.

4-c. The Commission notes that the Federal Reserve Board's current capital framework does not include a standardized calculation for market risk which recognizes offsets across commodity positions. The Basel III framework, however, does include provisions for such offsets.63 While it is anticipated that the prudential regulators will adopt a standardized market risk calculation based on Basel III, they have not done so to date.

The Commission requests comments on whether Regulation 1.17(c)(5)(iii) should be modified to include the Basel III simplified standardized approach of market risk for commodity swaps.64 If the Commission were to modify Regulation 1.17(c)(5)(iii) consistent with the current Basel III framework for the simplified standardized approach for computing market risk, should the Commission consider amending Regulation 1.17(c)(5)(iii) with the objective of maintaining a harmonized approach with the prudential regulators if and when they adopt the corresponding aspect of the Basel III framework? How would such revisions impact FCMs or SDs that are dually-regulated as BDs or SBSDs? While the intent of the Commission would be to limit the incorporation of the Basel III approach only to those sections that describe allowable netting within the commodities class, it may be that the fusion of these sections or concepts into the rest of the Commission's proposed rule present additional challenges. Accordingly, the Commission requests comments identifying and addressing these challenges and suggestions on how the Commission may modify the regulations to overcome them. This may include for example, differences in definitions between the Basel III framework and definitions contained in the Proposal.

The 2016 Capital Proposal included a standardized market risk capital charge for uncleared interest rate swaps.65 The proposed standardized market risk capital charges for uncleared interest rate swaps was consistent with the SEC's proposed standardized market risk capital charges for uncleared interest rate swaps in an effort to harmonize the two rules to minimize operational costs on entities dually registered with the CFTC and SEC, and therefore subject to both CFTC and SEC capital rules.66

Pursuant to the Proposal, a Covered Firm that was not approved to use internal market risk models would be required to take a standardized market risk capital charge equal to a percentage of the notional amount of the uncleared interest rate swap. The percentage that would be applied to the notional amount would be based upon the remaining time to maturity of the interest rate swap, and would range from 0% (for interest rate swaps with a remaining time to maturity of less than 3 months) to 6% (for interest rate swaps with a remaining time to maturity of 25 years or more). The 2016 Capital Proposal further provided that a Covered Firm may net certain of the long and short uncleared interest rate swaps to reduce the net notional amount, provided that the net notional amount is subject to a minimum floor standardized capital charge equal to 0.5%.67

Commenters objected to the proposed standardized market risk charges as being too punitive and not tailored to the risk posed by the relevant portfolios of positions.68 Specifically, commenters noted that the proposed standardized market risk charges would be substantially higher than the capital charges based on clearing house maintenance margin requirements for cleared interest rate futures contracts.69 These commenters indicated that the excessive capital requirements derived from the proposed standardized capital charges would particularly impact small to mid-sized Covered Firms that are not approved or otherwise do not use internal market risk models.

The Commission continues to believe that it is appropriate for the capital rule to include standardized market risk charges for uncleared interest rate swap positions to help ensure that a Covered Firm maintains capital to address potential decreases in the value of such positions, and as a general cushion to cover other types of risks. The Commission also believes that standardized market risk charges are necessary as not all Covered Firms will have internal models to compute market risk charges.

The Commission, however, recognizes that the Proposal would impose substantial capital charges that are not properly calibrated to the risks of the interest rate swap positions. In addition, the Commission acknowledges that the standardized market risk charges would impact Covered Firms that do not use internal models, which is expected to be smaller to mid-sized Covered Firms that are not part of a financial group that has obtained the approval of the SEC, prudential regulators, or a foreign regulator to use internal capital models. The Commission believes that establishing an appropriate level for the standardized capital charge for uncleared interest rate swaps would benefit market participants by encouraging smaller to mid-sized SDs to remain or to enter the market. Accordingly, the Commission request further comment on the proposed standardized market risk charge for uncleared interest rate swaps.

5-a. The Commission requests comment on modifying the proposed capital charges for interest rate swap positions for Covered Firms. Should the Commission modify the proposed regulation to include the 0.125% capital charge adopted by the SEC? Is the 0.125% capital charge appropriately calibrated to the risk of the interest rate swap positions? What would be the financial impact on Covered Firms' capital by modifying the regulation to provide for a 0.125% capital charge? How would the modified capital charge at a 0.125% level satisfy the statutory requirement of helping to ensure the safety and soundness of a SD? What would be the potential impact of having a capital charge that was not appropriately calibrated to the risk of the swap positions? Please provide empirical data and analysis in support for your responses.

5-b. The Commission requests comment on whether additional guidance concerning the method of applicable netting of uncleared interest rate swaps positions is necessary.

The 2016 Capital Proposal would require an FCM or SD to incur a standardized market risk capital charge for uncleared CDS. As noted above in section 4, the standardized market risk capital charge for uncleared CDS would be determined by multiplying the notional amount of the swap by a fixed percentage based upon the remaining length of time to maturity of the swap and the current basis point spread of the swap.

The SEC Final Capital Rule includes the same standardized market risk capital charges for uncleared CDS referencing broad-based security index.70 However, the SEC Final Capital Rule contains slightly different categories of remaining length of maturity of the swap than the Commission's 2016 Capital Proposal. 71 This difference was not intentional and is not deemed material.

The Commission and SEC have a long history of harmonizing CFTC and SEC capital requirements in order to reduce costs that would otherwise be imposed on dually-regulated entities, including dually-registered FCM/BDs, from having to comply with two different regulatory requirements. This approach to a uniform capital rule reduces costs to registrants and encourages entities to engage in activities that require registration with both the CFTC and SEC, while also providing appropriate regulatory requirements. To maintain this established system of uniform capital requirements, the Commission proposes to modify the grid of the final length of time to maturity of the CDS contact referencing broad-based security index in proposed Regulation 1.17(c)(5)(iii)(A)(1) to harmonize the standardized uncleared CDS contract market risk capital charges with the final SEC standardized capital charges.

6-a. The Commission requests comment on the potential modification of the standardized market risk charges for uncleared CDS referencing broad-based security index.

6-b. The potential modification to paragraph (c)(5)(iii)(A)(1) of Regulation 1.17 would revise the language of each row heading one month less, for example the first row would be titled less than 12 months as opposed to 12 months or less.

Would the potential modification described above appropriately address the harmonization of the CFTC and SEC standardized market risk capital charge for uncleared CDS referencing broad-based security index? If not, are there additional modifications that would need to be addressed, or different rule language necessary to appropriately harmonize the CFTC and SEC CDS standardized market risk charges? The Commission is of the view that the changes to the table above would have a de minimis effect on the required amount of capital; however, the Commission requests comments and supporting data on how the changes to the table would, if at all, affect efficiency, competitiveness, financial integrity, and price discovery of swaps market?

The 2016 Capital Proposal included a provision permitting SDs that are “predominantly engaged in non-financial activities” to compute their minimum regulatory capital based upon the firms' “tangible net worth” (the “Tangible Net Worth Capital Approach”) in lieu of the Bank-Based Capital Approach or the Net Liquid Assets Capital Approach.72 Proposed Regulation 23.101(a)(2) defined the term “predominantly engaged in non-financial activities” by referencing the definition of the term “financial activities” under the Federal Reserve Board's regulations establishing criteria for determining if a nonbank financial company is predominantly engaged in financial activities.73 For purposes of the Proposal, an entity would be considered “predominantly engaged in non-financial activities” if: (1) The consolidated annual gross financial revenues of the entity in either of its two most recently completed fiscal years represents less than 15 percent of the entity's consolidated gross revenue in that fiscal year (“15% Revenue Test”), and (2) the consolidated total financial assets of an entity at the end of its two most recently completed fiscal years represents less than 15 percent of the entity's consolidated total assets as of the end of the fiscal year (“15% Asset Test”). For purposes of the 15% revenue test, consolidated annual gross financial revenues would mean that portion of the consolidated total revenue of the entity that are related to activities that are financial in nature. For purposes of the 15% asset test, consolidated total financial assets would mean that portion of the consolidated total assets of the entity that are related to activities that are financial in nature.

The Commission proposed a Tangible Net Worth Capital Approach in recognition that certain entities that engage primarily in non-financial activities may meet the statutory and regulatory definitions of the term “swap dealer” and, therefore, would be required to register as such with the Commission.74 However, while these entities may engage in swap dealing activities, they are primarily commercial enterprises. The business activities and the composition of the balance sheet of these commercial entities may differ materially from entities predominantly engaged in financial activities, including the types of transactions they enter into, and the types of market participants and swap counterparties that they deal with. Because of these differences, the Commission believed that application of the Bank-Based Capital Approach or Net Liquid Assets Capital Approach to these SDs could result in inappropriate capital requirements that would not be proportionate to the risk associated with these entities.75 The proposed Tangible Net Worth Capital Approach would provide that an SD that was predominantly engaged in non-financial activities must maintain tangible net worth equal to or greater than the highest of:

(1) $20 Million plus the amount of the SD's market risk exposure requirement and credit risk exposure requirement associated with the SD's swaps and related hedge positions that are part of the SD's dealing activities;

(2) 8% of the sum of the:

(a) The amount of uncleared swap margin 76 for each uncleared swap position open on the books of the SD, computed on a counterparty by counterparty basis pursuant to the Commission's margin rules for uncleared swap transactions (Regulation 23.154);

(b) The amount of initial margin that would be required for each uncleared SBS position open on the books of the SD, computed on a counterparty by counterparty basis pursuant to SEC Rule 18a-3(c)(1)(i)(B) (17 CFR 240.18a-3(c)(1)(i)(B)) without regard to any initial margin exemptions or exclusions that the SEC rules may provide to such SBS positions; and

(c) The amount of initial margin required by clearing organizations for cleared proprietary futures, foreign futures, swaps, and SBS positions open on the books of the swap dealer; or

(3) The amount of capital required by a registered futures association of which the SD is a member.

Certain commenters generally supported the Tangible Net Worth Capital Approach but questioned the criteria proposed to qualify for the approach as overly narrow and entity specific. These commenters generally noted that a parent entity that is predominantly engaged in non-financial activities would not be permitted in any practical way to establish an SD subsidiary that would be able to use the Tangible Net Worth Capital Approach as the swaps activity of the SD would be considered financial activities.77 Some commenters further noted that the proposed Tangible Net Worth Capital Approach would discriminate against corporate entities that are predominantly engaged in non-financial activities but elect to maintain their swap dealing activities in separate legal entities.78 Another commenter stated that commercial enterprises may establish SD subsidiaries to perform centralized risk management operations for the commercial enterprise, and that such SD subsidiaries should have the option to elect a Tangible Net Worth Capital Approach.79 These commenters generally suggested that the assessment of whether the entity satisfies the conditions for the use of the Tangible Net Worth Capital Approach should be made at an SD's parent level and not at the level of the SD.

The Commission continues to believe as it stated in the 2016 Capital Proposal that certain SD entities which may engage in dealing activities but be associated with primarily commercial entities will need a more flexible capital requirement than either the Bank-Based Capital Approach or the Net Liquid Assets Capital Approach. In consideration of the comments that the Tangible Net Worth Capital Approach may not be available to the full universe of SDs that it may best fit, based on the type of transactions and market functions fulfilled by such SDs, the Commission believes ensuring the continued viability of the current range of SD businesses merits seeking additional comment on possibly broadening the applicability of the Tangible Net Worth Capital Approach, while considering the need for associated additional risk mitigants if a broader application is adopted. Expanding the availability of the Tangible Net Worth Capital Approach to SDs that are subsidiaries of a corporate group that is predominantly engaged in non-financial activities would provide flexibility to allow such corporate groups to determine the most efficient and effective corporate structure to meet their business and operational needs without forcing such entities to elect either the Net Liquid Assets Capital Approach or Bank-Based Capital Approach, which are designed primarily for financial entities, for their SD subsidiaries. Providing SDs that are subsidiaries of corporate groups that are predominantly engaged in non-financial activities with a choice of using the Tangible Net Worth Capital Approach may also encourage non-financial firms to register as SDs, which may benefit commercial end users and other market participants that use such SDs to hedge their commercial risk. Accordingly, the Commission is requesting further information with respect to the consideration of the Tangible Net Worth Capital Approach as follows.

7-a. The Commission requests comment on whether the rules should permit an SD that is not “predominantly engaged in non-financial activities” as defined in proposed Regulation 23.100 to nevertheless to use the Tangible Net Worth Capital Approach if its parent entity or the ultimate parent of its consolidated ownership group otherwise satisfies the criteria? This approach would effectively permit SDs that are subsidiaries of commercial enterprises that are “predominantly engaged in non-financial activities” as defined by the proposed rules to elect to use the Tangible Net Worth Capital Approach in computing their capital requirements. What conditions should the Commission consider if it were to adopt such an approach? Under various conditions, how would cost of capital requirement change?

7-b. Should the Commission require an SD that relies on a parent entity to satisfy the “predominantly engaged in non-financial activities” criteria to elect the Tangible Net Worth Capital Approach to obtain parent guarantees, or some other form of financial support, for its swaps obligations? In addition to parent guarantees, what other forms of financial support should the Commission consider? How and to what extent might such requirements help protect market participants and the public? If no guarantees or other forms of financial support are provided, how would the SD be ensured of meeting its financial obligations?

7-c. Should the Commission require a higher minimum capital requirement for SDs that rely on its parent to meet the criteria to be eligible to use the Tangible Net Worth Capital Approach? If so, what should the minimum capital requirement be for such SDs? How should the Commission determine such SD's minimum capital requirements?

7-d. Should the Commission consider any revisions to the 15% Asset Test and/or the 15% Revenue Test? If so, what revisions should the Commission consider? Why are such revisions necessary to achieve the purpose of the Tangible Net Worth Capital Approach?

7-e. Should the Commission further expand the use of the Tangible Net Worth Capital Approach to SDs that are subsidiaries of parent entities that are predominantly engaged in financial activities if such SDs are primarily engaged in commodity swap transactions? How would the minimum capital requirement for such SDs under the proposed Tangible Net Worth Capital Approach compare to the minimum capital requirement under the Bank-Based Capital Approach or Net Liquid Assets Capital Approach.

7-f. The Commission request comments and supporting data on how various choices regarding changes under Tangible Net Worth Capital Approach would affect SD's risk management, liquidity provision, and capacity of serving end users? How would these choices affect efficiency, competitiveness, integrity and price discovery of swaps markets?

7-g. Should the Commission include in the rules a procedure that would allow an SD to petition the Commission on a case-by-case basis to use the Tangible Net Worth Capital Approach?

The 2016 Capital Proposal included proposed Appendix A to Regulation 23.102 which described the requirements for the calculation of market risk exposure using internal models.

8-a. Commenters noted that while proposed Regulation 23.101(a)(1)(i)(B) provided that an SD that elects the Bank-Based Capital Approach must compute its risk-weighted assets in accordance with the requirements of the Federal Reserve Board for bank holding companies and set forth in 12 CFR part 217, the internal capital model requirements in proposed Regulation 23.102 did not explicitly incorporate the market risk and credit provisions of 12 CFR part 217.80 To address this omission, a commenter suggested that the Commission modify paragraph (c) of proposed Regulation 23.102 to provide that a swap dealer's application must include: (1) In the case of a swap dealer subject to the minimum capital requirements in § 23.101(a)(1)(i) applying to use internal models to compute market risk exposure, the information required under 12 CFR 217 subpart F, as if the swap dealer were a bank holding company subject to 12 CFR part 217; (2) in the case of a swap dealer subject to the minimum capital requirements in § 23.101(a)(1)(i) applying to use internal models to compute credit risk exposure, the information required under 12 CFR 217 subpart E, sections 131-155, as if the swap dealer were a bank holding company subject to 12 CFR part 217; or (3) in the case of a swap dealer subject to the minimum capital requirements in § 23.101(a)(1)(ii), the information set forth in Appendix A of the section.

In addition, the commenter suggested the Commission modify paragraph (d) of proposed Regulation 23.102 to provide that the Commission or the registered futures association may approve or deny the application, or approve an amendment to the application, in whole or in part, subject to any conditions or limitations the Commission or registered futures association may require, if the Commission or registered futures association finds the approval to be appropriate in the public interest, after determining, among other things, whether the applicant has met the requirements of this section, and the appendices to this section. A swap dealer that has received Commission or registered futures association approval to compute market risk exposure requirements and credit risk exposure requirements pursuant to internal models must compute such charges in accordance with 12 CFR 217 subpart F, § 217 subpart E, sections 131-155 or Appendix A of the section, as applicable per paragraph (c).

The Commission requests comment on the suggested modifications to paragraphs (c) and (d) of proposed Appendix A to Regulation 23.102, which are intended to explicitly provide that SDs that elect to use the Bank-Based Capital Approach are subject to the Federal Reserve Board's market risk and credit risk model requirements. This modification would revise the text of Appendix A to be consistent with the Commission's stated objective and intent in the 2016 Capital Proposal that SDs that elect the Bank-Based Capital Approach would be subject to the Federal Reserve Bank's capital requirements, including the market risk and credit risk model requirements contained in 12 CFR part 217. Would the rule language accurately reflect the potential modification and properly address the issue? If not, please provide alternative rule language to affect the modification.

8-b. Commenters to the 2016 Capital Proposal requested clarification whether an SD applying for approval to use internal models would need to apply for models for market risk and credit risk or if they could request approval to use models for only one of the exposure types, market or credit, while opting for the standardized calculation method for the other.81 The Commission invites comments and supporting data on this issue. How different would capital requirements be under various choices? Some commenters also inquired whether an SD's application for internal model approval had to encompass asset classes or asset types in which it is not actively dealing. The Commission would like to clarify that the suitability of internal models is to be evaluated for the specific activities of the SD and not for activities that the SD does not engage in.

The 2016 Capital Proposal would require SDs and FCMs, in computing their respective capital, to take market risk capital charges to protect against potential losses in the value of their proprietary trading positions, and to take counterparty credit risk charges to protect against potential counterparty credit risk. Proposed Regulation 23.102 would permit an SD (and an FCM that is registered as an SD), subject to the prior approval of the Commission or a registered futures association (i.e., NFA), to compute market risk and credit risk capital charges using internal models in lieu of standardized market risk and credit risk capital charges.82 The Commission proposed to permit market risk and credit risk modeling as it recognized that properly designed and monitored internal models, including value-at-risk models, are a more effective means of measuring economic risk from complex trading strategies involving swaps, SBS, and other investment instruments than the standardized capital charges, which are primarily computed based upon a fixed percentage of the notional or fair values of the instruments.

The SD's application to use internal models would have to be in writing and filed with the Commission and with the NFA in accordance with the applicable instructions. The model application would have to include specified information, which is contained in proposed Appendix A to Regulation 23.102. For example, proposed Appendix A would require an SD to submit: (1) A list of categories of positions the SD holds in its proprietary accounts and a brief description of the methods the SD would use to calculate deductions for market risk and credit risk on those categories of positions; (2) A description of the mathematical models to be used to price positions and to compute deductions for market risk and credit risk; (3) A description of how the SD will calculate current exposure and potential future exposure for its credit risk charges; and, (4) A description of how the SD would determine internal credit risk weights of counterparties, if applicable.83

The 2016 Capital Proposal would further provide that as part of the approval process, and on an ongoing basis, an SD would be required to demonstrate to the Commission or NFA that the models reliably account for the risks that are specific to the types of positions the SD intends to include in the model computations.84 Finally, the 2016 Capital Proposal provided that the Commission or NFA may approve, in whole or in part, an application or an amendment to the application, subject to any conditions or limitations the Commission or NFA may require.85

The Commission received several comments concerning the use of internal capital models. One commenter expressed a strong concern regarding the 2016 Capital Proposal's potential heavy reliance on the use of internal models.86 The commenter stated that a reliance on internal models can permit regulated entities to manipulate risk controls to increase their own profits at the cost of increasing risks to the public. The commenter pointed out that analysis of the crisis experience evidenced manipulation of models to reduce capital charges. While the commenter acknowledged post-crisis refinements to internal model requirements, both in technique and governance, it argued that resource limitations at regulators, as well as continuing pressure from industry, may limit regulators' ability to prevent weakening standards and model misuse. The commenter thus advocated for strong limitations and floors on the use of internal models.87

Other commenters generally supported the Commission's proposal to permit internal capital models in lieu of standardized capital charges.88 Another commenter stated that it strongly supports permitting SDs the flexibility to use internal models, when appropriate.89

Several commenters stated that it was necessary for the Commission to develop an efficient approach to the review and approval of internal models. In this regard, one commenter stated that it believed that the Commission's final rule should provide for the recognition of internal capital models used throughout corporate families if such models have been approved by a prudential regulator, the SEC, or a foreign regulator in a jurisdiction that has adopted the Basel capital requirements, provided that the relevant regulatory authority has ongoing periodic assessment power with regard to the model and provides the CFTC and the NFA with appropriate information.90 Another comment stated that the Commission should modify the Proposal to permit SDs that are U.S. non-bank entities to use internal capital models approved and periodically assessed by a prudential regulator, the SEC, or the SDs' home country supervisor (if applicable), without requiring additional pre-approval of those models by the Commission or NFA.91 Several commenters stated that the Commission should automatically approve market risk models and credit risk models of SDs that have already been approved by a prudential regulator, the SEC, or certain foreign regulators.92 Another commenter stated that all models should be deemed “provisionally approved” while under review by the Commission or NFA, and that in no event should an SD be required to use the proposed standardized capital charges while awaiting model approval.93 One commenter requested that the Commission clarify that no SD would be required to use the proposed standardized capital charges while awaiting model approval.94

The Commission continues to believe the regulations should provide for the appropriate use of internal market risk and credit risk models in lieu of the standardized capital charges. As the Commission noted in the 2016 Capital Proposal, the Commission considered the degree to which its Proposal would be consistent with existing regulatory frameworks. Currently, prudential regulators permit SDs subject to their capital requirements to use internal capital models. In addition, the SEC Final Rule will permit SBSDs to seek approval from the SEC to use internal capital models. Accordingly, the Commission continues to support a capital requirement that would permit SDs to use internal capital models, which will allow such firms to compete with prudentially regulated or SEC regulated entities.

The use of models by firms that demonstrate compliance with both the quantitative and qualitative requirements also will potentially benefit market participants. As noted above, the Commission believes that properly designed and monitored internal models are a more effective means of measuring economic risk from complex trading strategies than the standardized capital charges, which are primarily computed based upon a fixed percentage of the notional or fair values of the instruments. SDs authorized to use models will generally have lower capital costs as compared to SDs that use standardized capital charges. The lower costs may result in the SDs engaging in mores swaps with counterparties or lower transaction costs for the SDs and counterparties.

The Commission requests comment on the following with respect to the model approval process.

9-a. The Commission requests comment on whether the proposed process for an SD to obtain regulatory approval to use internal models should be modified. If so, how should the Commission modify the model approval process? Should the Commission have different processes for SDs and for FCMs (including FCMs that are dually-registered as SDs)?

9-b. The Commission requests comment on permitting the Commission or NFA to accept market risk and/or credit risk models of an SD, or SD affiliate, that have been approved by a prudential regulator, the SEC, or a foreign regulator to be used by the SD to comply with the Commission's model requirements? What conditions should the Commission or NFA consider in permitting SDs to use models of affiliates that have been approved by other regulators? How would the Commission or NFA address possible situations where the SD's positions are materially different, such as a heavy concentration in a particular asset class or a particularly illiquid asset, from the positions of the affiliate that obtained model approval?

9-c. One commenter provided suggested rule language to modify Regulation 23.102 to permit SDs to use internal market risk and/or credit risk models without obtaining the prior written approval of the Commission or the NFA.95 The ability for an SD to use a model without obtaining the prior written approval would be subject to the following conditions: (1) The model had been approved by the SEC, a prudential regulator, or a foreign regulatory authority whose capital adequacy requirements are consistent with the Basel-based capital requirements for banks; (2) the SD makes available to the Commission copies of underlying documentation; and, (3) for models approved by foreign regulators, a description of how the relevant foreign jurisdiction capital adequacy framework addresses the elements of the Commission's capital requirements.96 The potential modification would establish a new paragraph (e) to Regulation 23.102 which would provide a swap dealer subject to the minimum capital requirements in Section 23.101(a)(1) may use an internal credit risk or an internal market risk capital model without the prior written approval of the Commission or a registered futures association if: (1) The relevant model has been approved and currently is in use, either by the relevant swap dealer or by an affiliated entity, under the supervision of the Securities and Exchange Commission, a prudential regulator or a foreign regulatory authority whose capital adequacy requirements are consistent with the Basel-based capital requirements for banking institutions; and (2) the swap dealer has made available to the Commission any copies of underlying documentation, including regulatory approvals, evidencing review, approval and supervision of the internal capital models, to the extent permitted by applicable law.

Further, this modificiation would provide, in the case of a model approved by a foreign regulatory authority, the swap dealer has submitted to the Commission: (i) A description of the objectives of the relevant foreign jurisdiction's capital adequacy requirements; (ii) a description (including specific legal and regulatory provisions) of how the relevant foreign jurisdiction's capital adequacy requirements address the elements of the Commission's capital adequacy requirements for swap dealers, including, at a minimum, the methodologies for establishing and calculating capital adequacy requirements; and (iii) a description of the ability of the relevant foreign regulatory authority or authorities to supervise and enforce compliance with the relevant foreign jurisdiction's capital adequacy requirements. Such description should discuss the powers of the foreign regulatory authority or authorities to supervise, investigate, and discipline entities for compliance with capital adequacy requirements, and the ongoing efforts of the regulatory authority or authorities to detect and deter violations, and ensure compliance with capital adequacy requirements. The description should address how foreign authorities and foreign laws and regulations address situations where an entity is unable to comply with the foreign jurisdiction's capital adequacy requirements.

The Commission requests comments on the suggested new paragraph (e) to Regulation 23.102. Please suggest any modifications that are necessary to the new paragraph (e). In addition, what types of information do registrants feel they may be restricted under law from providing to the Commission? Please be specific and identify the legal requirements and/or privileges that may impact the registrant's provision of information to the Commission or NFA. How can the Commission and NFA ensure they receive the information they need to supervise the use of the model on a going forward basis?

9-d. The Commission requests comments and supporting data on how various changes to the model approval process would affect the efficiency, competitiveness, financial integrity, and price discovery of the swaps market? Would the various changes affect the ability of the Commission to effectively meet the safety and soundness mandate established for capital requirements in the CEA?

The 2016 Capital Proposal included liquidity requirements for SDs, which would include SDs that also are registered as FCMs.97 Proposed Regulation 23.104(a) would require each SD electing the Bank-Based Capital Approach to meet the liquidity coverage ratio established by the Federal Reserve for bank holding companies under 12 CFR part 249. The proposed liquidity coverage ratio would require an SD to maintain each day an amount of high quality liquid assets (“HQLAs”) 98 that is no less than 100 percent of the SDs total net cash outflows over a prospective 30 calendar-day period (the “HQLA Test”).99

For SDs that elect the Net Liquid Assets Capital Approach, and for FCMs dually-registered as SDs, proposed Regulation 23.104(b) would require each SD/FCM to perform stress testing on at least a monthly basis that takes into account certain assumed conditions lasting for 30 consecutive days (the “Liquidity Stress Test”). The assumed conditions for the Liquidity Stress Test would include a decline in creditworthiness of the SD/FCM severe enough to trigger contractual credit related commitment provisions of counterparty agreements; the loss of all existing unsecured funding at the earlier of its maturity or put date and an inability to acquire a material amount of new unsecured funding; and, the potential for a material net loss of secured funding. The Commission's proposed Liquidity Stress Test was consistent with the liquidity stress testing requirements proposed by the SEC for BDs and SBSDs.100 The SEC, however, elected not to adopt final liquidity requirements for BDs and SBSDs.101

Commenters raised issues with the proposed HQLA Test and the Liquidity Stress Test. One commenter suggested that SD entities should be able to elect either the HQLA Test or the Liquidity Stress Test requirement unrelated to the SD's chosen capital approach.102 Another commenter stated that the requirements of the HQLA Test and the Liquidity Stress Test should be revised to be more similar to each other given that both approaches have the comparable regulatory objective of helping to ensure that an SD has sufficient access to liquidity to meet its obligations during periods of expected and unexpected market activity.103 The commenter specifically noted that the Liquidity Stress Test's definition of liquidity reserves is materially narrower than the HQLA Test's definition of high quality liquid assets, and that the Commission should expand the definition under the Liquidity Stress Test to match the definition under the HQLA Test so as to recognize the full range of assets that are actually available to a firm to support its liquidity needs.104

Commenters also raised the concept of a third alternative, which would be the application of a more qualitative than quantitative requirement applicable to SDs that are subsidiaries of bank holding companies and already subject to comprehensive overall liquidity risk management program requirements at a parent level.105

The Commission proposed liquidity requirements to address the potential risk that an SD may not be able to efficiently meet both expected and unexpected current and future cash flow and collateral needs as a result of adverse events impacting the SD's daily operations or financial condition.106 The proposed liquidity requirements would apply to SDs electing the Bank-Based Capital Approach and the Net Liquid Assets Capital Approach, but were not proposed for entities electing the Tangible Net Worth Capital Approach, as such SDs must be predominantly engaged in non-financial activities, which would limit their activities as counterparties or financial intermediaries to other parties.

The Commission recognizes that SDs are subject to existing CFTC requirements to maintain a general risk management program that addresses liquidity risk. Regulation 23.600(b)(1) provides that an SD must establish, document, maintain, and enforce a system of risk management policies and procedures designed to monitor and manage the risks associated with the swaps activities of the SD. Regulation 23.600(c)(4)(iii) provides that the risk management program must include liquidity risk policies and procedures that take into account, among other things, a daily measurement of liquidity needs; the assessment of procedures to liquidate all non-cash collateral in a timely manner and without significant effect on price; and the application of appropriate collateral haircuts that accurately reflect market and credit risk. The Commission, however, proposed the Liquidity Stress Test and the HQLA Test to provide specific quantitative and qualitative criteria that an SD must use in measuring its liquidity under defined scenarios. The Commission continues to believe that liquidity requirements are a necessary complement to the SD capital requirements, particularly for SDs that elect the Bank-Based Capital Approach. As previously discussed, the Bank-Based Capital Approach is not a liquidity-based capital requirement in the manner similar to the Net Liquid Assets Capital Approach.

The Commission requests further comments on the proposed liquidity requirements as set forth below.

10-a. The Commission requests comment on all aspects of the liquidity proposals contained in the 2016 Capital Proposal. Please provide modified regulatory text in support of any comments provided, if applicable.

10-b. Should the Commission modify the Proposal to permit an SD to elect the HQLA Test or the Liquidity Stress Test, irrespective of the capital approach followed by the SD?

10-c. Should the Commission modify the definition of liquidity reserves to make the definition in the Liquidity Stress Test similar to the HQLA Test? If so, how should the definition be modified? Please suggest rule language to modify the regulation.

10-d. Should the Commission modify the Proposal to permit an SD to consider relying on the existing application of qualitative liquidity controls applicable at bank holding companies for SDs which are subsidiaries of bank holding companies in lieu of requiring the quantitative HQLA Test requirement proposed in Rule 23.104(a) as suggested by commenters as a third alternative? How would such approach apply to SDs electing the Bank-Based Capital Approach?

10-e. Should the Commission, similar to the SEC, not adopt the Liquidity Stress Test requirement as proposed in Rule 23.104(b)? If so, should the Commission impose an alternative liquidity requirement on SDs that elect the Net Liquid Assets Capital Approach beyond the general risk management requirements of Regulation 23.600? If the Commission does not adopt the Liquidity Stress Test or an alternative liquidity requirement, would this raise any competitive impact on SDs electing the Bank-Based Capital Approach? If so, how should the Commission address the competitive issues?

10-f. Should the Commission consider eliminating specific quantitative liquidity requirements for SDs electing either the Bank-Based Capital Approach or the Net Liquid Assets Capital Approach, in consideration of the requirement of all SDs to have comprehensive risk management programs including liquidity risk as in effect under Rule 23.600?

10-g. Should the Commission include any additional quantitative or more specific qualitative liquidity risk requirements in connection with any consideration of additional expansion of the Tangible Net Worth Capital Approach to a broader subset of SDs?

10-h. The Commission requests comments and supporting data on how various choices regarding changes to liquidity requirements would affect the cost of SD's participation in the swap markets? How would various choices affect the efficiency, competitiveness, integrity, and price discovery of swap markets?

The 2016 Capital Proposal included proposed financial reporting requirements for SDs and MSPs. SDs and MSPs that are subject to the Commission's capital requirements would be required to, among other things: (1) Maintain current ledgers and other similar records summarizing transactions affecting their assets, liabilities, income, and expenses; (2) file notices of certain events with the Commission, including notices of failing to comply with the minimum capital requirements; (3) file monthly unaudited and annual audited financial statements with the Commission; and (4) respond to requests from the Commission for additional information as requested.107

The 2016 Capital Proposal would also require SDs and MSPs that are subject to the capital rules of a prudential regulator to file certain information with the Commission. Such information includes: (1) Quarterly balance sheet, regulatory capital computations, and aggregate swaps position information; (2) notice filings, including notice of a failure to maintain the minimum applicable capital requirement; and (3) additional information as requested by the Commission.108

The 2016 Capital Proposal would permit certain SDs and MSPs to submit unaudited and audited financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (“IFRS”) in lieu of generally accepted accounting principles established in the United States (“U.S. GAAP”).109 To be eligible to use IFRS, the SD or MSP may not be organized under the laws of a state or other jurisdiction of the United States, and may not be otherwise required to prepare financial statements in accordance with U.S. GAAP.110

Commenters generally supported the Commission approach of permitting non-U.S. SDs and MSPs to use IFRS in lieu of U.S. GAAP in the preparation of required financial statements. Commenters, however, requested that the Proposal be modified to permit U.S.-based SDs that are subsidiaries of non-U.S. parent entities to prepare required financial statements in accordance with IFRS.111 These commenters stated that U.S. SDs that are subsidiaries of foreign-based holding companies may prepare their financial statements in accordance with IFRS as the subsidiary is consolidated with the parent in producing the parent's consolidated financial statements, and further stated that requiring U.S. GAAP financial statements in such situations would impose unnecessary costs on SDs without providing substantial enhancements to the regulatory objectives.112

As stated in the 2016 Capital Proposal, the Commission recognized that several SDs or MSPs domiciled outside the U.S. may not use U.S. GAAP as their native accounting principles and that requiring these registrants to maintain two separate accounting records and systems to satisfy two separate financial reporting requirements would involve substantial expense and burden.113 The Commission also does not want to burden or create an unfair advantage to U.S. domiciled SDs or MSPs that do not otherwise prepare financial statements in accordance with U.S. generally accepted accounting principles.

11-a. The Commission requests comment as to whether the 2016 Capital Proposal should be modified to permit U.S. domiciled SDs or MSPs that are subsidiaries of foreign parent entities or holding companies to submit required unaudited or audited financial statements prepared in accordance with IFRS in lieu of U.S. GAAP. If so, should the modification be limited to U.S. SDs that are consolidated into foreign entities that are predominantly engaged in non-financial activities?

11-b. The Commission further requests comment regarding material differences between IFRS and U.S. GAAP, and how such differences may impact the financial condition of the SDs or MSPs?

The 2016 Capital Proposal would require in proposed Regulation 23.105(e)(5) that an SD or an MSP subject to the Commission's capital rules file an annual audited financial report as of the close of its fiscal year no later than sixty days after the close of the SDs or MSPs fiscal year-end. Several commenters expressed concern that the sixty day timeline was not practical for many large non-financial companies as they are typically permitted to provide audited financial statements within ninety days of the end of the year.114 In 2016 Capital Proposal the Commission noted that the sixty day financial reporting timeline is consistent with the timeline required by both the SEC and that currently required of FCMs. Further, timely financial reporting ensures that the Commission and its oversight functions can assess equally across all firms compliance with its capital rule, as well as, promote a culture of compliance at the firm and with its auditor that is at least as stringent as other similarly situated registrants. However, the Commission recognizes that not all SDs may be subjected to the same operational burdens and is cognizant that imposing an accelerated reporting cycle on certain SDs may unnecessarily increase costs of compliance without much added benefit.

12-a. The Commission requests comment as to whether the 2016 Capital Proposal should be modified to recognize an exception to the proposed requirement for SDs to file annual audited financial report with the Commission within sixty-days of the SD's year-end date.

12-b. Should the Commission modify the requirement to permit a ninety-day period for SDs or MSPs that are not predominantly engaged in financial activities or that consolidate into parent entities that are not predominantly engaged in financial activities?

12-c. Are there other alternatives of how the Commission should define SDs that would be eligible to file annual audited financial statements within ninety days of the SDs' year-end dates?

12-d. How much additional cost will a SD save if they are permitted to file their audited financial statements within a ninety day period as opposed to a sixty day period?

Proposed Regulation 23.105(i)(3) and 23.105(p)(7)(ii) would require that certain financial information be publically posted to the SD's or MSP's website within ten business days after the SD or MSP is required to file the financial information with the Commission. Several non-bank SDs that are subsidiaries of public companies requested that the posting period on firm's website be extended from ten days to twenty days for the quarterly information, noting that additional timeframe would be necessary to allow for internal and external auditors to review the information.115 One commenter stated that public disclosure of financial reports will be onerous for commercial SDs, while others requested elimination of public disclosures by prudentially regulated SDs.116

The Commission noted in the 2016 Capital Proposal that its approach was consistent with the financial reporting information the Commission had previously determined should not qualify as exempt from the Freedom of Information Act for FCMs. For the bank SDs, the Commission noted the Proposal was consistent with publicly available information provided by bank entities in call reports.117 The Commission also noted that the SEC requires similar public posting of financial information pursuant to Regulation 17 CFR 240.18a-7(b)(1) and (2).118 The Commission continues to agree that public disclosure of basic financial information is in the public's best interest, but wishes to ensure that manner in which disclosure is accomplished does not create an unnecessary burden on similarly situated or dual-registered registrants.

13-a. The Commission requests comment on modifying the Proposal by aligning the public disclosure requirements for SDs that are not affiliated with banks with that required by SEC for stand-alone SBSDs which would replace the quarterly public disclosure of financial information requirement with a bi-annual requirement? This modification would include change of the unaudited financial report posting requirement on the firm's website from ten business days as proposed to thirty calendar days following the date of the statements, while the annual audited requirement would be required to be posted ten days following the date they are filed. The Commission invites comment as to whether these changes are practicable, especially for those swap dealers which are not otherwise required to publicly disclose financial information currently, and whether the modifications would continue to provide the public with meaningful information on a timely basis?

13-b. The Commission requests comment on whether it would be appropriate to remove the proposed requirement that bank SDs (SDs subject to the capital requirements of a prudential regulator) be publicly posted on their website under the rationale that this information is already provided to the public on a timely basis as a result of separate disclosure requirements imposed by the prudential regulators? 119

Several commenters noted the importance with harmonizing the Commission's financial reporting and notification requirements with requirements of other regulators, namely the SEC and the prudential regulators. The Commission agrees on this general principle. Since the 2016 Capital Proposal, the SEC has finalized its recordkeeping, notification and reporting rule for SBSDs, which includes several detailed forms and accompanying instructions.120 However, the Commission in the 2016 Capital Proposal did not propose specific forms for the monthly and annual financial reporting requirements, aside from the specific schedules found in Appendices A and B to proposed Regulation 23.105. Further, under proposed Regulation 23.105(d)(3) all dual registered SD and SBSDs are permitted to file SEC forms in lieu of the Commission's financial reporting requirements.

The Commission continues to believe that proposing a detailed form at this time is premature given the diversity of registrants under the Commission's jurisdiction and the several ways in which capital compliance can be achieved under the Commission's proposed approach.

Nonetheless, a commenter noted that the proposed appendices did not contain accompanying form instructions, despite having defined terms in both the column headings and rows.121 The 2016 Capital Proposal noted that the Appendices are based on identical information found in SEC forms now finalized in FOCUS Report Part II Schedules 1-4 of FORM X-17A-5, and FOCUS Report Part IIC of FORM X-17A-5.122

14-a. Accordingly, the Commission is considering including the following explanatory footnote in the appendices to Regulation 23.105 which will incorporate by reference the form instructions published by the SEC and invites comment as to whether this approach and language will be sufficient. The footnote would state that the information required to be reported within this form is intended to be identical to that required to be reported by Security Based Swap Dealers and Security Based Major Swap Participants under SEC FORM X-17A-5 FOCUS Report Part II. Please refer to FOCUS REPORT PART II INSTRUCTIONS and related interpretations published by the SEC in the preparation of this form.

In addition, the Commission requests comment on the following technical amendments to the financial statement forms and rules to ensure that harmonization is better achieved in financial reporting:

14-b. References to FORM SBS in Rule 23.105(d)(3) would be replaced with FORM X-17A-5 Focus Report Part II.

14-c. Regulation 23.105(p)(2) would be revised to require that SDs or MSPs that are the subject to the capital requirements of a prudential regulator would be required to file Appendix B to the Commission within thirty calendar days after the end of each calendar quarter.

14-d. Appendix A Schedule 1 column headings will be revised to include the words LONG/BOUGHT and SHORT/SOLD.

14-e. Appendix A Schedule 1 rows will be reorganized and renamed to require the identical information as found on FOCUS report Part II Schedule 1 of SEC FORM X-17A-5.

14-f. Appendix A Schedule 2, 3, and 4 column heading Total Exposure will be revised to state Current Net and Potential Exposure.

14-g. Appendix B column headings and rows will be revised to include identical information in the SEC FORM X-17A-5 FOCUS Report Part IIC and include the Cover Page included therein.

SEC Rule 18a-10 (17 CFR 240.18a-10) provides an alternative compliance mechanism pursuant to which a dual registered SD and SBSD may elect to comply with the capital, margin, and segregation requirements of the CEA and the Commission's rules in lieu of complying with applicable SEC rules. In order to qualify for alternative CFTC compliance, the SD/SBSD must be predominantly engaged in swaps business and may not be registered as a BD or and OTC Derivatives Dealer with the SEC.123

I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register NPRM Notice of Proposed Rulemaking OMB Office of Management and Budget § Section U.S.C. United States Code II. Background, Purpose and Legal Basis

The North Carolina Department of Transportation, who owns and operates the Isabel S. Holmes Bridge (US 74/SR 133), across the Northeast Cape Fear River, at mile 1.0, at Wilmington, North Carolina, has requested this modification to allow the drawbridge to be maintained in the closed-to-navigation position to facilitate bridge maintenance of the drawbridge.

The Isabel S. Holmes Bridge (US 74/SR 133), across the Northeast Cape Fear River, at mile 1.0, at Wilmington, North Carolina has a vertical clearance of 40 feet above mean high water in the closed position and unlimited vertical clearance above mean high water in the open position. The current operating schedule for the drawbridge is published in 33 CFR 117.829(a).

This proposed temporary final rule is necessary to facilitate safe and effective bridge maintenance of the drawbridge, while providing for the reasonable needs of navigation. A work platform will reduce the vertical clearance of the entire bridge span to approximately 34 feet above mean high water in the closed position. Vessels that can safely transit through the bridge in the closed position with the reduced clearance may do so, if at least a thirty-minute notice is given, to allow for navigation safety.

The Coast Guard is proposing this rulemaking under authority in 33 U.S.C. 499.

Under this proposed temporary final rule, the drawbridge will be maintained in the closed-to-navigation position twenty-four hours a day, seven days a week from 7 p.m. on January 1, 2020, through 12:01 a.m. on June 30, 2021. The bridge will open on signal for daily scheduled openings at 6 a.m., 10 a.m., 2 p.m., and 7 p.m., if at least a twenty-four hour notice is given; except for bridge closures authorized in accordance with 33 CFR 117.829(a)(4). The draw will also open on signal, if at least a twenty-four hour notice is given, for vessels unable to transit through the bridge during a scheduled opening, due to the vessel's draft; except for bridge closures authorized in accordance with CFR 117.829(a)(4). At all other times the drawbridge will operate per 33 CFR 117.829(a).

The bridge will not be able to open for emergencies and there is no immediate alternative route for vessels unable to pass through the bridge in the closed position. Vessels that can safely transit through the bridge in the closed position with the reduced vertical clearance may do so, if at least a thirty-minute notice is given, to allow for navigation safety.

We developed this proposed rule after considering numerous statutes and Executive Orders related to rulemaking. Below we summarize our analyses based on these statutes and Executive Orders and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB) and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.

This regulatory action determination is based on the fact that vessels can still transit the bridge on signal for daily scheduled openings at 6 a.m., 10 a.m., 2 p.m., and 7 p.m., if at least a twenty-four hour notice is given; except for bridge closures authorized in accordance with 33 CFR 117.829(a)(4). The draw will open on signal, if at least a twenty-four hour notice is given, for vessels unable to transit through the bridge during a scheduled opening, due to the vessel's draft; except for bridge closures authorized in accordance with 33 CFR 117.829(a)(4). At all other times the drawbridge will operate per 33 CFR 117.829(a).

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. While some owners or operators of vessels intending to transit the bridge may be small entities, for the reasons stated in section IV.A above, this proposed rule would not have a significant economic impact on any vessel owner or operator.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule.

If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT, above. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and the U.S. Coast Guard Environmental Planning Policy COMDTINST 5090.1 (series) which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f).

We have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule promulgates the operating regulations or procedures for drawbridges. Normally this action is categorically excluded from further review, under paragraph L49, of Chapter 3, Table 3-1 of the U.S. Coast Guard Environmental Planning Implementation Procedures.

Neither a Record of Environmental Consideration nor a Memorandum for the Record are required for this rule.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period.

Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

We encourage you to submit comments through the Federal eRulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

We accept anonymous comments. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided. For more about privacy and the docket, visit http://www.regulations.gov/privacynotice.

Documents mentioned in this NPRM as being available in this docket and all public comments, will be in our online docket at http://www.regulations.gov and can be viewed by following that website's instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or a final rule is published.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:

The Route 1 & 9 Bridge at mile 1.8 over the Hackensack River at Jersey City, New Jersey, has a vertical clearance of 35 feet at mean high water and 40 feet at mean low water. Horizontal clearance is approximately 200 feet. The waterway users include recreational and commercial vessels including tugboat/barge combinations.

The Route 7 Bridge at mile 3.1 over the Hackensack River at Jersey City, New Jersey, has a vertical clearance of 35 feet at mean high water and 40 feet at mean low water. Horizontal clearance is approximately 158 feet. The waterway users include recreational and commercial vessels including tugboat/barge combinations.

The existing regulation, 33 CFR 117.5, requires both bridges open on signal at all times. NJ DOT has requested that overnight hours between 11 p.m. and 7 a.m. be modified to two hours advance notice. This rule change will allow for more efficient and economic operation of the bridge while meeting the reasonable needs of navigation. The Coast Guard is proposing this rulemaking under authority in 33 U.S.C. 499.

The bridge logs show that between 11 p.m. and 7 a.m., the Route 1 & 9 Bridge had 27 annual openings in 2017, 12 annual openings in 2018, and 11 annual openings to date in 2019 (through October). During the subject hours, the Route 7 Bridge had 16 annual openings in 2017, 1 annual opening in 2018, and 0 annual openings to date in 2019. The Coast Guard proposes to permanently modify the operating regulation.

The proposed rule would allow that both Route 1 & 9 and Route 7 Bridges shall open on signal; except that, from 11 p.m. to 7 a.m., the draw shall open on signal if at least two hours advance notice is given by calling the number posted at the bridge. It is the Coast Guard's opinion that the proposed rule meets reasonable needs of marine traffic.

We developed this proposed rule after considering numerous statutes and Executive Orders related to rulemaking. Below we summarize our analyses based on these statutes and Executive Orders and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the Office of Management and Budget (OMB) has not reviewed the NPRM and pursuant to OMB guidance, it is exempt from the requirements of Executive Order 13771.

The Coast Guard believes this rule is not a significant regulatory action. The bridges will still open for all vessel traffic after a two-hour advance notice is given during overnight periods. The vertical clearance under both bridges in the closed position are relatively high enough to accommodate most vessel traffic. We believe that this proposed change to the drawbridge operation regulations at 33 CFR 117.723 will meet the reasonable needs of navigation.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities.

The Route 1 & 9 and Route 7 Bridges provide 35 feet of vertical clearance at mean high water that should accommodate all the present vessel traffic except deep draft vessels. The bridges will continue to open on signal for any vessel, except between 11 p.m. and 7 a.m. when a two-hour advance notice will be required. While some owners or operators of vessels intending to transit the bridge may be small entities, for the reasons stated in section IV.A., above, this proposed rule would not have a significant economic impact on any vessel owner or operator.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment (see ADDRESSES) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT, above. The Coast Guard will not retaliate against small entities that question or complain about this proposed rule or any policy or action of the Coast Guard.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.).

A rule has implications for federalism under Executive Order 13132, (Federalism), if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this proposed rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this proposed rule does not have tribal implications under Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments) because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this proposed rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this proposed rule will not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.

We have analyzed this proposed rule under Department of Homeland Security Management Directive 023-01, and Environmental Planning COMDTINST 5090.1 (series), which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f). We have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule promulgates the operating regulations or procedures for drawbridges. Normally, this action is categorically excluded from further review, under paragraph L49, of Chapter 3, Table 3-1 of the U.S. Coast Guard Environmental Planning Implementation Procedures.

Neither a Record of Environmental Consideration nor a Memorandum for the Record are required for this rule.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

We view public participation as essential to effective rulemaking, and will consider all comments and material received during the comment period. Your comment can help shape the outcome of this rulemaking. If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation.

We encourage you to submit comments through the Federal e-Rulemaking Portal at http://www.regulations.gov. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

We accept anonymous comments. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided. For more about privacy and the docket, visit http://www.regulations.gov/privacynotice.

Documents mentioned in this NPRM as being available in this docket and all public comments, will be in our online docket at http://www.regulations.gov and can be viewed by following that website's instructions. Additionally, if you go to the online docket and sign up for email alerts, you will be notified when comments are posted or a final rule is published.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 117 as follows:

The Postal Service published a notice of proposed rulemaking on July 23, 2018 (83 FR 34807-34811) to amend DMM section 505.3.0, Merchandise Return Service (MRS), to remove the references to traditional MRS processes and introduce an enhanced USPS Returns service. One formal response was received relating only to terminology used to describe users of the Enterprise Payment System (EPS).

The Postal Service has elected to issue a second revised proposed rule in order to further clarify our proposal and provide a revised effective date.

Under the Package Platform initiative, the Postal Service has leveraged devices that were installed as part of the Automated Package Verification system to enhance the capability of equipment used for the processing of package-size mailpieces. The upgraded equipment captures near real-time data on package dimensions, weight, mail class or product, and other attributes, and transmits the data to Postal Service information systems. The Postal Service will use this new technology to streamline its processes for the identification and postage assessment of each return package, and enable account holders to pay the postage for their returns electronically. Mailers will receive detailed reports to monitor package level pricing as their returns are processed and delivered through the Postal Service network. This improved functionality will significantly reduce the need to manually weigh and invoice returns or to estimate postage via sampling under the Postage Due Weight Averaging Program for MRS packages, and will eliminate the scan-based payment process currently used with USPS Returns services.

The USPS Returns service's new methodology was deployed January 27, 2019, allowing existing customers to migrate to the automated returns process and new customers to establish automated returns service. Current USPS Returns service and MRS customers would be expected to migrate to the new automated methodology by August 28, 2020. The originally proposed deadline of January 2021 for MRS customers to migrate to the new USPS Returns methodology is being revised because the Postal Service has been working closely with returns customers for an extended period of years, and more actively prior to and since the deployment of the automated functionality, and believes MRS customers can convert by August 28, 2020.

The proposed USPS Returns service automated methodology would use the same commercial prices as those currently applied to USPS Returns services and MRS: Priority Mail® Commercial Base® and Commercial Plus® (as applicable to the qualifying USPS Returns account holders), First-Class Package Service®—Commercial, and Parcel Select Ground®, and would apply those prices to each individual return package. Negotiated Service Agreement (NSA) prices would be available for eligible customers using the USPS Returns service automated process.

USPS Returns service account holders would pay postage and fees through an Enterprise Payment System (EPS) account. EPS is a relatively new payment system designed to provide a single point for all payment-related activities. Returns customers of any type would be required to set up an EPS account for electronic funds transfer for payment of USPS Returns service. USPS Returns service account customers can view payment information in a consolidated format in their EPS account accessed through the Business Customer Gateway at https://gateway.usps.com. The available information includes account balances, postage activity reports, transactions history, and other information. For EPS account set up or support, contact Postalone@usps.gov or call the PostalOne! Helpdesk at 800-522-9085, or the USPS Mailing and Shipping Solution Center at 1-877-MRC-0007 (1-877-672-0007).

USPS Tracking® is included as part of the service for any USPS Returns service product, and the Extra Services available for a fee for the USPS Returns service automated methodology include Insurance, Signature ConfirmationTM, and Certificate of Mailing service. In cases where the USPS Returns service account holder must sign for multiple returns bearing accountable Extra Services, the Postal Service will create an electronic firm sheet to capture the recipient's signature at the time of delivery and append it to the applicable associated returns. If all or part of the Intelligent Mail® package barcode (IMpb®) is unreadable, or the package is unable to be priced based on the availability of data collected, postage will be based on historical data, or default data determined at time of enrollment.

While moving forward with the substantive changes to the returns options described in this proposed rule, the Postal Service is modifying the proposed DMM changes to exclude the originally proposed section 505.3.8 and instead include those changes in an expanded section 505.3.1, which will replace current sections 505.3.1 through 505.3.6. This approach will consolidate the new USPS Returns automated methodology material and the existing returns sections into one section.

Additionally, the Postal Service is proposing to remove the references to “Merchandise Return Service”, both in section 505.3.0 and in the other sections that refer to Merchandise Return Service. When appropriate, these references are being replaced with references to USPS Returns service.

In addition, the Postal Service proposes to update Quick Service Guides 220, 503, and 800, to reflect these DMM revisions.

We believe these proposed revisions to our returns package product offerings will provide customers who choose the Postal Service for return services a more efficient process and a superb customer experience.

Although exempt from the notice and comment requirements of the Administrative Procedure Act (5 U.S.C. 553(b), (c)) regarding proposed rulemaking by 39 U.S.C. 410(a), the Postal Service invites public comments on the following proposed revisions to Mailing Standards of the United States Postal Service, Domestic Mail Manual (DMM), incorporated by reference in the Code of Federal Regulations. See 39 CFR 111.1.

We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes.

Accordingly, 39 CFR part 111 is proposed to be amended as follows:

I. Public Participation Written Comments

Submit your comments, identified by Docket ID No. EPA-HQ-OW-2017-0300 at https://www.regulations.gov (our preferred method), or the other methods identified in the ADDRESSES section. Once submitted, comments cannot be edited or removed from the docket. The EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (i.e., on the web, cloud, or other file sharing system). For additional submission methods, the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.

On November 13, 2019, the EPA published in the Federal Register (84 FR 61684) a notice of proposed rulemaking (NPRM) for the National Primary Drinking Water Regulations: Proposed Lead and Copper Rule Revisions. The (NPRM) revisions and request for public comment, as initially published in the Federal Register, provided for written comments to be submitted to the EPA on or before January 13, 2020 (a 60-day public comment period). Since publication, the EPA has received requests for additional time to submit comments. Many of the requests cite the need for additional time to consider the regulatory changes that have been proposed and to evaluate the substantial supporting materials in the docket. The EPA has considered these requests and is extending the public comment period for an additional 30 days until February 12, 2020. The EPA will consider public comments in the development of final regulatory revisions to the National Primary Drinking Water Regulations for Lead and Copper. The proposal and supporting documents are available at https://www.regulations.gov (Docket ID No. EPA-HQ-OW-2017-0300).

In proposed rule FR Doc. 2019-23708 appearing on page 58674 in the issue of November 1, 2019, make the following corrections:

1. On page 58674, in the heading, the agency name is corrected to read “Environmental Protection Agency”.

2. On page 58674, in the AGENCY caption, the agency name is corrected to read “Environmental Protection Agency (EPA)”.

3. On page 58674, in the first sentence of the summary, “Environmental Services Agency” is corrected to read “Environmental Protection Agency”.

This is a summary of the Public Notice (2.5 GHz Small Business Size Standards Public Notice), WT Docket No. 18-120, DA 19-1184, released on November 15, 2019. The complete text of the 2.5 GHz Small Business Size Standards Public Notice is available for public inspection and copying from 8:00 a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from 8:00 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference Information Center, 445 12th Street SW, Room CY-A257, Washington, DC 20554. The complete text is also available on the Commission's website at www.fcc.gov/auctions or by using the search function for WT Docket No. 18-120 on the Commission's ECFS web page at www.fcc.gov/ecfs. Alternative formats are available to persons with disabilities by sending an email to FCC504@fcc.gov or by calling the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY). Pursuant to Sections 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document.

1. In the 2.5 GHz Small Business Size Standards Public Notice, the WTB and OEA seek comment on the small business size standards to be used to determine an entity's eligibility for small business bidding credits in an auction of unassigned Educational Broadband Service (EBS) spectrum in the 2.5 GHz band. In the 2.5. GHz Report and Order, 84 FR 57343, October 25, 2019, the Commission modernized the regulatory framework for the 2.5 GHz band to make this swath of vital mid-band spectrum available for advanced wireless services, including 5G, with unassigned spectrum to be made available for commercial use via competitive bidding following the completion of a Rural Tribal priority filing window. In so doing, the Commission adopted small business size standards and associated bidding credits for new EBS licenses to improve the ability of small businesses to attract the capital necessary to participate meaningfully in the auction of 2.5 GHz spectrum.

2. The Notice of Proposed Rulemaking (NPRM) in this proceeding, 83 FR 26396, June 7, 2018, proposed to conduct any auction of EBS licenses in conformity with the Commission's Part 1 competitive bidding rules. The NPRM also proposed not to apply designated entity preferences in such auctions, and accordingly did not propose any small business size standards under which qualifying small businesses would receive bidding credits. In comments and ex parte letters submitted in response to the NPRM, several parties supported the adoption of bidding credits in an EBS auction to encourage the participation of small service providers. Upon consideration of the record in this proceeding, the Commission concluded that using bidding credits in competitive bidding for EBS licenses in the 2.5 GHz band would be an effective tool to achieve the statutory objective of promoting the participation of designated entities in the provision of spectrum-based services. Noting that the removal of the eligibility restriction and educational use requirements will attract more commercial operators to the 2.5 GHz band, the Commission found that bidding credits should help facilitate greater participation in any auction of EBS licenses and that offering bidding credits to designated entities should improve the ability of small businesses to attract the capital necessary to meaningfully participate in such an auction. Thus, the 2.5 GHz Report and Order adopted small business size standards and associated bidding credits for new EBS licenses.

3. A Federal department or agency that adopts a size standard for categorizing a business concern as a small business is required to consult with the Small Business Administration (SBA) prior to proposing the size standard for public comment and subsequently, it is required to obtain the SBA Administrator's approval of the size standard. In this proceeding, because the NPRM did not propose to apply designated entity preferences in auctions of new EBS licenses in the 2.5 GHz band, the NPRM did not propose any size standards under which qualifying small businesses would receive bidding credits. Therefore, the Commission did not consult with the SBA regarding proposed size standards for new EBS licenses in the 2.5 GHz band. However, in the 2.5 GHz Report and Order, the Commission directed the WTB, in conjunction with OEA, to seek further comment on the two adopted small business size standards and to consult with the SBA and obtain its approval of the adopted size standards in advance of any auction of 2.5 GHz EBS overlay licenses, as required by law.

4. Accordingly, we seek comment on the definitions of a “small business” as an entity that, together with its affiliates, its controlling interests, and the affiliates of its controlling interests, has average gross revenues that are not more than $55 million for the preceding five years, and a “very small business” as an entity that, together with its affiliates, its controlling interests, and the affiliates of its controlling interests, has average gross revenues that are not more than $20 million for the preceding five years. Pursuant to the 2.5 GHz Report and Order, a winning bidder in an auction of EBS licenses that qualifies as a “small business” would be eligible for a 15% bidding credit, and a winning bidder qualifying as a “very small business” would be eligible for a 25% bidding credit.

5. Copies of the comments and replies filed in response to the 2.5 GHz Small Business Size Standards Public Notice will be provided to the SBA consistent with SBA procedures for approval of size standards prescribed by Federal departments and agencies.

6. Ex Parte Rules. This proceeding has been designated as a “permit-but-disclose” proceeding in accordance with the Commission's ex parte rules. Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter's written comments, memoranda or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment filing system available for that proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission's ex parte rules.

This is a summary of the Commission's document, Report No. 3136, released December 05, 2019. The full text of the Petitions are available for viewing and copying at the FCC Reference Information Center, 445 12th Street SW, Room CY-A257, Washington, DC 20554. Petitions also may be accessed online via the Commission's Electronic Comment Filing System at: http://apps.fcc.gov/ecfs/. The Commission will not send a Congressional Review Act (CRA) submission to Congress or the Government Accountability Office pursuant to the CRA, 5.U.S.C. because no rules are being adopted by the Commission.

Subject: Promoting Telehealth in Rural America, FCC 19-78, published at 84 FR 54952, October 11, 2019, in WT Docket No. 17-310.

Number of Petitions Filed: 5.

Table of Contents I. Introduction II. Background III. Considerations Regarding Federal Motor Vehicle Safety Standards for Tires a. Tire Strength Test b. Tire Bead Unseated Test c. Tire Endurance d. Tire Markings e. Other Tire-Related Issues IV. Additional Questions V. Public Participation VI. Rulemaking Notice and Analyses I. Introduction

On October 2, 2017, DOT issued a Federal Register notice requesting public comment on existing rules and other agency actions that are candidates for repeal, replacement, suspension, or modification (82 FR 45750). This public input was aimed to inform DOT's review of its existing regulations and other agency actions to evaluate their continued necessity, determine whether they are crafted effectively to solve current safety issues, and evaluate whether they potentially burden the development or use of domestically produced energy resources. DOT received almost 3,000 comments in response to this notice, of which approximately twenty-three addressed rules and agency actions under the scope of NHTSA. The agency is publishing a series of advance notices of proposed rulemaking (ANPRMs) on various topics derived from input submitted by stakeholders in response to the DOT notice and NHTSA's own regulatory review. This ANPRM discusses requirements and test procedures for tires that may be candidates for repeal, replacement, suspension or modification.

As part of its mission, NHTSA issues Federal Motor Vehicle Safety Standards (FMVSSs) and regulations for new vehicles and motor vehicle equipment to save lives, prevent injuries, and reduce economic costs due to road traffic crashes. NHTSA also reviews and revises existing standards and regulations to respond to, for example, the introduction of new technology in motor vehicles. In 2017, section 2(a) of Executive Order (E.O.) 13771, Reducing Regulation and Controlling Regulatory Costs, establishes that unless prohibited by law, whenever an agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it must identify at least two existing regulations to be repealed. Also, according to E.O. 13777, Enforcing the Regulatory Reform Agenda, each agency must evaluate existing regulations, and make recommendations for their repeal, replacement, or modification. As part of this process, the Department is directed to seek input from entities significantly affected by its regulations. In response to the October 2, 2017 notice, the U.S. Tire Manufacturers Association (USTMA) 1 identified tire-related regulations that, in its view, are outdated, unnecessary, or ineffective. USTMA stated that the regulations identified present an opportunity to lower regulatory burdens on tire manufacturers and increase regulatory effectiveness by eliminating regulations that do not reflect current technology and removing requirements where compliance costs exceed benefits. Topics identified include: (1) Tire strength (plunger energy) tests in FMVSSs No. 109, 119, and 139; (2) bead unseating resistance tests in FMVSS Nos. 109 and 139; (3) the tire endurance test in FMVSS No. 139; (4) the Uniform Tire Quality Grading Standards (UTQGS) in 49 CFR 575.104; and (5) tire markings for ply rating, tubeless, and radial in FMVSS No. 139.

USTMA mentioned that each of the regulations identified do not appropriately address how tire technologies have changed since the regulations' inception. Continental Automotive Systems, Inc. (Continental), a member of USTMA, agreed with the comments, with emphasis on the elimination of the tire strength test in FMVSS Nos. 109 and 139. Comments received on the UTQGS, along with other consumer information topics are not the focus of this ANPRM and may be addressed in a separate rulemaking.2

NHTSA seeks focused comment on issues and possible modifications to the strength test and bead unseating resistance test for modern tires. NHTSA also seeks comment on the certain aspects of the tire endurance test. Lastly, the agency seeks comment on the current use and relevance of some tire marking regulations as well as other matters related to new tire technologies. Safety standards for tire rims (FMVSSs No. 110 and 120) and tire pressure monitoring systems (FMVSS No. 138) are not the focus of this notice. Similarly, issues related to previously proposed upgrades to FMVSS No. 119, are not the focus of this notice.3

In 2000, a surge in tire tread separation failures prompted Congress to enact the Transportation Recall Enhancement, Accountability, and Documentation Act (TREAD) Act.4 Section 10 of the TREAD Act, “Endurance and resistance standards for tires”, required NHTSA to revise and update FMVSS No. 109—New Pneumatic Tires 5 and FMVSS No. 119—New Pneumatic Tires for Vehicles Other than Passenger Cars.6 NHTSA made several improvements and established a new safety standard, FMVSS No. 139, New pneumatic radial tires for light vehicles.7 FMVSS No. 139 applies to new pneumatic radial tires for use on motor vehicles (other than motorcycle and low speed vehicles) that have a gross vehicle weight rating (GVWR) of 10,000 pounds or less.8 It adopted more stringent high speed and endurance tests as well as a new low-pressure performance test. The objective was to improve the ability of tires to endure the effects of tire heat building-up and severe under-inflation during highway travel under fully loaded conditions. In a petition for reconsideration to the final rule establishing FMVSS No. 139, manufacturers requested that NHTSA either redefine “chunking” or not consider “chunking” to be an indication of tire failure during the endurance test.9 The agency decided against eliminating “chunking” as a test failure condition.10

As part of the improvements to the tire safety standards following the TREAD Act, NHTSA proposed to replace the strength test in FMVSS No. 109 with a road hazard impact test, modeled after a Society of Automotive Engineers (SAE) recommended practice. The agency also proposed to replace the bead unseating test in FMVSS No. 109 with a new test used by Toyota.11 The construction characteristics of a radial tire, relative to a bias-ply tire, are what make the tests appear to be ineffective in differentiating among modern tires with respect to these aspects of performance. However, after further consideration and public comments, NHTSA deferred action on proposals to revise the existing strength test and bead unseating resistance test because additional research was needed to inform a decision.

Since then, both industry and NHTSA have examined the strength test and bead unseating test, by conducting additional research and updating relevant industry standards.12 13

FMVSS for tires were first established in 1967. At the time, the typical light-vehicle tire was a bias-ply tire, had a 78 to 85 percent aspect ratio,14 and was mounted on a wheel with a 14- to 15-inch diameter (rim codes 14 or 15).15 Bias tires have body ply cords that are laid at alternate angles, substantially less than 90 degrees to the tread centerline, extending from bead to bead. As the tire deflects, shear occurs between body plies which generates heat.

Currently, most tires sold in the United States are radial tires. In contrast to bias-ply tires, radial tires have body ply cords that are laid radially at 90 degrees to the centerline of the tread, extending from bead to bead. Because the opposite ends of each cord are anchored to the beads at points that are directly opposite to each other, the radial tire carcass is more flexible. The radial tire is reinforced and stabilized by a belt that runs circumferentially around the tire under the tread. This construction allows the sidewalls to act independently of the belt and tread area when forces are applied to the tire. This independent action is what allows the sidewalls to readily absorb road irregularities without overstressing the cords. Research has shown that impact breaks caused by cord rupture are less likely to occur in radial-ply passenger car tires.16 Radial body cords deflect more easily under load, generating less heat. Currently, passenger car tires have reached aspect ratios as low as 20, and rim codes as large as 32.

Changes in tire technology, including tire construction and rim diameter codes ratios, have prompted NHTSA to consider updating the existing requirements and test procedures in FMVSS for modern tires. This ANPRM seeks comment and supporting information about tire-related regulations or provisions within the regulations which may be a candidate for repeal, replacement, suspension or modification.

NHTSA introduced the tire strength test, also known as “plunger energy,” as part of FMVSS No. 109 in 1967.17 The test is used to evaluate the strength of tire materials. The tire is mounted on a test rim and inflated to the specified pressure. The tire is conditioned at room temperature for at least three hours and its pressure readjusted as specified. Then, a steel plunger with a rounded end is used to contact the tire at the tread centerline. The plunger is advanced into the tire, at a rate of 50 mm per minute until a certain force (energy level) is reached or the tire is punctured. The tire strength test specifies a minimum energy that must be attained without the tire breaking. However, if the plunger is stopped by reaching the rim prior to attaining the minimum breaking energy (bottoming out) without breaking the tire, the breaking energy of the tire is calculated using the force at the time the tire bottoms out. If the minimum breaking energy is not reached, the tire fails the test.

The performance requirements for tire strength are included in FMVSS No. 109 S4.2.2.4, FMVSS No. 117 S5.1.1(d), FMVSS No. 119 S7.3 and FMVSS No. 139 S6.5.1 and S6.5.2 for LT tires. FMVSS No. 109, New pneumatic tires and certain specialty tires, applies to bias-ply tires used on light vehicles and radial tires for use on passenger cars manufactured before 1975. FMVSS No. 117, Retreaded pneumatic tires, applies to retreaded tires for use on passenger cars manufactured after 1948. FMVSS No. 119, applies to new pneumatic tires of motor vehicles with a GVWR of more than 4,536 kilograms and motorcycles. FMVSS No. 139, New pneumatic radial tires for light vehicles, applies to new radial tires used on light vehicles manufactured after 1975.

In a 2002 notice of proposed rulemaking, NHTSA reported that when conducting the strength test, the plunger often bottoms-out on the rim rather than breaking the reinforced materials in a radial tire. The issue seems to be more prevalent on radial tires with low aspect ratio (low-profile); these tires have less available section height for the plunger to travel to generate the required minimum breaking energy. The agency explained that radial tires have flexible sidewalls that absorb deflections and have high-strength belt packages. At the time, NHTSA proposed replacing the existing strength test with a new test modeled after SAE J1981, Road Hazard Impact for Wheel and Tire Assemblies.18 However, the agency deferred action on the proposal to revise the test because tests on 4 of the 20 tires subject to the SAE J1981 test resulted in the test device damaging the rim without air loss or damage to the tire.19 Public comments also questioned whether the proposed test was more stringent and correlated well with field performance.

On July 12, 2011, USTMA submitted a petition for rulemaking requesting NHTSA update existing requirements related to tire strength testing.20 In its petition, USTMA stated that when testing radial passenger tires with low aspect ratios, the plunger strikes the inside of the wheel well before reaching the minimum force required to pass the existing tire strength test. NHTSA test procedure (TP-109) indicates that: “If any plunger application contacts the test rim before the minimum specified breaking energy is reached, the tire shall be put on a different rim that has more clearance in the test area, and the test repeated.21 Tires are tested using any rim that is listed as appropriate for use with that tire according to the year books listed in the tire standards or by notification to NHTSA in accordance with FMVSS No. 139 S4.1 (or other similar provision for other tire standards).

In its petition, USTMA stated that, when using specially fabricated rims with deeper wells used solely for testing, the plunger may still bottom out on the rim; however, the tires would achieve the minimum strength requirement. USTMA included with its petition a table with strength test results for 20 tires tested using standard rims and specially fabricated deep well rims. The table includes data for tire rim codes 17 to 20, width 215 to 275, and aspect ratios 35 to 50. USTMA stated that there is a need to provide a more practical test procedure for low aspect ratio tires. To address its concerns, USTMA suggested that NHTSA adopt a test procedure for testing low-profile tires used in American Society for Testing and Materials (ASTM) F414-09, “Standard Test Method for Energy Absorbed by a Tire When Deformed by Slow-Moving Plunger.” When the plunger bottoms out on the rim without puncturing the tire, ASTM F414-09 specifies that the required minimum breaking energy is deemed to have been achieved.22 USTMA stated that this modification would eliminate the need to use deep-well rims for testing.

In response to the October 2, 2017 notice, USTMA asked that the tire strength test in FMVSS Nos. 109, 119, and 139 be eliminated.23 Although USTMA acknowledged its petition for rulemaking requesting modification of the tire strength requirement, it stated that the complete elimination of the strength requirement would reduce the regulatory burden on manufacturers without impacting tire safety or performance. USTMA also stated that eliminating the strength requirement would eliminate costs to NHTSA associated with auditing for compliance.

NHTSA examined the laboratory tire tread and sidewall strength test procedures.24 The study determined what percentage of tires tested to the applicable FMVSS No. 109 or FMVSS No. 119 experienced plunger bottom-out without reaching the minimum specified breaking energy. All 12 tires tested reached the FMVSSs minimum breaking energy level before bottoming (67%) or rupturing (33%).25 NHTSA also evaluated ways to modify the FMVSS strength test to avoid plunger bottom-out. Nine passenger car tires were evaluated with the then-draft version of the ASTM F414-06. The ASTM F414-06 included a clause that if a bottom-out occurred, the tire could be considered as passing any standard; or the tire could continue to be retested at incremental higher inflation pressures until rupture or bottom-out occurred at the maximum allowable pressure. The six tires tested to ASTM F414-06 also reached the FMVSS minimum breaking energy before either bottoming-out (66.6%) or rupturing (16.6%). When increasingly higher inflation pressure was used, four of those six tires transition from bottoming-out to rupturing. Lastly, six passenger tire models were tested using an experimental sidewall bruise/strength test and generated statistically different levels of bruise width, penetration, and rupture force between 1-ply, 2-ply, and 3-ply sidewall tires. The results suggested that plunger penetration and breaking force were significantly influenced by the number of plies in the tire sidewall.

NHTSA seeks comment on whether a change to or elimination of the tire strength test is appropriate. Based on the test results submitted by USTMA, some low-profile passenger car tires may not comply with the existing strength requirement. NHTSA currently does not have data to indicate a greater safety concern related to low-profile tires that may not meet the minimum strength requirement because they bottom out on the test rim prior to reaching the minimum strength requirement.

NHTSA also requests comment about modifying the tire strength test to accommodate low-profile tires. NHTSA seeks comments on these amendments where the tire strength test could be modified. First, NHTSA could allow testing with specially manufactured deep-well test rims. These rims would be like those used by USTMA in its testing of low-profile tires. The test results submitted by USTMA indicate that all tires they tested would meet the minimum tire strength requirement when tested with specially manufactured deep-well test rims. As the tire strength test procedure is currently written, tires are tested when mounted on rims meeting dimensional specifications set forth by tire manufacturers. These specifications may be submitted directly to NHTSA or those contained in publications of the following tire standards organizations including the Tire and Rim Association (TRA); the European Tyre and Rim Technical Organization (ETRTO); Japan Automobile Tire Manufacturers' Association, Inc. (JATMA); Tyre & Rim Association of Australia (TRAA); Associacao Latino Americana de Pneus e Aros (Brazil) (ALAPA); and South African Bureau of Standards (SABS). To test with specialized deep well rims, those rims would have to be specified by the tire manufacturer as suitable for use with the tire and either submitted to NHTSA or published by one of those standards organizations. NHTSA would then need to acquire those specialized rims to conduct its testing.

Second, NHTSA requests comment on the need and feasibility to set a different minimum breaking energy requirement to apply to low-profile radial tires. It is possible that a performance value could be derived from knowledge of the impact forces exerted on a tire when driven over a road hazard. However, NHTSA currently has no data to consider. In addition, the issue of what tires would be considered “low profile” and subject to a different minimum breaking energy would have to be addressed.

Third, NHTSA seeks comment on the idea of deeming tires that have bottomed out on the test rim to have met the minimum breaking energy requirement.26 This is consistent with USTMA's suggestion that NHTSA use the test procedure for testing low-profile tires used in ASTM F414-09, “Standard Test Method for Energy Absorbed by a Tire When Deformed by Slow-Moving Plunger.” According to ASTM F414-09, when the plunger bottoms out on the rim without puncturing the tire, the required minimum breaking energy is deemed to have been achieved.

Fourth, NHTSA seeks comment on whether a new performance test for tire strength has been developed or whether a new test should be developed. Such a test could address the issue raised in the petition related to the testing of low-profile tires. Low-profile tires may be more prone to blowing out upon impact with a road hazard (i.e., pothole, curb) because the low sidewall height causes the sidewall to be pinched between the road hazard and the rim. In addition, low-profile tires may be damaged when impacting a road hazard, resulting in a sidewall “bubble” that compromises the integrity of the tire. However, the existing tire strength requirement addresses the strength along the tread, not the sidewall. The testing of forces on the sidewall of the tire would likely require a dynamic road wheel impact test that is substantially different than the current quasi-static plunger test.27 NHTSA seeks comment about any safety concerns related to low-profile tires.

Finally, NHTSA seeks comment about the practical and safety implications of removing the tire strength test. The tire strength requirement was adopted at a time when most tires produced for the U.S. market were bias-ply tires. The purpose of the strength requirement is to ensure that there are no weak points along the tread of bias-ply tires. NHTSA seeks comment on the differences between the failure modes of radial-ply tires and bias-ply tires, specifically along the tread area, and whether the testing is necessary for radial tires. Data show nearly all passenger car tires sold in the U.S. today are radial tires.28 NHTSA also seeks comment about the scope of any elimination of, or amendments to, the tire strength requirement. For example, the performances test could be modified or eliminated for all tires, low-profile tires, or all radial tires. The issue identified by USTMA is not applicable to tires other than low-profile radial passenger car tires. Finally, although few bias-ply tires are sold in the U.S., some bias-ply tires are still used. NHTSA seeks comment on how bias-ply tires are used in the marketplace in the U.S. and whether bias-ply tires will continue to be sold in the U.S.

To summarize, NHTSA seeks comment on the following:

1. Can the tire strength test be repealed, replaced, or modified without negatively affecting safety? If not, what potential safety issues should the agency be focused on and how could such safety issues be mitigated? Explain your perspective, include specifics and data supporting your response.

2. Repealing. What are the practical and safety implications of eliminating the tire strength test? Should the test be eliminated for all low-profile tires, all radial tires, or all tires without adversely affecting safety? What are the estimated cost savings of repealing this provisions within the standards?

3. Modifying. What specific changes should the agency consider? What are the estimated cost savings of implementing such modifications? In addition, provide comments to the following possible modifications:

a. Specify and allow use of deep-well test rims.

b. Specify new minimum breaking energy (performance value) to apply to low-profile radial tires. How should NHTSA define the term “low-profile tires”?

c. Are there any ambiguities in the term “bottomed out” and, if so, is there any suggestion on how to define the term?

4. Replacing. What other test procedures(s) are available or can be developed to replace the strength test (currently used to evaluate the strength of tire materials)? Should a different procedure be used for low-profile tires? Please provide sufficient details about each procedure to permit the agency to analyze and determine whether the procedure is appropriate and feasible, and whether the procedure is objective and repeatable. What are the estimated costs of implementing such procedures?

5. How many bias-ply tires are sold in the U.S. annually? Will manufacturers continue selling bias-ply tires for use on motor vehicles? Should NHTSA keep the strength test for bias-ply tires?

NHTSA introduced the tire bead unseating resistance test as part of FMVSS No. 109 in 1967.29 This test is used to evaluate the ability of the tire's bead to remain seated on the rim and retain tire inflation pressure when the tire is subjected to high lateral forces.30 The test consists of mounting the wheel and tire in a fixture and force a bead unseating block against the tire sidewall as specified. The load is applied through the block to the tire's outer sidewall at the distance specified. The force applied to the sidewall is increased until the bead region unseats with resulting air loss, or the specified minimum force value is achieved, whichever occurs first. The performance requirements for bead unseating resistance that applies to passenger car tires are included in FMVSS No.109 S5.2 and FMVSS No. 139 S6.6.

The test forces used in the bead unseating resistance test are based on bias-ply tires. Because radial tires can satisfy the test easily,31 industry has suggested that NHTSA eliminate this requirement. In 2002, NHTSA proposed to replace the existing test with a new bead unseating test that was based on a procedure used by Toyota.32 The alternate test procedure uses forces more stringent than those in the current standard. However, NHTSA test data and public comments called into question whether the proposed test would adequately upgrade the existing standard. As a result, in the subsequent final rule, the agency decided to retain the FMVSS No.109 bead unseating test for pneumatic tires, to extend that test to light truck tires, and to conduct additional research to inform a decision.33

In an August 12, 2008 letter to NHTSA, USTMA petitioned the agency to update the bead unseating resistance test in FMVSS No. 109. USTMA described two issues with the existing test procedure. First, Figure 1, Bead Unseating Fixture, does not have specifications necessary to test tires with rim diameter code greater than 20. Second, Figure 2 and Figure 2A, the diagrams of the bead unseat block, do not provide suitable geometries for use on low aspect ratio and larger diameter tires. USTMA asked that NHTSA revise the test fixtures (in Figure 1, Figure 2, and Figure 2A) or reference within the regulation, ASTM International F2663-07, paragraph 11.10 and annex A1 Fixtures and Settings.

ASTM F2663, “Standard Test Method for Bead Unseating of Tubeless Tires for Motor Vehicles with GVWR of 4536 kg (10,000 lb.) or Less” was developed by the ASTM International F09 committee.34 The petitioner mentioned that the industry standard provides a solution to the two concerns identified because it includes a comprehensive set of test blocks that accommodate a wide range of tire sizes for bead unseating resistance testing and a formula to calculate the “A” dimension that is required to complete the test.

In April 2011, USTMA responded to a request for comments about existing DOT regulations.35 It suggested NHTSA remove the bead unseating test as a mandatory requirement for new pneumatic radial tires for light vehicles (as described in FMVSS No. 139). It mentioned that the test should be only applicable to tubeless bias-ply tires (in FMVSS No. 109). It expressed concerns that the bead unseat test is outdated, developed for bias-ply tires, and not effective in evaluating radial tires. USTMA cited differences in construction and force distribution between bias and radial tires as the reason it believes a bead unseat test for radial tires is of little value. USTMA suggested that, if NHTSA determines that it is critical to maintain the test, the agency consider test protocols like those found in ASTM International F2663-07a. It mentioned that using ASTM provisions would allow testing tires with rim diameter codes larger than 20 and with lower aspect ratios.

In a report issued in 2013, NHTSA described its work examining the feasibility of the equipment and test procedures in ASTM F2663-07a.36 The study evaluated block designs, the “A” dimension, and whether inflation pressures were appropriate for testing. A total of 14 passenger vehicle tires and 4 light truck (load ranges D & E) tire models were included in the study. The tires had widths from 155 to 345 mm, aspect ratios from 30 to 80, and rim codes from 12 to 28. Tires were selected to evaluate the limits of the test equipment including the physical dimensions and possible forces required to unseat the tire.

Although NHTSA did not find rim interference problems while testing these radial ply tires using the revised test blocks, the agency seeks comment on the testing of these tires. The study suggests that ASTM F2663-07a methods facilitated the conduct tests for passenger vehicles and light truck tires having a wide range of rim diameter codes and aspect ratios. The test blocks used allowed testing of different tire sizes with low aspect ratios since the block did not contact the rim before reaching the test force specified in the requirement. Two test pressures were used to evaluate the bead unseating performance of the tires tested. One test pressure was the inflation pressure, 180 kPa (26 psi), specified for the bead unseating test in FMVSS No. 109. The other pressure used was 240 kPa (35 psi). Results at the test pressures indicated that the force required to unseat the tire's bead from the rim exceeded the minimum test force required in FMVSS No. 109.

In June 2011, USTMA withdrew the petition after testing low-profile tires and indicated that additional study of the suggested test method was needed. It formed a task group to study and develop recommendations for ASTM and NHTSA to consider. The task group found that some sizes could not be tested according to ASTM F2663-07a due to: (1) Interference between the block and the fixture or the block and the rim and (2) test block sliding across the tread instead of pushing on the sidewall when testing. The task group developed recommendations for the location of the block and revised which blocks is most appropriate to use on each size.

These recommendations were presented to the ASTM F09 and included in F2663-15, published in 2015 to replace F2663-07a.37 In August 2016, USTMA petitioned NHTSA to amend FMVSS No. 109 and FMVSS No. 139. It requested the agency to adopt the F2663-15 ASTM Bead Unseating Procedure.

USTMA requested NHTSA eliminate the bead unseating test in FMVSS Nos. 109 and 139 for radial tires, indicating that the test is outdated and does not provide a safety benefit for modern tires.38 It highlighted four reasons for this request. First, most of the tires in the market today are radial ply tires and the bead unseating test was designed in the 1960s to evaluate bias-ply tires.39 Second, tires today have much larger diameters (up to 25-inch diameters) and smaller aspect ratios (as small as 20) and the current regulation does not properly address the range of tire sizes in the market today.40 41 Third, the test cannot be performed as intended for some modern tires, and these tires designed to pass the test may have additional material at no benefit to the consumer—with an unintended consequence of increasing rolling resistance, which contributes to lower vehicle fuel economy. Lastly, it indicated that eliminating the bead unseated requirements would reduce test and materials cost for tire manufacturers and reduce costs to NHTSA to audit compliance. It mentioned that field performance of tires in countries with no bead unseating performance test requirements show no related performance issues with tires in service. No data was provided with this submission.

NHTSA seeks comment on whether change to or elimination of the tire bead unseating test is appropriate. NHTSA seeks data about low-profile tire testing with regards to the bead unseat test. NHTSA also requests comment about modifying the test to accommodate low-profile tires. NHTSA seeks comment on whether the bead unseating test can be modified using ASTM F2663 to extend the applicability of the test to low profile tires and tires with larger rim diameter codes. NHTSA is also seeking comment on whether a new test to examine tire bead unseating, in addition to the one described in this notice, has been developed or whether a new test can be developed. Such a test could address the issue raised in the petition related to the testing of low-profile tires. Lastly, NHTSA seeks comment about the practical and safety implications of removing the tire bead unseating test and about the scope of any elimination of this requirement.

To summarize, NHTSA seeks comment on the following:

6. Can the bead unseating resistance test be repealed, replaced, or modified without negatively affecting safety? If not, what potential safety issues should the agency be focused on and how could such safety issues be mitigated? Explain your perspective in detail and include any available data in support of your response.

7. Repealing. What are the practical and safety implications of eliminating the tire bead unseating resistance test? Could the test be eliminated for all low-profile tires, all radial tires, all tires without adversely affecting safety? What are the estimated cost savings of repealing this provision within the standards?

8. Modifying. What specific changes should the agency consider? What are the estimated cost savings of implementing such modifications? NHTSA seeks specific comment on the following modification:

a. Adopt ASTM F2663, to apply FMVSS No. 109 procedure to tires with rim diameter code up to 30.42

9. Replacing. What other test procedures are available or can be developed to replace the bead unseating resistance test? Should a different procedure be used for low-profile tires?

Please provide sufficient details about each procedure to permit the agency to analyze and determine whether the procedure is appropriate and feasible, and whether the procedure is objective and repeatable. What are the estimated costs of implementing such procedures?

The endurance test requirements for passenger car tires are included in FMVSS No. 139. The test consists of mounting the tire on a test rim and inflate to the pressure specified for the tire. The assembly is conditioned and the pressure readjusted to the values specified. The assembly is then mounted in a test axle and pressed against the outer face of a smooth wheel. The test is conducted without interruptions at not less than 120 km/h and with the specified loads and test periods. The inflation pressure is not corrected during the test and the test load is maintained at the value corresponding to each test period. After running the test for the time specified, the inflation pressure is measured and the tire is visually inspected.

When tested in accordance to the specified test procedure, FMVSS No. 139, S6.3.2(a) specifies that there shall be no visual evidence of tread, sidewall, ply, cord, belt or bead separation; chunking; open splices; cracking or broken cords.43 The tire pressure after the test shall not be less than 95% of the initial pressure specified in S6.3.1.1.1.

After the 2013 final rule establishing FMVSS No. 139, tire manufacturers requested that NHTSA either redefine tire chunking or not consider tire chunking to be an indication of tire failure during the endurance test. In response to petitions for reconsideration to that final rule, the agency decided against eliminating “chunking” as a test failure condition.44 The agency concluded that operating a vehicle with chunked tires may create concerns due to wheel imbalance and vehicle vibration. Further, the agency found that allowing tread chunking just short of exposing the reinforcement cords could create risk of tire failure. No data was provided to the agency demonstrating that some fixed percentage of a tire's tread could break away without detrimental effect on safe vehicle operation. NHTSA noted that international standards also include the presence of tire chunking as a damage condition.

In response to the October 2, 2017 notice, USTMA stated that tread chunking is not a structural degradation of the tire, is not a safety related condition, and therefore should not be considered a damage condition used in regulatory compliance assessments. It views tire chunking as an endurance testing anomaly, indicating that chunking is also a result that lacks consistency due to variability in test conditions. USTMA did not provide data to support its assertion, to justify the expected benefits, or to evaluate the potential unintended consequences of removing this requirement. Such data would be helpful to inform potential regulatory action on this subject.

NHTSA seeks comments on the following:

10. NHTSA seeks data and information about the test conditions and performance requirements for the endurance test in FMVSS No. 139.

11. What are the potential cost savings associated with the removal of chunking as a damage condition for the endurance test? Please describe the cost elements and provide supporting data for the estimates.

12. Are there negative safety consequences of removing chunking as a relevant damage condition for the endurance test? Please explain.

FMVSS No. 139, S5.5 Tire markings, specifies that a tire must be marked on each sidewall with the following information: (a) The symbol DOT, which constitutes a certification that the tire conforms to the FMVSS; (b) the tire size designation as listed in the documents and publications specified in S4.1.1 of this standard; (c) the maximum permissible inflation pressure, subject to the limitations of S5.5.4 through S5.5.6 of this standard; (d) the maximum load rating and for light truck (LT) tires, the letter designating the tire load range; (e) the generic name of each cord material used in the plies (both sidewall and tread area) of the tire; (f) the actual number of plies in the sidewall, and the actual number of plies in the tread area, if different; (g) the term “tubeless” or “tube type,” as applicable; (h) the word “radial,” if the tire is a radial ply tire; and (i) the alpine symbol, at the manufacturer's option if the tire meets the definition of a “snow tire.”

USTMA states that several marking regulations for tires are obsolete and should be eliminated. These include ply description and ply rating; `tubeless' marking, and `radial' marking.45 USTMA indicates that the number of plies no longer indicates a tire's robustness, customers do not purchase tires based on this information, and there is no safety impact associated with this information or errors to it. USTMA states that errors in marking can lead to a manufacturer filing a petition for inconsequential noncompliance, with associated administrative cost for both NHTSA and tire manufacturer. The agency has made determinations that some labeling errors constitute an inconsequential noncompliance.46

NHTSA seeks comments on the following:

13. Are there benefits to all required tire markings, specifically, ply description and ply rating; `tubeless' marking, and `radial' marking and seeks information on the impacts of these marking requirements on motor vehicle safety? If there are potential safety issues associated with the removal of any required markings, how could such safety issues be mitigated? Explain your perspective, include specifics and any data supporting your response.

14. What are the potential cost savings associated with the removal of these markings (ply description and ply rating; `tubeless' marking, and `radial' marking)? Please provide any supporting data for the estimates.

In response to a January 18, 2018, request for comments on automated driving systems (ADS),47 Bridgestone America asked that NHTSA consider new and emerging tire technologies to reduce tire failures on ADS-equipped vehicles.48 It asked that NHTSA consider how pneumatic tire alternatives can be permitted as compliance options for both ADS-equipped vehicles and conventional vehicles. Examples provided include extended mobility tires; run-flat tires; and non-pneumatic extended use tires. NHTSA seeks comment on how existing regulations can be revised to foster tire innovation without adversely affecting safety.

NHTSA has also received two petitions for rulemaking to update tire regulations and the agency is seeking comments in this ANPRM to support its response. First, in a December 3, 2010 petition,49 the Tire and Rim Association petitioned NHTSA to recognize 250 kPa and 290 kPa as allowable maximum inflation pressures for passenger car tires in FMVSS No. 139, and to provide a corresponding reference in FMVSS No. 138. TRA stated that these tire sizes have been recognized by the European Tyre and Rim Technical Organization and the Japanese Tyre Manufacturers Association and have been approved and published by ISO. TRA suggested that no adjustments to test criteria would be necessary, meaning that 250 kPa tires would be subject to the test criteria for 240 kPa standard load tires and 290 kPa tires would be subject to the test criteria for 280 kPa extra load tires.50 Although this would result in 250 kPa and 290 kPa tires being subject to slightly more stringent standards than the 240 kPa and 280 kPa tires, higher tire pressure equates to higher load capacity. NHTSA seeks comment on whether to amend FMVSS No. 139 as requested by TRA (with a corresponding amendment to FMVSS No. 138).

In a July 14, 2014 petition,51 TRA requested that NHTSA revise the metric conversion for T-type spare tires. Currently, T-type spare tires have a maximum inflation pressure of 420 kPa (60 psi). Currently, the TRA year book recognizes both 415 kPa and 420 kPa as options for T-type spare tires with the notation that NHTSA requires T-type spare tires to be marked with a maximum inflation pressure of 420 kPa. ETRTO and JATMA only specify a maximum inflation pressure of 420 kPa. No change was suggested to the 60 psi maximum inflation pressure. NHTSA requests comment on whether this change suggested by TRA is necessary and would not reduce safety.

15. NHTSA seeks comments on the following: Please provide information about emerging tire technologies and trends that may impact motor vehicle safety.

16. Do existing regulations impede tire innovation(s)? Please explain.

17. What regulatory actions are needed to remove impediment(s) to tire innovation without adversely affecting safety?

Your comments will help us improve this rulemaking. NHTSA invites you to provide different views on options NHTSA discusses, new approaches the agency has not considered, new data, descriptions of how this ANPRM may affect you, or other relevant information.

NHTSA welcomes public review of on all aspects of this ANPRM, but request comments on specific issues throughout this document. NHTSA will consider the comments and information received in developing its eventual proposal for how to proceed with updating requirements for motor vehicles. Your comments will be most effective if you follow the suggestions below:

• Explain your views and reasoning as clearly as possible.

• Provide solid technical and cost data to support your views.

• If you estimate potential costs, explain how you arrived at the estimate.

• Tell NHTSA which parts of the ANPRM you support, as well as those with which you disagree.

• Provide specific examples to illustrate your concerns.

• Offer specific alternatives.

• Refer your comments to specific sections of the ANPRM, such as the units or page numbers of the preamble.

Your comments must be written and in English. To ensure that your comments are filed correctly in the Docket, please include the docket umber of this document located at the beginning of this notice in your comments.

Your primary comments should not be more than 15 pages long.52 You may attach additional documents to your primary comments, such as supporting data or research. There is no limit on the length of the attachments.

Please submit one copy of your comments (two if submitting by mail or hand delivery), including the attachments, to the docket via one of the methods identified under the ADDRESSES section at the begging of this document. If you are submitting comments electronically as a PDF (Adobe) file, we ask that the documents submitted be scanned using an Optical Character Recognition (OCR) process, thus allowing NHTSA to search and copy certain portions of your submission.

Please note that pursuant to the Data Quality Act, for substantive data to be relied upon and used by the agency, it must meet the information quality standards set forth in the OMB and DOT Data Quality Act guidelines. Accordingly, NHTSA encourages you to consult the guidelines in preparing your comments. DOT's guidelines may be accessed at www.transportation.gov/regulations/dot-information-dissemination-quality-guidelines.

Privacy Act: Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act statement published in the Federal Register on April 11, 2000 (65 FR 19477-78) or you may visit http://www.transportation.gov/privacy.

If you submit comments by hard copy and wish Docket Management to notify you upon its receipt of your comments, enclose a self-addressed, stamped postcard in the envelope containing your comments. Upon receiving your comments, Docket Management will return the postcard by mail. If you submit comments electronically, your comments should appear automatically in the docket number at the beginning of this notice on http://www.regulations.gov. If they do not appear within two weeks of posting, we suggest that you call the Docket Management Facility at 202-366-9826.

If you wish to submit any information under a claim of confidentiality, you should submit three copies of your complete submission, including the information that you claim to be confidential business information, to the Chief Counsel, NHTSA, U.S. Department of Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590. In addition, you should submit a copy from which you have deleted the claimed confidential business information to Docket Management, either in hard copy at the address given above under ADDRESSES, or electronically through regulations.gov. When you send a comment containing information claimed to be confidential business information, you should include a cover letter setting forth the information specified in 49 CFR part 512.

NHTSA will consider all comments received to the docket before the close of business on the comment closing date indicated above under the DATES section. NHTSA will consider these additional comments to the extent possible, but we caution that we may not be able to fully address those comments prior to the agency's proposal.

You may read the comments received by Docket Management in hard copy at the address given above under the ADDRESSES section. The hours of the Docket Management office are indicated above in the same location. You may also read the comments on the internet by doing the following:

(1) Go to http://www.regulations.gov.

(2) Regulations.gov provides two basic methods of searching to retrieve dockets and docket materials that are available in the system:

a. The search box on the home page which conducts a simple full-text search of the website, into which you can type the docket number of this notice and

b. “Advanced Search,” which is linked on the regulations.gov home page, and which displays various indexed fields such as the docket name, docket identification number, phase of the action, initiating office, date of issuance, document title, document identification number, type of document, Federal Register reference, CFR citation, etc. Each data field in the advanced search function may be searched independently or in combination with other fields, as desired. Each search yields a simultaneous display of all available information found in regulations.gov that is relevant to the requested subject or topic.

(3) Once you locate the docket at http://www.regulations.gov, you can download the comments you wish to read. We note that since comments are often imaged documents rather than word processing documents (e.g., PDF rather than Microsoft Word), some comments may not be word-searchable.

Please note that, even after the comment closing date, NHTSA will continue to file relevant information in the Docket as it becomes available. Further, some people may submit late comments. Accordingly, NHTSA recommends that you periodically check the Docket for new material.

NHTSA has considered the impact of this ANPRM under Executive Order 12866, Executive Order 13563, and DOT Order 2100.6, “Policies and Procedures for Rulemakings.” This rulemaking has been determined to be not “significant” under the Department of Transportation's regulatory policies and procedures and the policies of the Office of Management and Budget. Because NHTSA does not have sufficient information to formulate a proposal on all of the issues discussed in this notice, NHTSA cannot estimate the costs and benefits of this ANPRM. However, NHTSA requests comments on the costs and benefits of any of the regulatory actions suggested in this ANPRM or by any commenter.

This action is not subject to the requirements of E.O. 13771 (82 FR 9339, February 3, 2017) because it is an advance notice of proposed rulemaking.

Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., no analysis is required for an ANPRM. However, vehicle manufacturers and equipment manufacturers are encouraged to comment if they identify any aspects of the potential rulemaking that may apply to them.

As an ANPRM, NHTSA does not believe that this document raises sufficient federalism implications to warrant the preparation of a federalism assessment. NHTSA believes that federalism issues would be more appropriately considered if and when the agency proposes changes to its tire regulations.

With respect to the review of the promulgation of a new regulation, section 3(b) of Executive Order 12988, “Civil Justice Reform” (61 FR 4729, February 7, 1996) requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect; (2) clearly specifies the effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct, while promoting simplification and burden reduction; (4) clearly specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issues by the Attorney General. This document is consistent with that requirement.

Under the Paperwork Reduction Act of 1995 (PRA), a person is not required to respond to a collection of information by a Federal agency unless the collection displays a valid OMB control number. There are no information collection requirements associated with this ANPRM. Any information collection requirements and the associated burdens will be discussed in detail once a proposal has been issued.

Section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) requires NHTSA to evaluate and use existing voluntary consensus standards in its regulatory activities unless doing so would be inconsistent with applicable law (e.g., the statutory provisions regarding NHTSA's vehicle safety authority) or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies, such as the Society of Automotive Engineers. The NTTAA directs us to provide Congress (through OMB) with explanations when we decide not to use available and applicable voluntary consensus standards. As NHTSA has not yet developed specific regulatory requirements, the NTTAA does not apply for purposes of this ANPRM.

The Unfunded Mandates Reform Act of 1995 requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure of State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually (adjusted for inflation with base year of 1995). NHTSA has determined that this ANPRM would not result in expenditures by State, local, or tribal governments, in the aggregate, or by the private sector, in excess of $100 million annually.

NHTSA has analyzed this rulemaking action for the purposes of the National Environmental Policy Act. The agency has preliminarily determined that implementation of this rulemaking action would not have any significant impact on the quality of the human environment.

The Plain Language Writing Act of 2010 (Pub. L. 111-274) requires that federal agencies write documents in a clear, concise, and well-organized manner. While the Act does not cover regulations, Executive Orders 12866 and 13563 require each agency to write all notices in plain language that is simple and easy to understand. Application of the principles of plain language includes consideration of the following questions:

• Have we organized the material to suit the public's needs?

• Are the requirements in the notice clearly stated?

• Does the notice contain technical language or jargon that is not clear?

• Would a different format (grouping and order of sections, use of headings, paragraphing) make the rule easier to understand?

• Would more (but shorter) sections be better?

• Could we improve clarity by adding tables, lists, or diagrams?

If you have any responses to these questions, please include them in your comments on this proposal.

The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.

Background

On November 7, 2019, we published in the Federal Register (84 FR 60278) a document that proposed: (1) Changes to our October 7, 2014, proposed rule (79 FR 60419) to list the West Coast DPS of fisher as a threatened species under the Act (16 U.S.C. 1531 et seq.); and (2) a rule issued under section 4(d) of the Act for this DPS. The November 7, 2019, Federal Register publication (84 FR 60278) opened a 30-day public comment period, ending December 9, 2019. The Service now reopens the comment period as specified above in DATES.

See the November 7, 2019, Federal Register publication (84 FR 60278) for more information about previous Federal actions concerning this DPS.

We will accept comments and information during this reopened comment period on our November 7, 2019, revised proposed rule (84 FR 60278). We will consider information and recommendations from all interested parties. We intend that any final action resulting from the proposal will be based on the best scientific and commercial data available and will be as accurate and as effective as possible. Our final determination will take into consideration all comments and any additional information we receive during the comment period. Therefore, the final decision may differ from the November 7, 2019, revised proposed rule (84 FR 60278), based on our review of all information we receive during this rulemaking. Comments previously submitted need not be resubmitted and will be fully considered in preparation of the final determination.

Comments should be as specific as possible. Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you assert. Please note that submissions merely stating support for, or opposition to, the action under consideration without providing supporting information, although noted, will not meet the standard of best available scientific and commercial data. Section 4(b)(1)(A) of the Act directs that determinations as to whether any species is endangered or threatened must be made “solely on the basis of the best scientific and commercial data available.”

You may submit your comments and materials by one of the methods listed in ADDRESSES. We request that you send comments only by the methods described in ADDRESSES. If you submit information via http://www.regulations.gov, your entire submission—including your personal identifying information—will be posted on the website. If your submission is made via a hardcopy that includes personal identifying information, you may request at the top of your document that we withhold this information from public review. However, we cannot guarantee that we will be able to do so. We will post all hardcopy submissions on http://www.regulations.gov.

Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on http://www.regulations.gov at Docket No. FWS-R8-ES-2018-0105, or by appointment, during normal business hours, at the Yreka Fish and Wildlife Office (see ADDRESSES). Our final determination concerning the November 7, 2019, revised proposed rule (84 FR 60278) will take into consideration all written comments we receive during the open comment periods and comments from peer reviewers. These comments will be included in the public record for this rulemaking, and we will fully consider them in the preparation of our final determination.

The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq.).

Background

Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations in title 50 of the Code of Federal Regulations (50 CFR part 424) set forth the procedures for adding species to, removing species from, or reclassifying species on the Federal Lists of Endangered and Threatened Wildlife and Plants (List or Lists) in 50 CFR part 17. Section 4(b)(3)(A) of the Act requires that we make a finding on whether a petition to add a species to the List (i.e., “list” a species), remove a species from the List (i.e., “delist” a species), or change a listed species' status from endangered to threatened or from threatened to endangered (i.e., “reclassify” a species) presents substantial scientific or commercial information indicating that the petitioned action may be warranted. To the maximum extent practicable, we are to make this finding within 90 days of our receipt of the petition and publish the finding promptly in the Federal Register.

Our regulations establish that substantial scientific or commercial information with regard to a 90-day petition finding refers to “credible scientific or commercial information in support of the petition's claims such that a reasonable person conducting an impartial scientific review would conclude that the action proposed in the petition may be warranted” (50 CFR 424.14(h)(1)(i)).

A species may be determined to be an endangered species or a threatened species because of one or more of the five factors described in section 4(a)(1) of the Act (16 U.S.C. 1533(a)(1)). The five factors are:

(a) The present or threatened destruction, modification, or curtailment of its habitat or range (Factor A);

(b) Overutilization for commercial, recreational, scientific, or educational purposes (Factor B);

(c) Disease or predation (Factor C);

(d) The inadequacy of existing regulatory mechanisms (Factor D); or

(e) Other natural or manmade factors affecting its continued existence (Factor E).

These factors represent broad categories of natural or human-caused actions or conditions that could have an effect on a species' continued existence. In evaluating these actions and conditions, we look for those that may have a negative effect on individuals of the species, as well as other actions or conditions that may ameliorate any negative effects or may have positive effects.

We use the term “threat” to refer in general to actions or conditions that are known to, or are reasonably likely to, affect individuals of a species negatively. The term “threat” includes actions or conditions that have a direct impact on individuals (direct impacts), as well as those that affect individuals through alteration of their habitat or required resources (stressors). The term “threat” may encompass—either together or separately—the source of the action or condition or the action or condition itself. However, the mere identification of any threat(s) may not be sufficient to compel a finding that the information in the petition is substantial information indicating that the petitioned action may be warranted. The information presented in the petition must include evidence sufficient to suggest that these threats may be affecting the species to the point that the species may meet the definition of an endangered species or threatened species under the Act. If we find that a petition presents such information, our subsequent status review will evaluate all identified threats by considering the individual-, population-, and species-level effects and the expected response by the species. We will evaluate individual threats and their expected effects on the species, then analyze the cumulative effect of the threats on the species as a whole. We also consider the cumulative effect of the threats in light of those actions and conditions that are expected to have positive effects on the species—such as any existing regulatory mechanisms or conservation efforts that may ameliorate threats. It is only after conducting this cumulative analysis of threats and the actions that may ameliorate them, and the expected effect on the species now and in the foreseeable future, that we can determine whether the species meets the definition of an endangered species or threatened species under the Act. If we find that a petition presents substantial scientific or commercial information indicating that the petitioned action may be warranted, the Act requires that we promptly commence a review of the status of the species, and we will subsequently complete a status review in accordance with our prioritization methodology for 12-month findings (81 FR 49248; July 27, 2016).

The petition findings contained in this document are listed in the table below, and the basis for each finding, along with supporting information, is available on http://www.regulations.gov under the appropriate docket number.

Bethany Beach firefly (Photuris bethaniensis); Sussex County, Delaware.

On May 15, 2019, we received a petition from the Center for Biological Diversity and Xerces Society for Invertebrate Conservation requesting that the Bethany Beach firefly be listed as endangered or threatened and critical habitat be designated for this species under the Act. The petition clearly identified itself as such and included the requisite identification information for the petitioner, required at 50 CFR 424.14(c). This finding addresses whether the petition presents substantial information indicating the petitioned action may be warranted.

Based on our review of the petition and sources cited in the petition, we find that the petition presents substantial scientific or commercial information indicating the petitioned action may be warranted for the Bethany Beach firefly due to potential threats associated with the following: Habitat loss, degradation, or modification (via urban development, wetland conversion, and habitat fragmentation) (Factor A); overutilization for recreational purposes (Factor B); and other natural or manmade factors (via light pollution, invasive species, pesticide use, and the effects of climate change (sea level rise, increased incidence of severe storms, and increased temperature and phenology changes)) (Factor E). The petition also presented substantial information indicating that the existing regulatory mechanisms may be inadequate to address impacts of these threats (Factor D).

The basis for our finding on this petition, and other information regarding our review of the petition, can be found as an appendix at http://www.regulations.gov under Docket No. FWS-R5-ES-2019-0088 under the Supporting Documents section.

Gulf Coast solitary bee (Hesperapis oraria); Jackson County, Mississippi; Mobile and Baldwin Counties, Alabama; Escambia, Okaloosa, Walton, Santa Rosa, and Bay Counties, Florida.

On April 2, 2019, we received a petition dated March 27, 2019, from the Center for Biological Diversity, requesting that the Gulf Coast solitary bee be listed as endangered or threatened and critical habitat be designated for this species under the Act. The petition clearly identified itself as such and included the requisite identification information for the petitioner, required at 50 CFR 424.14(c). This finding addresses whether the petition presents substantial information indicating the petitioned action may be warranted.

Based on our review of the petition and sources cited in the petition, we find that the petition presents substantial scientific or commercial information indicating the petitioned action may be warranted for the Gulf Coast solitary bee due to potential threats associated with the following: Effects from climate change, pesticide spraying, and urbanization (Factor A); and loss of pollination mutualism (Factor E). The petition also presented substantial information indicating that the existing regulatory mechanisms may be inadequate to address impacts of these threats (Factor D).

The basis for our finding on this petition, and other information regarding our review of the petition, can be found as an appendix at http://www.regulations.gov under Docket No. FWS-R4-ES-2019-0089 under the Supporting Documents section.

On the basis of our evaluation of the information presented in the petitions under sections 4(b)(3)(A) and 4(b)(3)(D)(i) of the Act, we have determined that the petitions summarized above for the Bethany Beach firefly and Gulf Coast solitary bee present substantial scientific or commercial information indicating that the petitioned actions may be warranted. We are, therefore, initiating status reviews of these species to determine whether the actions are warranted under the Act. At the conclusion of the status reviews, we will issue findings, in accordance with section 4(b)(3)(B) of the Act, as to whether the petitioned actions are not warranted, warranted, or warranted but precluded by pending proposals to determine whether any species is an endangered species or a threatened species.

The primary authors of this document are staff members of the Ecological Services Program, U.S. Fish and Wildlife Service.

The authority for these actions is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq.).

The Gulf reef fish fishery, which includes greater amberjack, is managed under the FMP. The FMP was prepared by the Council and is implemented by NMFS through regulations at 50 CFR part 622 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).

The Magnuson-Stevens Act requires NMFS and regional fishery management councils to prevent overfishing and to achieve, on a continuing basis, the optimum yield from federally managed fish stocks to ensure that fishery resources are managed for the greatest overall benefit to the nation.

The greater amberjack stock in the Gulf has been overfished since 2001. To help rebuild the stock NMFS has implemented several modifications to the rebuilding plan, including changes to the commercial and recreational catch levels, and changes to management measures intended to constrain harvest and extend the commercial and recreational seasons. Most recently, NMFS implemented a framework action that modified the greater amberjack rebuilding time period, and modified the sector-specific annual catch limits (ACLs) and annual catch targets (ACTs) (82 FR 61485; December 28, 2017). NMFS also implemented another framework action that was expected to extend the greater amberjack recreational fishing season by modifying the recreational fishing year and the fixed closed season (83 FR 13426; March 29, 2018).

This proposed rule would implement a framework action that is expected to extend the fishing season for the commercial sector by reducing the commercial trip limit. Greater amberjack is not a common target species for the reef fish commercial sector, with the majority of trips landing less than 500 lb (227 kg), gutted weight, 520 lb (236 kg), round weight, of the species. However, some directed trips with higher harvest levels do occur. When commercial landings for greater amberjack are projected to meet the commercial annual catch target, which is codified as the commercial quota, NMFS prohibits harvest for the remainder of the fishing year and any overage of the annual catch limit is paid back the following year (50 CFR 622.41). Harvest for Gulf commercial greater amberjack has closed before the end of the fishing year every year since 2009.

In 2012, NMFS implemented Amendment 35 to the FMP, which established a greater amberjack commercial trip limit of 2,000 lb (907 kg), round weight (77 FR 67574; November 13, 2012). In 2015, the greater amberjack commercial trip limit was reduced to 1,500 lb (680 kg), gutted weight; 1,560 lb (708 kg), round weight, (80 FR 75432; December 2, 2015).

The Council decided to reduce the trip limit further to a level that is expected to lengthen the fishing season while continuing to allow enough harvest per trip to support the current small number of vessels that engage in directed trips.

This proposed rule would reduce the Gulf greater amberjack commercial trip limit from 1,500 lb (680 kg), gutted weight, 1,560 lb (708 kg), round weight, to 1,000 lb (454 kg), gutted weight, 1,040 lb (472 kg), round weight. Additionally, there would be a reduction in the trip limit to 250 lb (113 kg), gutted weight, 260 lb (118 kg), round weight, when 75 percent of the commercial ACT has been landed.

As described in the framework action, the proposed trip limit reduction is expected to extend the length of the commercial fishing season beyond June, the month when recent closures have occurred. However, an in-season closure is still expected to occur sometime in September.

The Council considered three other trip limit alternatives which ranged from 750 lb (340 kg), gutted weight (780 lb (354 kg), round weight), to 250 lb (113 kg), gutted weight (260 lb (118 kg), round weight). However, the Council determined that these trip limits were too small to allow for directed commercial greater amberjack trips. Additionally, the 250 lb (113 kg), gutted weight, alternative was not expected to allow fishers to harvest all of the commercial ACT.

This proposed rule would revise the boundaries of three Gulf reef fish management areas to reflect a change in the seaward boundary of Alabama, Louisiana, and Mississippi for purposes of management under the FMP. Generally, the state/Federal waters boundary for fisheries management is 3 nm off the coasts of Louisiana, Mississippi, and Alabama and 9 nm off the coasts of Texas and Florida. However, language included in the 2016 and 2017 Consolidated Appropriations Acts (P.L. 114-113, December 18, 2015, and P.L. 115-31, May 5, 2017), changed the state/Federal waters boundary for purposes of management under the FMP to 9 nm off the coasts of all of the Gulf states. Therefore, some existing Federal reef fish management areas that were exclusively in Federal waters now extend into state waters.

This proposed rule would update the regulations to revise the coordinates of the inshore boundaries for the reef fish stressed area (Table 2 of Appendix B to 50 CFR part 622), the reef fish longline and buoy gear restricted area (Table 1 of Appendix B to 50 CFR part 622), and the recreational shallow-water grouper closure (50 CFR 622.34(d)). This rule would also update the terminology in the coordinate tables to reflect that this is boundary specific to Gulf reef fish management. This rule would not change the management measures associated with each area.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this proposed rule is consistent with the Framework Action to the FMP, the Magnuson-Stevens Act, and other applicable laws, subject to further consideration after public comment.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866. This proposed rule is not an Executive Order 13771 regulatory action because this proposed rule is not significant under Executive Order 12866.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration (SBA) that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination follows.

A description of the proposed rule, why it is being considered, and the objectives of, and legal basis for this proposed rule are contained in the preamble of this proposed rule at the beginning of the SUPPLEMENTARY INFORMATION section and in the SUMMARY section. The Magnuson-Stevens Act provides the statutory basis for this proposed rule. No duplicative, overlapping, or conflicting Federal rules have been identified. In addition, no new reporting, record keeping, or other compliance requirements are introduced by this proposed rule. Accordingly, the requirements of the Paperwork Reduction Act do not apply to this proposed rule.

The proposed action would reduce the commercial trip limit for Gulf greater amberjack from 1,500 lb (680 kg), gutted weight, 1,560 lb (708 kg), round weight, to 1,000 lb (454 kg), gutted weight, 1,040 lb (472 kg), round weight, with an added measure that the trip limit would reduce to 250 lb (113 kg), gutted weight, 260 lb (118 kg), round weight, when 75 percent of the commercial ACT had been reached. As a result, this action would directly affect federally permitted commercial fishers fishing for greater amberjack in the Gulf. For RFA purposes only, NMFS has established a small business size standard for businesses, including their affiliates, whose primary industry is commercial fishing (see 50 CFR 200.2). A business primarily engaged in commercial fishing (NAICS code 11411) is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including affiliates), and has combined annual receipts not in excess of $11 million for all its affiliated operations worldwide.

To determine whether the proposed rule would have a significant economic impact on a substantial number of small entities, NMFS first describes the characteristics of the federal commercial reef fish vessels that harvest greater amberjack in the Gulf. NMFS then estimates the number of commercial vessels to which the reduction in the trip limit reduction would apply, as well the average revenue of these vessels. Last, NMFS estimates to what extent the proposed rule would reduce the revenue or profits of these vessels.

Commercial vessels in the Gulf used a variety of gear types in harvesting reef fish, including greater amberjack. Most vessels used hook-and-line gear in harvesting greater amberjack, with a few using longline or some other fishing gear types, such as spear or powerhead while diving. All vessels, regardless of gear type used, depended more on species other than greater amberjack for their revenues. Relative to total revenues, greater amberjack accounted for approximately 2.24 percent, 0.25 percent, and 9.75 percent for vessels using hook-and-line, longline, and other gear types, respectively. Although greater amberjack is a minor revenue generator for an average vessel, it appears that vessels using other gear types, such as diving gear, depend on greater amberjack more than other vessels.

Florida is the dominant state in the harvest of Gulf greater amberjack, both in terms of landings and revenues. The number of Florida vessels that harvested greater amberjack is the key factor that places Florida above the level of other states. Although Louisiana registered a much lower number of vessels than Florida, greater amberjack landings and revenues from the species appear to be relatively substantial. The other three Gulf states have relatively minor commercial landings of greater amberjack. Although Florida ranks first in terms of total revenues from all sources, Texas ranks first in terms of revenues per vessel, with Alabama/Mississippi (combined for confidentiality purposes) ranking last.

From 2013 through 2017, on average, 204 vessels per year landed greater amberjack from the entire Gulf. These vessels, combined, averaged 628 trips per year in the Gulf on which greater amberjack was landed and 3,167 other trips, which were taken either in the Gulf and no greater amberjack were harvested, or in the South Atlantic regardless of species caught. The average annual total dockside revenue (2017 dollars) was approximately $0.66 million from greater amberjack, $5.68 million from other species co-harvested with greater amberjack (on the same trips), and $32.53 million from other trips by these vessels in the Gulf on which no greater amberjack were harvested or occurred in the South Atlantic. Total average annual revenue from all species harvested by vessels harvesting greater amberjack in the Gulf was approximately $38.87 million or approximately $190,000 per vessel. Revenues from greater amberjack accounted for approximately 1.7 percent of total revenues from all species, indicating that greater amberjack is a minor revenue generator for an average vessel.

Based on the foregoing revenue information, all commercial vessels affected by the proposed action may be considered to be small entities. Because all entities that are expected to be affected by this proposed rule are considered small entities, the issue of disproportional effects on small versus large entities does not arise.

Based on 2016-2018 data, the proposed action would extend the commercial fishing season from 85 days (closure date of June 27) under the no action alternative to, potentially, 170 days (closure date of September 20), but the entire commercial greater amberjack ACT would still be reached in a fishing year, resulting in about the same total revenues from greater amberjack as the no action alternative. Compared to the current trip limit, the 1,000-lb (454-kg), gutted weight, 1,040-lb (472-kg), round weight, trip limit would reduce harvest of greater amberjack per trip by about 18 percent and the 250-lb (113-kg), gutted weight, 260-lb (118-kg), round weight, trip limit would further reduce harvest per trip to about 71 percent. The reduced trip limit would therefore be expected to reduce revenue per trip and possibly lower profits per trip given the same fishing cost. As noted above, greater amberjack accounts for only 1.7 percent of total reef fish vessel revenues indicating that the resulting reduction in revenues per trip would be relatively small. In addition, an extended commercial fishing season would likely provide a better pricing condition for greater amberjack, further mitigating the reduced harvest per trip. Moreover, commercial vessels can make some adjustments as to species composition of catch to make up for whatever is lost as a result of a reduced trip limit for greater amberjack. Although the proposed action would possibly reduce revenues per trip, total annual revenues would remain the same. Therefore, NMFS does not expect the economic impacts of the reduced trip limit on revenues to be significant. Additionally, the updated 9 nm state/Federal boundary coordinates would not affect the analysis done for this proposed rule.

The information provided above supports a determination that this proposed rule would not have a significant economic impact on a substantial number of small entities. Because this proposed rule, if implemented, is not expected to have a significant economic impact on any small entities, an initial regulatory flexibility analysis is not required and none has been prepared.

For the reasons set out in the preamble, 50 CFR part 622 is proposed to be amended as follows: